Response actions that Nissan undertook strategically to hasten its restoration process from damages caused by the disaster are information sharing, global allocation of supply, managing production, and empowering action.
Associated with sharing information is the cost of transferring staff members from non-Japanese centers to Japan, where response operations were highly required. Moreover, the reduced number of staff members in non-Japanese centers is another cost that Nissan incurred in sending some of their staff members to aid in the restoration efforts.
Regarding the action of global allocation of supplies, Nissan allocated its supplies primarily to products with the highest profit margins making it incur costs related to the deficiency of the lowest margin products and loss of low-end customers. In the action of managing production,
Nissan slowed down the rate of production, and thus, reducing in-transit and in-stock supplies and underutilizing its facilities. Furthermore, to mitigate the reduction of critical components, Nissan used airfreight, which is very expensive when compared to the routine shipping. Concerning the action of empowering management to make hasty decisions and undertake timely activities, Nissan had to modify its delegation rules and transfer authority of decision-making to peripheral authorities.
The response actions, namely, sharing of information, global allocation of supply, managing production, and empowering action have significant potential benefits to Nissan. The benefits associated with the action of sharing information are enhanced restoration efforts, firsthand experience, and equitable sharing of information. The potential benefit associated with the action of global allocation of supply is that it enabled Nissan to maintain its profit margins despite decreased production and sales.
Concerning the action of managing product, the potential benefit that Nissan gained is reduced production costs owing to slow rate of production. Additionally, Nissan benefitted from airfreight because it ensured that there is a timely transit of critical supplies to various global regions to supplement in-transit products. In the action of empowering peripheral management by delegating duties and responsibilities, Nissan promoted speedy and effective mitigation and restoration measures.
To prepare for and respond to the disaster effectively, Nissan could have decentralized its operations and distribute them to different continents, namely, North America, Europe, Asia, South America, Africa, and Australia. Given that Nissan centralized its operations in Japan, it increased the impact of disasters on its production and supply. The costs associated with the centralization of operation are massive because they entail construction plants and related infrastructure in various strategic regions across the world.
Moreover, Nissan has to recruit, train, and distribute human resources to various global plants, where it has decentralized operations. Despite the massive costs, decentralization of operations is beneficial to Nissan because it reduces the impact of disasters on its operations. When disaster affects a plant in a region, the remaining plants in other regions optimize operations. Additionally, decentralization of operations is beneficial because it reduces transport costs and ensures a constant supply of products to diverse markets.
Nissan could have also enhanced the efficiency of its supply chain to prepare for and respond to the disaster successfully. Since the disaster affected the supply chain and caused a shortage of critical products, enhancement of the efficiency of the supply chain could have effectively mitigated the impact of the disaster.
To enhance effectiveness of supply chain, Nissan needs to construct supply chain stores in strategic markets to cushion shortages that emanate from different forms of disasters, which threaten the normal supply of products to the respective markets. Furthermore, increased number of chain stores implies that Nissan should employ an additional workforce that is commensurate to the workload. In spite of these costs, enhancing efficiency of supply chains is beneficial to Nissan because it ensures that there is
To assess the risk of the supply chain disruption, Nissan could have assessed the resilience of the supply chain. Nissan should have estimated the number of days it would take for it to exhaust products, which are both in-transit and in-stock inventories. The length of time it would take Nissan to exhaust its products is a reliable parameter, which indicates the resilience that the supply chain has in the face of impending risks. Moreover, Nissan could have assessed the demand for the products in global markets and project it over a reasonable period for purposes of planning.
As disruptions are predictable events, Nissan could have assessed the vulnerability of its supply chain to operational contingencies, natural disasters, terrorism, and political upheavals. Nissan should have assessed operational contingencies such as breakdown of equipment, lack of power, strikes, shortage of raw materials from suppliers, and systemic failures.
Assessment of the vulnerability of the supply chain to natural disasters such as earthquakes, storms, and hurricanes was essential. Terrorism and political upheavals are some of the factors that have huge potential of disrupting supply chain in various parts of the world, and thus, critical assessment of their threats is necessary.
Although Nissan employed build-to-stock strategy in a few products and build-to-order strategy in most products, the overall impact was that it affected its capacity to respond to the disaster and recover from its effects. Build-to-order strategy is beneficial in the supply of customized products, and thus, aid in meeting diverse needs of customers.
However, build-to-order is a disadvantageous strategy because it reduces the supply of products and causes their chronic shortage in diverse markets. In this case, it implies that Nissan had no enough stock of products by the time the disaster hit the production plants. The build-to-order strategy, therefore, aggravated the shortage of products in global markets.
Given that build-to-order strategy entails customers placing orders and waiting for their customized products for a certain period, the effect is that there is a considerable waiting time. In this view, the waiting time slowed down the supply of products to the markets, and thus, failing to alleviate the massive shortages. Moreover, continued shortage of products made Nissan lose customers and reduce sales, hence, hindering its recovery from the effects of disaster.
The operational changes announced in 2012 will have positive effects on future disruptions. The operational changes imply that when disruptions occur in Japan, it would not have a massive effect on supply chain because North American plants would upscale production and supplement deficient products in the markets. In essence, the operational changes reduce the risk and the impact of disruptions on Nissan.
The operational changes would reduce steady-state operations in Japan because North American plants would have taken duplicate operations. Evidently, the operational changes aim to reduce the amount of components that North American plants import from Japan by 50%. The net effect is that the steady-state operations in Japan would decrease by 50%, which is commensurate with the responsibility taken up by North American plants.
The management is making a trade-off between centralization and decentralization of operations. This trade-off occurs because maintenance of operations within Japan is centralization, while shifting some operations to North America constitutes decentralization. In the aspect of centralization, Nissan enjoys numerous benefits because implementation of policies is uniform, coordination of operations is easy, there is reduced financial burden, and conflict resolution is quick. On the other hand, decentralization of operations has benefits such as quick decision-making, effective supervision, reduced management burden, and product differentiation.