.

How did Nissan's product line strategy help or hurt its

ability to respond to and recover from the disaster?
According to the case study by the 1960s, Toyota transitioned away from push
manufacturing and reduced buffer stocks by implementing the principles of just in
time (JIT) manufacturing. This became known as the Toyota Production System
(TPS). TPS required close coordination with production because it eliminated large
buffer stocks. This system was prone to risks when disruptions in the flow of
resources could cause idle manufacturing stages downstream. Nissan and other
Japanese manufactures adopted many principles of TPS; however, Nissan leveraged
a regional decentralized supply chain structure while supporting a strong central
control affecting global operations. (Kevi, 2013) This structure benefited Nissan
greatly as it reduced idle production caused by central supply chain disruptions
because many supplies were fabricated regionally. Also, Nissans corporate officers
represented a range of nationalities. This diverse regional experience facilitated a
holistic ideology for the company. In conjunction with regional supply chains, Nissan
simplified its product line and adopted a build to stock strategy for just a few SKUs
in each model. Per the case study, John Martin, the companys SVP of
manufacturing, stated that these supply chain management principles were key to
the, responsibility to keep production plans runningof which are crucial to
disaster and recover. Nissans CFO, Joseph Peter, attributed Nissans ability to
respond and recover from disaster as a product from matching, our manufacturing
and sourcing footprint to our sales footprint. Even though Nissans supply chain
disruptions were less than its competitors, the risk mitigation in supply chain could
have still been improved. This is why in 2012 Nissan announced it would increase
localization production of vehicles in the USA from 70% to 90% by 2015. (Kevi,
2013) Works Cited Federal Highway Administration.

The case identifies several aspects of the Nissan response

that were particularly beneficial. Expand on the points
made in the case to identify the potential costs and
benefits of these actions.

This question will be answered in two parts. The first part will discuss the responses
coupled with the potential costs and benefits within weeks and months after the
disaster. The second part will discuss the responses taken several months and years
after the disaster.
Part I:
The gathering and sharing of information was decentralized and collaborative. Each
region was asked to send two representatives to Japan to gather information and

offer solutions so that the company, as a whole, could conduct a collaborative effort
with input and information from all regions. The costs of this seem to be nominal as
trivial resources were used to transport and sustain only two representatives in this
collaborative initiative. However, the benefits would be noticeable. Having local
regional representatives in the circle of company-wide decision making allowed
regions that would be greatly affected to be prioritized over regions that would be
less affected, decreasing the overall company impact of the disaster. This sharing of
information and solutions assured that the company as a whole could adequately, 1.
allocate supplies, 2. manage production and 3. empower actions to those regions
with critical needs. This assured the flow of accurate information and solutions that
reflected actual needs.
1. The allocation of supplies likely had substantial benefits. Loss of sales revenue
was thwarted from becoming idle inventory when unaffected regions were able to
allocate their supplies to high margin vehicles. This was accomplished because
regions producing low margin vehicles forwent their GPS units, knowing they were
not necessary to sell the low margin vehicles, and sent the GPS units to regions that
would use the units needed for high margin vehicles. This allowed for greater
revenue generation, likely in the hundreds of millions of Yen (basing off exhibit 3 in
the case study) instead of decreasing sales by delaying the production of high
margin vehicles. The associated costs were the forgoing of attractive, but not
necessary, sales features of low margin vehicles to facilitate the greater revenue
benefits derived from higher margin vehicles.
2. Managing production would have had little incremental costs but noticeable
benefits. Nissan slowed production lines and considered in-stock and in-transit
inventory to anticipate bottle necks. This prevented normal amounts of parts from
backing up into idle inventory and requiring housing and sitting costs. It also
decreased costly overtime associated with normal amounts of production.
Considering in-transit inventory time to find supply alternatives also likely saved
millions. This is because the delivery of in-transit inventory, perhaps 20 days from
Japan to materials plants in Mississippi, allowed enough time to secure air freight
shipping for critical parts to be sent quickly to mitigate the reduction of in-transit
stocks. The shipping costs for air freight and quicker transportation would be
costlier than sea shipments, but the benefits were the generating of sales that
would have been forgone without the delivery of the critical components.
3. By empowering action, Nissan became flexible so that regional management
could execute decisions quickly without lengthy analysis from central authorities. In
essence, Nissan potentially thwarted the loss of millions of dollars in sales by
speeding critical decision making and recovery related issues by the downward
delegation of authority for a limited period of time. As new information came in from
different regions, corrective actions could be executed quickly. However, the costs
of removing a strong central authority may have effected quality expectations.
Nevertheless, the associated benefits were quicker decision making which

prevented resources from becoming idle, thus preventing the loss of sales and
reducing costs.

Question 2: What else could Nissan have done to prepare

for and respond to the disaster? Keep in mind the cost and
benefits of the suggestions .

According to Nissan, the company had indeed been employing seismic simulations
while retrofitting and reinforcing buildings in the area since 2003. However, Nissan
underestimated the damages caused by the tsunami, which was a product of the
earthquake. Now considering that tsunamis are products of underwater
earthquakes, why didnt Nissan calculate tsunami damages to a degree equal with
those of earthquakes? Nissan could have created new tsunami evacuation routes
and centers that took into account tsunami risks. Also, Nissan could have greatly
increased its food storages to be sufficiently adequate for its employees, their
families and local residents within a critical radius. Although the buildings were
tested and reinforced after seismic simulations, there could have been better
measures to prevent items from falling during earthquakes as noted per the case
study. These additional measures could have likely had nominal incremental costs,
but as a benefit, these measures could have been effective at saving lives from
tsunami risks.
However, provided such information were given, which preparation and contingency
proposals should have been chosen amidst the scarce resource the company
allocated to risk management? The answer is found through Net Present Value
(NPV) analysis. NPV considers the financial gain or loss of a project by taking into
account the initial costs and discounting all future costs/benefits to the present
point in time for comparison with competing projects. A positive NPV identifies
projects that exceed the cost of capital and produce a net positive benefit. All else
held constant, when comparing mutually exclusive projects, projects with higher
NPVs are preferred. In order to calculate the NPV of a project without a spreadsheet,
one needs:
1. The discount factor- The multiplier for each year based on the discount rate for
the year
2. The yearly benefits or costs- cash inflows or cash outflows

3. What could Nissan have done to assess the risk of

disruption in their supply chain?

Nissan did have an organization dedicated to the risk management starting back in
2008. The Global Disaster Control could have planned and identified the risks a bit
more strategically, especially when it came to geographical interdependencies and
risk contingencies. They likely created a probability matrix which took into account
the impact and the probability of such events occurring in specific areas where
Nissan does business. Now, Japan is located in an area where earthquakes are
frequent and Nissan identified that risk. However, according to the case study, the
impact of tsunamis was underestimated and this was a major flaw in the
probability/impact matrix. Then Nissan would conduct a quantitative and qualitative
analysis to plan the types of responses necessary. However, the underestimating in
the identification phase prevented a proper risk analysis to respond to the tsunami
risks. It is ironic that the tsunami risks in Japan were underestimated because,
tsunami, is a Japanese word and tsunamis have a long history of destruction in
Japan spanning many centuries
The tsunami risks should have been easily identified through Delphi techniques
when it came time to brainstorm and identify potential risks. Using such experts
familiar with Japanese disaster risks should have been a priority and placed tsunami
risks in the high risk zone. Regardless of the methodology to identify risks, the
organizational risk owner is the Global Disaster Control, which is responsible for
Nissans risk management.

To avoid these bottle necks bottle necks in the supply chain, Nissan could have
streamlined, to an even higher extent, all critical parts to be interchangeable with
parts in different regions. This would practically eliminate the need for contingency
reserves of critical and diverse coming needed from Japan and other regions. Per

the case study, parts and supplies had to be forgone from one factory and sent to
another factory. This network of interdependency created bottlenecks and had the
parts been the same across the board, this could have been avoided. The
bottlenecks started a ripple effect where critical unique parts became difficult to
obtain and thus hindered the production of regions relying on the scarce unique
parts.
Besides streamlining parts across the board, Nissan could have also localized parts
production, again, to a greater extent, to omit the parts interdependencies and
facilitate regional self sufficiency. However, this could be costly as production costs
in one country could be much more expensive in another. With such a large
company, not all interdependency can be eliminated entirely so a contingency plan
and/or contingency reserves could have been better put in place for critical parts.
Now contingency reserves could have worked, provided the reserves were sufficient
enough. Critical parts have been identified as a major cause for production
bottlenecks; non-local critical parts could be stored and readily available during
shortages. Yes, this would prevent a sudden scarcity of critical parts and prevent
bottlenecks but only until the dependent production facilities became functional and
contingency reserves werent depleted. Nevertheless, there would would be
housing costs for contingency reserves

4.) How did Nissans product line strategy help or hurt its ability
to respond and to recover from the disaster?
According to the case study by the 1960s, Toyota transitioned away from push
manufacturing and reduced buffer stocks by implementing the principles of just in
time (JIT) manufacturing. This became known as the Toyota Production System
(TPS). TPS required close coordination with production because it eliminated large
buffer stocks. This system was prone to risks when disruptions in the flow of
resources could cause idle manufacturing stages downstream. Nissan and other
Japanese manufactures adopted many principles of TPS; however, Nissan leveraged
a regional decentralized supply chain structure while supporting a strong central
control affecting global operations.
This structure benefited Nissan greatly as it reduced idle production caused by
central supply chain disruptions because many supplies were fabricated regionally.
Also, Nissans corporate officers represented a range of nationalities. This diverse
regional experience facilitated a holistic ideology for the company. In conjunction
with regional supply chains, Nissan simplified its product line and adopted a build to
stock strategy for just a few SKUs in each model.
Per the case study, John Martin, the companys SVP of manufacturing, stated that
these supply chain management principles were key to the, responsibility to keep
production plans runningof which are crucial to disaster and recover. Nissans

CFO, Joseph Peter, attributed Nissans ability to respond and recover from disaster
as a product from matching, our manufacturing and sourcing footprint to our sales
footprint. Even though Nissans supply chain disruptions were less than its
competitors, the risk mitigation in supply chain could have still been improved. This
is why in 2012 Nissan announced it would increase localization production of
vehicles in the USA from 70% to 90% by 2015.