The Application of MRP in Nissan Company - Case Study Example

Part 1

A

The operation management focused on the in-stock and in-transit inventory and at the same time slowing the production both in the upstream and downstream according to the anticipated challenges. For instance, it managed to slow down some products that increased the overtime costs as a means of lowering them. The management further moved the vacation period to April and may so that the company could free up the capacity during the summer when the anticipated upstream challenges would have cleared. The company utilized the time acquired from the in-transit inventory to obtain and implement supply alternatives as it was the case with Japan and the west coast of USA, particularly in Mississippi and Tennessee. Here, the management had 20days to identify ways of accessing alternative supplies of critical parts. In addition to that, the company was able to airlift essential parts from Japan to bridge the gap that existed with the in-transit stocks as using the air freight was faster.

B

Nissan introduced a simplified product line that was different from its competitors. It engaged in the build-to-stock approach of some of its SKU’s in every model and others in the build-to-strategy. According to the management, such strategy would assist the company in simplifying the operations as well as the product offerings to its customers. It was a strategy that saw the company increase its sales significantly.

C

The company has two business components namely, the service and manufacturing operation. While one may consider them as related, they have different. A business can run even when one is not present. Customers are essential for the company to buy the products so that the acquired income can finance the manufacturing process. Following the 2011 earthquake, the Nissan’s manufacturing plants suffered a lot of damages and could not produce its leading products which are vehicles. At that point, the service operation survived on the existing inventories to make sales for the company. The two are essential in creating customer value, the primary goal of the organization to satisfy its customers. While service operations are in direct contact with the customer and can get specifications that can meet their demands such as color, quantities, such information is vital to the manufacturing operation to incorporate them into the products so that they can have a higher value to them. In this way, Nissan can manage to manufacture vehicles that meet the specific needs of its customers with the help of the service operation department.

Part 2

A

Material requirement planning shortened as MRP is an inventory management technique that uses computerized programs that aids assist the production managers to schedule as well as place orders for the dependent demand items. In this case, the dependent demand items are those required to manufacture finished goods such as the raw materials. The introduction of MRP to the company would assist in a number of its operations such as billing of the raw materials, scheduling of files as well as the record files. Through MRP, Nissan can use the material bills to identify some individual components required to manufacture a particular number of finished products. The system would subtract the actual quantities of inventory to determine the necessary order. The application of MRP would assist the production managers within the company reduce the inventory levels which increased holding costs. In addition to that, Nissan would manage to have adequate tracking of material requirements, identify economic order sizes and safety stock quantities.

B

Both the CPM and PERT are essential tools for project management which assists in goal prioritizing. The two are diagrammatical that guide the managers in the best ways they can navigate from the initial step of the project to the result using the shortest time possible. For the Nissan case, the management would use CPM when planning out the Global Disaster Headquarter contingency plans. It would be of relevance when computing the minimum required time that would be used to accomplish the overall goal of the project. Using PERT that utilizes three estimates, Nissan would develop a plan that would assist in getting the vehicles from the production sites to the showrooms. While several factors affect a project some of which are materials, downtime, labor among others, the PERT method would be the most appropriate to use because it considers all of them when plating the overall expected completion date of the project.

C

Sequencing entails deciding on what job to complete. It is the dispatching of jobs through priority rules. When applying sequencing, Nissan can have five sequencing rules to choose from for its production. These are first come, first served, Earliest due date, longest processing time, shortest processing time and critical ratio. The first come, first served could allow the company to sequence jobs in order of their arrival at the workstation. With the earliest due date, the sequencing would be in the order of the materials are scheduled for delivery. The shortest processing sequencing would follow the order of processing duration with those requiring shortest time given the priorities. With the longest processing time, those needing a long time appear first in the process. Finally, the critical ratio sequencing would allow the company to sequence based on the increase in the ratio of time required to work on them to the available time.

D

The theory of constraints is essential in the identification of the significant limiting factor that prevents the achievement of goals. According to the theory, the constraints are the bottleneck. The theory itself is an approach for enhancing improvements which assume that in complex systems such as ones in manufacturing, there are multiple connected activities out of which one of them is a constraint to the whole system. It follows five steps which are the identification of the limitations, exploitation, subordination and synchronization, elevation of the performance and repetition of the process. The first step requires the operation manager to identify the limiting factors that hinder the achievement of the goals. Here, the plant manager for Nissan can identify the particular parts which put affects the entire assembly process. The second step would be exploiting the constraint by way of making improvements to the affected regions using the available resources. The third step will require the managers to review the all the possible activities in the process to facilitate alignment with the needs of the constraint. It will require solving all the problems. The elevation of the performance of the constraint will involve eliminating it for good. With the final, the company has to keep on repeating the process on a routine basis for improvement purposes to allow for the identification and fixation of issues whenever they occur.

E

Forecasting is integral to any company. Through forecasting, Nissan can identify the products that are likely to have higher demand so that it can increase the inventories to ensure the production is continuing to meet the demand. The following are the five steps that facilitate a successful creation of forecasting system. These are the definition of the problem, gathering of the information, conducting preliminary analysis, identifying the fitting models and the use and evaluation of forecasting model. Defining the problem would be the most challenging thing as it involves a proper understanding of the individuals who require the forecasts and how to use them. The gathering of the information will include the collection of both statistical and accumulated expertise from people. The preliminary analysis involves graphing the gathered data and assessing their consistency patterns. Fitting the models will require determining the historical data and set of assumptions. After that, the company will be ready to use the forecasting the model and then evaluate the outcomes and well as its effectiveness. Nissan can use prediction in many ways some of which are faring of the vehicles in the showroom.

F

The following are the seven factors that make Nissan in both the supply chain and risk management. The first is risk governance. The company has needed to have appropriate risk management structures, processes as well as culture. The second is the flexibility and redundancy with the company’s product, network and process architectures. The third is the alignment with the partners in the supply chain. The fourth is the integration of both the upstream and downstream supply chain. The fifth is the alignment between the internal business functions while six is the management of the complexities and rationalization. The final is the use of the intelligence and analytical capabilities to promote supply chain and risk management functions.

Through the Nissan’s global disaster headquarters, the company to plan how to deal with the shortages and supply chain problems. After the occurrence of the disaster, the company was able to transport supplies from one place to another to minimize the downed time in the production lines. Nissan through its preparedness was able to maintain a six-month output while its competitors struggled to produce.

G

Just-in-Time (JIT) is a method of controlling the problems associated with inventory. Materials are only bought when the need arises and thus allowing the company to maintain less Inventory. Nissan had to keep the required amount of stock on hand to complete the job. Maintaining fewer quantities ensures that the company utilizes less storage space and also reduces the costs associated with holding the inventory. The method has both advantages and disadvantages to the company as follows. Benefits related to its ability to meet the customer needs as well as reduce inventory costs. It allowed the customers to have decreasing disruptions when receiving their ordered products. It would reduce the holding space and the staff required to maintain it. Its disadvantages are the need for significant coordination between the suppliers and the retailers. However, this can be solved by syncing their computer systems to allow direct monitoring of inventory levels and quicker responding to low inventory levels.

The Toyota Production System (TPS) focuses on continuous improvement for the people and the standard work practices. It has three core components namely, continuous improvement, respect for people and standard work practice. Continuous improvement builds on the organizational culture and instills it within people. The respect for people allows empowering of the employee to make decisions relevant to the functions of the business. Toyota recognizes that its employees are more knowledgeable about their jobs and thus using TPS provides the employees with an opportunity to enrich themselves and their job. Toyota has standard work practices that specify the content, sequence, timing and even the outcome of the process. They have direct customer-supplier connections that determine the personnel, methods, timing and also the quantity. The advantages of the approach include the reduction of waste, less movement of the production labor, less time is required for JIT production. Further, it allows for checking of all the production steps. Its disadvantages include the high cost of implementation, training of the employees, the need to have suppliers that can manage small amounts of on-hand inventory.

H

Total quality management (TQM) is an approach familiar to the operation managers. It is the management of the entire organization to excel in all the aspects of product and service relevant to the customers. There are several tools which operations can use for their TQM some of which include pie charts, histograms, bar graphs just to mention a few, each with a different use to the managers. Knowing to use them distinguishes as a company from the rest. For instance, run charts would be suitable to the Nissan Company during the process of vehicle assembly to assist in assessing the accuracy rates and tracking high and low points within the process. In addition to that, the focus groups would help in gathering customer information that would assist in brainstorming ideas as well as creating affinity diagrams.

Part 3: Data analysis

Cause and effect diagrams are essential to the operation managers in the identification of quality issues and inspection of points. It is a schematic technique that facilitates the identification of the areas with quality problems. In the case of Nissan, the diagrams would aid in identifying the different factors that have the potential of hurting the production and transportation of the parts form the manufacturing plant.

Time map function is another tool that would be beneficial for the tracking of time demands. It is a tool that illustrates a timeline of the process and the guidelines of where the process should be at any given time. Below is an example of tike function map for Nissan for producing a new vehicle to the market.

Different forms of charts and graphs can be used to weigh the advantages and disadvantages of the different sites. Using the provided data, one can create a pivot chart that aid in weighing the pros and cons of setting a business in Mexico and Columbia for informed decision making. Using the weighted values, one can identify how the company assumes that the listed factor could guide in making decisions on where to build a plant.

Row Labels

Sum of Weight

Sum of Mexico City

Sum of Columbia, SC

Labor Costs

0.10

80

50

Labor Productivity

0.20

85

75

Political Risk

0.25

70

80

Rental Costs

0.15

90

55

Taxes

0.10

90

50

Transportation Costs

0.20

40

90

Grand Total

1

455

400

After the computation, it appears that Mexico City is appropriate for setting up the business based on the weighted values of the factors.

Using the ABC system could help Nissan deal with the inefficiencies of the inventory management systems. The system groups and ranks items based on their usefulness in the achievement of business goals. Nissan can identify the things that have higher costs so that it can get suppliers with reasonable prices to save on costs.

Data S for parts and costs

Item

Annual Demand

Cost/Unit

Dollar value

% Dollar Value

A2

3000

50.00

150000

13.79%

B8

4000

12.00

48000

4.41%

C7

1500

45.00

67500

6.21%

D1

6000

10.00

60000

5.52%

E9

1000

20.00

20000

1.84%

F3

500

500.00

250000

22.99%

G2

300

1500.00

450000

41.38%

H2

600

20.00

12000

1.10%

I5

1750

10.00

17500

1.61%

J8

2500

5.00

12500

1.15%

Part 4: sustainability

A

Nissan utilizes triple bottom plebe for sustainability. For this concept, the company should be prepared for three different bottom lines which are corporate profit, people account and planet account. The corporate profit bottom line should come from the profit and loss account while the people account focuses on how an organization is socially responsible in its operation. The planet account is responsible for the environment. As a sustainability approach, the triple bottom line would help in measuring the financial, social as well as environmental performance of a corporation over a period. Nissan links the CSR actions with its business operation to promote a corporate management that is consistent with the goals of sustainable profit, the growth of the company and development of the society.

B

The ISO 14000 standards are also relevant in increasing the Nissan’s corporate social responsibility. The company has acquired a certificate for some of its major production plants which makes it possible to achieve consistent environmental management. In this way, it can allow its objectives bolster its environmental management.

C

Nissan continues to grow its environmental management through its plans and certifications. For instance, the ISO 14001 enables the company to integrate CSR into its daily production and at the same time limiting the emissions into the environment. However, Nissan has numerous ways through which it can incorporate the CSR principles into its operations. It can use its inventory management approaches such as JIT and TPS to cut on the wastes. For instance, JIT can help in reducing the fuel costs and storage space to allow other manufacturers or suppliers to use them.