Problem Statement
Nissan should be able to manufacture automobiles without being hindered from internal and external events. From the supply to manufacturing, all the way to dealership should run smoothly as a cohesive unit. All of the elements of Nissan’s business practice should be working at a normal level. In 2011 a chain reaction of events took place in Japan. A single event would be challenging to overcome. Having three major catastrophes strike at the same time is devastating. Nissan practiced and prepared for cataclysmic events, but no one could ever imagine a series of natural disasters would have a crippling effect on the nation of Japan. On March 11 th of 2011an earthquake trigger a tsunami that lead to the Fukusima Nuclear Reactor to meld down. According to Aggarwal and Kumar (2016), Nissan lost 17 family and five staff members. More than 50 of its dealers and 40 of its component suppliers were damaged.
Two of Nissan plants- the Tochigi engine and vehicle assembly plant and the Iwaki engine plant- were severely damaged.” Each day Nissan was offline, the company would suffer a loss of twenty-five million dollars. Nissan moved very quickly in the aftermath. Nissan appointed Colin Dodge as Chief Recovery Officer. This appointment was unique, no other Japanese auto maker displayed this type of leadership. Nissan was the only automaker to have a diversified board of directors. All other Japanese automobile companies was solely comprised of Japanese nationals. In our discussions, we believe this diversity allowed for greater pragmatic thinking that led to quicker action to get the company to recover.
Delegate your assignment to our experts and they will do the rest.
Analysis
Nissans Business Continuity Plan (BCP) to Recover its Supply Chain Operations
Nissan has a well-developed Business Continuity Plan (B.C.P.). The company is forward thinking in preparing for business disruptions. They are committed to having contingency plans for disasters. Nissan does not just plan for disasters; moreover, they actually drill and anticipate major interruptions with real world simulations on an ongoing basis. This type of preparedness displays a serious commitment on the company’s behalf of the reality they live in. Most corporations are fiscally driven with a sole focus on making money; never planning on the possibility of a disruption taking place. On the other hand, Nissan’s pragmatic thinking compels the company to prepare of the unimaginable.
According Aggarwal and Kumar, Hitoshi Kawaguchi states “This company has been doing this every year, for the last five or six years. Once you prepare yourself for all kinds of disasters then you don’t panic, and think that’s quite important for us to be well-trained for natural disasters like a great earthquake or anything which could damage the company’s operations (Nissan Shitai, 2020).” In the wake of the disaster the company lost twenty-three hundred cars that were completed. They immediately shut down production in five of their plants. The disaster further compounded the company’s problem by having gas and electrical problems nationwide. Nissan gathered the executives and assessed the damages, quickly developing a recovery plan. According Aggarwal and Kumar 2016 “Hundreds of employees worked together in a cross-functional and cross-regional manner.” This triple natural disaster left the company with massive problems. Nissan reacted quickly to restore operational readiness in comparison to their competitors. Knowing it would take months if not years to return to pre-disaster levels. Nissan swift and decisive action was the first and most important step in the recovery process.
Nissan’s Resilience Strategies
Nissan’s decision to establish a crisis management committee that oversaw all recovery activities and supervised operations in the country and abroad was a critical component for the firm’s quick and effective response to the 2011 disaster. In disaster events, government agencies, NGOs, individual volunteers, and other response subjects need timely and accurate disaster information to response rapidly (Song, Z., Zhang, H., & Dolan, C., 2019). In terms of communication, Nissans crisis management committee was able to provide good communication and coordination to improve the firm’s disaster response.
Rapid decision-making capabilities after the disaster was formerly established with the decision for Nissan to set up its Global Disaster Control headquarters in Yakushima where it could update information on disaster management, work for employee safety and ensure business continuity, while helping to equip Nissan with the strategic alignment to quicky recover from the disaster. During a disaster, the search, communication, and feedback process for information determines the various agents’ actions, which helps drive self-organization. Self-organization is the collective process where various agents communicate, choose and adjust each other’s behaviors in order to enable the achievement of common goals. In the process of realizing a common goal for disaster reduction, participants will adjust their self-organizing behaviors in relation to the changing disaster environment. (Song, Z., Zhang, H., Dolan, C) 2019. Nissan also established a clear order of importance and a diagnosis of the company, enabling the alignment of the firm’s employees and its shared vision with all stakeholders which also attributed to rapid response and recovery.
Nissan had also been applying seismic retrofitting so that it would be more resilient to damages and requirements in its plants and facilities, located in the earthquake prone areas by planning evacuation centers and routes in advance. This helped Nissan established an effective risk management strategy for quick recovery after a disaster.
Nissans approach to prioritize and make a decision through a safety confirmation system helped the company start recovery operations in an expedited and focused manner, while prior established drills and simulations helped Nissan forecast and respond quickly (Aggarwal & Srivastava, 2016). The flexibility and redundancy developed, allowing Nissan to absorb disruption and adapt to change was critical. All of the prior established resilient strategies gave Nissan an efficient plan for the occurrence of a disaster and the ability to quickly respond by including in its disaster resilience strategy prevention and early warning capability for disasters, rapid response and recovery to disaster events, and the ability to learn and adapt to reduce the impact of future disasters (Song, Z., Zhang, H.,& Dolan, C., 2019).
Critical Analysis of Nissan’s Strategies
Nissan has worked up a great strategy for risk management and strong and volatile strategies. Their risk management strategies are very impressive and efficient and are very much acknowledged by professionals across the world and they have implemented these strategies in many other organizations. Nissan adhered to many changes on its operations to help any future challenges of disruption. The organization put a lot of time and effort into understanding the dependencies of their primary and secondary suppliers in their supply chain. They also made efforts to increase local production and not completely depend on their components from its foreign factories.
Nissan learned many different things from the disaster which taught them to modify their approaches in the future. They even implanted drills to be better prepared and modifications to their purchasing process. There is always room for improvement in any plan, in theirs I would say improve by improving their operational strategy and implanting the SCORE model. If all their changes are implemented and carried out correctly this will ensure a better recovery plan for Nissan and they will not have as many disruptions.
Conclusions and Recommendations
Nissan is an established automobile company that should conduct its operations without being affected by external and internal factors. However, this was not the case in 2011, when an earthquake, tsunami, and nuclear disaster-affected Japan. As a result of these events, Nissan's production was adversely affected. However, the company responded quickly and efficiently after the earthquake. Nissan's resilience strategy is indeed an outstanding response to the three disasters. Nissan made its recovery efforts to ensure the resumption of automobiles' manufacturing and delivery after experiencing the damage. However, it took months for the firm to achieve its pre-disaster operations state. The company's resilience practices were considered superior to those of other vehicle manufacturing companies in Japan. Also, how the company managed its supply chain management was acknowledged by analysts. For example, within fifteen minutes after the earthquake occurred, Nissan had created a global disaster control headquarters. Besides the quick decisions made, the company also applied its already existing capabilities for fast recovery. Furthermore, the company executed its safety confirmation system to ensure everyone's safety, including its suppliers. The drill conducted every year were useful in conducting recovery activities in a fast and focused way.
However, Nissan had underestimated the impact of a possible disaster, and the catastrophes made the firm realize the need to bolster its supply chain. By requiring its Tier two and three suppliers to have alternate sources of their parts, the company made an appropriate decision that can prevent a similar disruption in future disasters. Out of the adverse events that hit Nissan, the company identified an opportunity to re-evaluate and modify its disaster strategy by making more evacuation centers and stoking all the needed resources. The developed framework to ensure safety and damage assessment for a possible earthquake of more than six or other natural disasters is critical in ensuring that business activities are not disrupted when such events occur. The company's occasional pieces of training, frequent drills, and multiple other measures are essential in ensuring that Nissan's employees take action when an emergency occurs to prevent more harm or damage.
To reduce the impact of future disasters on the company's supply chain, Nissan should work with its suppliers to improve its business continuity plan. It should include assessing the priority of the work done by all functions and making countermeasures to ensure continued priority work. Besides, Nissan's business continuity plan should be evaluated every year in its Plan-Do-Check-Act (PDCA) cycle process. This activity would help determine if the implemented and proposed business continuity plan actions have achieved the company's goals. Besides, the annual assessment would help identify areas that might require changes or adjustments to achieve goals. Moreover, Nissan should significantly reduce its reliance on Japan's vehicle components and have more factories outside Japan. The move would help the company substantially reduce disruptions and losses/damages caused by natural disasters and other adverse events.
When the tsunami occurred, Nissan suffered a loss of one thousand and three hundred Infiniti and one thousand cars to be shipped to the United States. Also, the company closed five of its factories in Japan. To prevent such significant damage in the future, Nissan should have more factories and suppliers in other countries such as the United States. The firm would reduce its overreliance on cars manufactured in Japan. In case such disasters occur in the future, their impact would not affect the supply chain in the United States. By understanding the dependencies in the company's supply chain, Nissan would improve its business continuity plan, hence mitigating risks in its supply chain. Besides, sustainability in its supply chain would ensure that the company remains steady even in adverse events such as earthquakes.
References
Aggarwal, S., & Srivastava, M. K. (2016, May 30). Nissan Shatai: For Investors: Policies & Systems: BCP (Business Continuity Plan) . Nissan Shatai | For Investors | Policies & Systems | BCP (Business Continuity Plan). https://www.nissan shatai.co.jp/en/ir/management/bcp/index.html .
Nissan Shatai (2020). Policies & Systems | BCP (Business Continuity Plan). https://www.nissan shatai.co.jp/EN/IR/MANAGEMENT/BCP/index.html
Song, Z., Zhang, H., & Dolan, C. (2020). Promoting disaster resilience: Operation mechanisms and self-organizing processes of Crowdsourcing. Sustainability , 12 (5), 1862. doi:10.3390/su12051862
