Analyzing and Stimulating Supply Chin Disruption to the Automobile Industry - Case Study Example

Nissan Motor Company Operation Management (Name) (University) Executive Summary In the year 2011, Japan encountered three disasters simultaneously. The disaster included earthquake, Tsunami and Nuclear. The outcome of the disaster greatly affected top organization operational management activities. Japan experienced poor production rates hence loss of economic revenue for the entire country. In this retrospect, this paper seeks to build a case study of the Nissan Motor company operational management as per the experience of the devastated outcome in the year 2011. For in depth analysis, the paper seeks to analyze Nissan Motor company production rates and supply chain management after the disaster. Problem Statement For the past three years, Nissan Motor company has been experiencing operational management challenges due to Japan natural disasters. As per the findings, Japan experienced three different types of disasters, thus earthquake, Tsunami and Nuclear reactors leakage. The disaster greatly affected Nissan Operational Management towards poor level of production internationally, challenges in supply chain management and poor revenue generation. Generally, the listed shortcomings are based on weaker operational management after the occurrence of the three disasters. Several strategies are positioned towards combating the operational management challenges experienced in Nissan Motor company. The strategy focuses on supply chain management that embraces flexibility by empowering each operating regions. The strategy will ensure that each operating regions will be equipped with the needed resources and equipments to operate independently without the support of other regions. In this context, the company manufacturing plants will be in a position to operate irrespective of challenges from other regions. Analyzing Data Operational Management Research showcase that in 2011, Japan experienced Tsunami, Earthquake, and nuclear power plant leakage that covered a wider radius in the country (World Nuclear Association, 2016). The finding indicated that the earthquake recorded a magnitude of up to 9.0 scales; the Tsunami recorded a 40 meter high level that managed to travel more than 10 kilometer radius across Japan and three nuclear power plant of up to 7th level. The most affected facility in the region includes the Nissan Motor Company whereby most of its operational facilities were damaged among other organization. Such an outcome greatly affected the entire operational management services at the Nissan company. Economically The catastrophic experiences in Japan led to an economic loss of up to ¥16.9 trillion (Government of Japan, 2011). The economic loss was as a result of the Japan Government suspending at least 80% of the automobile manufacturing in Japan hence the production rate had to go down by 60% thus the total production from automobile industry was at 9% after calamities (Ono, 2014). Nissan automobile company suffered a loss up to six production facilities while about 50 of its major product suppliers were impaired (Schmidt, 2013). Basically, the suspension was greatly adhered to unstable operating environment, employee psychologically and health well-being challenges, poor infrastructure and limited facilities for the company to operate. Additionally, the automobiles markets outside Japan were adversely affected such as Honda and Toyota (International Fleet World, 2016). According to IHS Global research, findings predicted that over 4 million will be lost due the disasters, while 90 % of the loss will come from the Japanese producers (McKinsey & Company, 2016). The outcome indicates that Nissan Motor company was encountering operational management crisis that required urgent interventions. Selecting Decision Criteria Risk and Assessment Generally, it is important for an organization to identify the risks available for the assessment to be conducted. The ability to effectively identify the risk, companies is positioned to quantify and prioritize the risks. Through quantifying, organizations will have the ability to make mitigations strategies that can easily handle the expected risks. In this retrospect, Nissan operational management disaster outcome showcased risks towards an effective and efficient operating service. In this context, Nissan Motor company had to gauge the impact of the risk associated with the supply chain disruption towards an effective and efficient operating services. In this context, it was agreed that the risk and its assessment would focus on the company manufacturing cycle towards potential logistic constraints due to the disaster. Flexibility of Process Nissan company workable process greatly adhered to the hierarchal system whereby majority of the manufacturing process arose from the central headquarters in Japan. After the struck of the disaster, the company failed to operate effectively due to higher dependency of the regional manufacturing plants towards the central headquarter. As such, the company needs to seek newer approaches in strengthening the regional manufacturing plants to be self dependency for an effective operation process. Optimization of Buffer Inventory Contrarily to the Japan disaster, it was agreed that the company needs to continue operating so that it can recover from the shock. Such a strategy was applied under the optimization of buffer inventory for the company. The optimization of buffer inventory showcased that the company had enough supplies for its continuous operation though the calamities had affected the company. As such, the decision criteria greatly focused on continues operating of the business and generation of the revenue so that Nissan company can arose from the disastrous shock. Supply and Delivery Alternatives Some of the collaborated regional and international companies receiving supplies from Nissan company were not affected. As such, Nissan company had to strengthen it collaborative relationship with such companies in attaining strong supplies purposefully to generate the company resources. The applied strategy implied that Nissan was basically trying to empower the trading relationship with some of its partners. The decision making approach at this phase focused on reducing the potential errors that could easily affect Nissan company and the ability to simultaneously cut costs from its operation so that enough resources could be collected t restructure the company backs to its market position. Managing Logistic Processes The critical decision aspect on logistic processes was to position Nissan company not to entirely depend on supplies delivery approach as a means of getting back strongly to the automotive industry. The criteria at this stage strongly recommended that Nissan company has to strongly bring critical components to Japan whereby the company services can be aligned to the current economic status of Japan. In this case, Nissan products will only be sourced globally when if only the identified market for supplies is in place. Suppliers Company’s strong relationships with suppliers pose an added advantage during business financial crisis. In this case, Nissan decision approach was to strongly depend on its suppliers after the disruptions occurred and basically monitor the suppliers for any potential problems that could easily arise. In this context, Nissan company would have the audacity to understand the supplier’s risks factors in cases of emergency that could easily affect Nissan businesses. Generating Alternatives Information Sharing Nissan Motor company strategized on using the decentralization and collaborative approaches to gather information for problem solving. In this approach, Nissan company requested a visit of two representatives to Japan, purposefully to gather information and offer a workable solution to the company as a whole. Such an approach showcase that Nissan company greatly focused on costs which can be presumed to be cost nominal because the used resources were only meant to sustain two representatives from each region. This was due to the hard economical time experienced by the company after the disasters. Consequently, two representatives approach seem beneficial to the company in decision-making process. The decision making process focused on prioritizing regions that would be greatly affected than the other regions due to the disaster. In this context, the decision making process adhered to the impact of decreasing the overall impact of disaster to the company. Generally, the decentralization and collaborative approach in information sharing adequate allocation of supplies to each region, managing the required level of production and, empowering actions to regions that were critically affected by the disaster. Allocation of Supplies Nissan Motor company strategic allocation of supplies had substantial benefits towards the company. The loss of revenues due to the encountered disaster was managed by using the idle inventory to allocate more supplies of high margin Nissan automotives to the unaffected operating regions. The operating strategy was successful because low selling region forwent the production of GPS units knowing that the product won’t sell well in their market hence forwarding the GPS units to the most needed market that would be highly sell the product hence improving on the company revenue. Management of Production Based on Nissan operational challenges, the company management on production showcased noticeable benefits. The current in-stock and in-transit inventory positioned the company production operational to be slowed down. Considering in-stock inventory, the company reduced the production level purposefully to prevent products from backing up hence creating an idle inventory and a further cost for housing the products. It’s worth noting that, the disaster had destroyed majority of the Nissan operational facilities hence a shortage in product storage facilities. Regarding in-transit inventory, Nissan company used the air freight to supply critical products quickly purposefully to mitigate the reduction of in-transit inventory stocks in a little time. In this aspect, the company managed to generate quickly sales that could have been forgone without applying quicker methods of supplies such as the use of airfreights. Empowering Actions Nissan Motor company empowering focused on executing decision making process either from the regional offices or central authorities. Each region was given mandate to make a workable decision hence spearheading a quicker service operation rather than to wait for instruction from the central headquarters. As such, the company managed to save lots of millions due to a speed up critical decision making process and the ability to recover special related issues by having a downward delegation of authority at a limited period of time. In this retrospect, it can be argued that regional empowering action led to quicker decision making process which inhibited the resource from becoming idle thus preventing the possibility of loss of sales for the company. Recommendation Nissan company showcased weaknesses in global disaster control strategies regarding identifying and planning for the expected risks to occur in its operating environment. The assigned body showed some failures in strategic analysis of disasters when it comes to geographical interdependencies and risk contingencies. In this context, the impact of the Tsunami was underestimated hence a major flaw for the company. The underestimation of Tsunami occurrence and damages in the identification phase during analysis led to poor risk response during Tsunami disasters. To effectively handle such disaster in future, the company needs to strategically conduct a qualitative and quantitative analysis purposefully to plan the type of responses to be in place during disasters. After the disaster, Nissan company experienced some bottle necks of its products due to the supply management process in place. To prevent the future possibility of bottle neck occurrence of products during disasters, Nissan company needs to streamline its critical parts to be interchangeable with different parts from different regions. Such a technique will practically eliminate the contingency reserve of critical products only from Japan to be moved to other regions. Additionally, each region needs to work interdependently purposefully so that if one region encounters challenges, other Nissan manufacturing plant can continue to manufacture automotives without experiencing shortcomings. As such, the company would have strategically eliminated the possibilities of experiencing bottle necks during shortcoming of service rendering. To effectively attain self dependency of each region, Nissan company needs to strategically empower the localization production of its products. Such a strategy will enable the company to have self sufficiency in each regional production of Nissan automotives. Action and Implementation Plan Actionable Business Continuity Strategy The actionable business continuity strategy is a strategic system in place that would enable the Nissan company to effectively operate incase of any challenges that would occur in the company. The actionable plan needs to have an effective and efficient supply chain and risk management processes. This is essential especially when one region fails to manufacture the automotives; the other functioning regions are able to meet the demand of the supplies expected from the failed manufacturing plant. Though it will be costly, Nissan Motor company needs to empower its operating plants to have the enough facilities to effectively produce enough products if several plants fail to produce. In the process, the company will continue to meet the expected demands from the consumers. To fully implement the actionable business continuity plan, the company requires much more resource, updated technologies and the skilled labors. As such, the company needs to invest greatly on its revenue and insurance covers purposefully to attain the plan. Additionally, the company needs to offer new trainings to both newer and older employees within the organization across all the departments. The training will be essential to insure that the newly structured facilities are positioned to begin the new operations as soon as possible. References List Government of Japan. (2011) Japan’s Challenges towards Recovery. Available at http://www.meti.go.jp/english/earthquake/nuclear/japan-challenges/index.html. [Retrieved on 23rd /November/2016] International Fleet World. (2016) Honda Looks to Future. Available at http://internationalfleetworld.com/profile-honda-looks-to-the-future/. [Retrieved on 23rd /November/2016] Ono, K. (2015) Analyzing and Stimulating Supply Chin Disruption to the Automobile Industry based on Experiences of the Great East Japan Earthquake. Journal of Integrated Disaster Risk Management. Available at www.idrimjournal.com/OLF/ONLINE-FIRST.pdf. [Retrieved on 23rd /November/2016] Schmidt, W. (2013) Nissan Motor Company Ltd: Building Operational Resiliency. Available at https://mitsloan.mit.edu/.../CaseDocs/13-149%20Nissan.Simchi-Levi.pdf. [Retrieved on 23rd /November/2016] World Nuclear Association. (2016) Fukushima Accident. Available at http://www.world-nuclear.org/information-library/safety-and-security/safety-of-plants/fukushima-accident.aspx. [Retrieved on 23rd /November/2016] Read More