Summary
The earthquake of March 2011 has left a significant mark on not only the lives of thousands of Japanese citizens but also on the economic well-being of a range of companies. Nissan was one of the organizations that suffered impressive damages (Schmidt & Simchi-Levi, 2013, p. 1, para. 1-8).
The specified issue affected the Japanese automotive industry significantly. Having only recently gained weight in the global car market, Japan was on the verge of losing its competitive advantage. Nissan, being one of the industry leaders, was affected greatly (Schmidt & Simchi-Levi, 2013, pp. 2-3, para. 9-12).
One must admit that Nissan’s corporate philosophy is rather sensible. Being very flexible and diverse, the company has been focusing on the expansion of its supply chain. The simplification of the product allowed exploring a variety of economic options (Schmidt & Simchi-Levi, 2013, pp. 3-4, para. 13-15).
The company’s risk management strategy was based primarily on its experience. The risk management team sought to locate the existing risks and address them as soon as possible. Therefore, the lack of training made the process very complicated since people did not have the required skills (Schmidt & Simchi-Levi, 2013, pp. 4-5, para. 16-19).
When managing the aftermath of the earthquake, Nissan focused on rebuilding its supply chain. The tools such as information sharing, allocating supply, managing production, and empowering action were used. Thus, a rapid assessment of the damage and the identification of the available solutions became possible (Schmidt & Simchi-Levi, 2013, pp. 5-7, para. 19-33).
The disaster was followed by a quick drop in production rates. Many companies suffered from disruptions in the supply chain, yet Nissan avoided the threat successfully owing to its risk management framework. According to the statement of Nissan’s representatives, the company was going to focus on improving its supply chain (Schmidt & Simchi-Levi, 2013, pp. 7-8, para. 34-37).
Response, Its Costs, and Benefits
The management of disasters is one of the most challenging tasks for an organization operating in the global market since natural disasters are barely predictable (Ministry of Foreign Affairs, Government of Japan, 2012b). Therefore, it is crucial to develop the framework that allows responding to the crisis in a manner as efficient and expeditious as possible, thus, helping reduce the negative impact and facilitating the safety of all stakeholders involved (Ministry of Foreign Affairs, Government of Japan, 2012a).
As the case of Nissan (Schmidt & Simchi-Levi, 2013, p. 2, para. 2, lines 3-4) shows, the introduction of a strategy based on efficient information and supply chain management processes allows for addressing disasters fast, yet, for complete success, the company should have developed an appropriate disaster management framework beforehand (WardsAuto Group, 2012).
As the case study shows, in its attempt to recover from the damage done by the earthquake, Nissan focused on renovating its supply chain (Schmidt & Simchi-Levi, 2013, p. 4, para. 2, lines 4-5). The identified step can be considered rather sensible since it helps address the issues associated with the delivery of the necessary resources, the fast dissemination of data, etc. (Mochimaru, 2011). Speaking of which, the emphasis on information management was the key advantage of the strategy.
Thus, the foundation for identifying the problems and using the available resources to develop a sustainable strategy was built. Consequently, the organization enjoyed a significant number of benefits, including the opportunity for addressing the problem expeditiously. The focus on production management and the choice to promote high-margin vehicles as opposed to low-margin ones, in turn, can be deemed as the primary cost.
Other Options, Their Costs, and Benefits
Even though the framework adopted by Nissan to reduce the negative effects of the disaster served its purpose, there were several ways to improve the outcomes. For instance, more elaborate precaution measures and a better thought-out disaster management plan could have been a significant improvement. The managers at Nissan seem to have underrated the effects of natural disasters and, therefore, developed a rather superficial disaster management framework.
Particularly, simpler routes for evacuation of the target population could have been designed (“Nissan 2011 annual report,” 2011). The identified approach would have allowed saving a significant amount of time, thus, creating prerequisites for reducing the damage to the key stakeholders. The expenses that the said step required would have been minor once a proper data management approach had been used. For instance, a more detailed study of the local infrastructure and the design of new routes might have been an option.
Risk Assessment Opportunities; Retrospect
The introduction of more coherent qualitative and quantitative assessments of the threat and the focus on creating a rigid framework for essential steps to be taken, e.g., evacuation, should have been considered. Thus, the organization would have avoided numerous damages to which it was exposed. The qualitative approach would have shed light on the essential factors that contributed to the increase in the risk levels. For instance, carrying out interviews among the target population would have allowed determining the awareness levels among them. Thus, the type of instructions that the identified stakeholders would have needed in the crisis would have been determined, and the appropriate tool for providing the target population with the relevant information could have been designed.
Product Line Strategy and Response/Recovery
The introduction of the Just-in-Time (JIT) approach as the foundation for the manufacturing process contributed significantly to the enhancement of the response efficacy and the speed of recovery (Schmidt & Simchi-Levi, 2013, p. 3, para. 1, line 3). Particularly, the tools for managing the available resources in a manner as efficient and expeditious as possible were designed. The JIT framework served as the means of compensating for the lack of preparedness by which the company’s strategy was characterized.
Furthermore, Nissan’s managers should be credited for a reduction in buffer stocks so that the process of resource management could have become easier and faster: “The firm reduced buffer stocks and instead adopted the principles of just-in-time manufacturing” (Schmidt & Simchi-Levi, 2013, p. 3, para. 1, lines 2-3). Consequently, it can be assumed that the strategy used for the product line in the organization served as the foundation for addressing the crisis successfully.
Exposure to Future Disruptions
The operational changes are bound to promote safety successfully since a “more robust supply chain” (Schmidt & Simchi-Levi, 2013, p. 8, para. 4, line 4) allows for a more efficient management of the available information. Therefore, consistent improvement of the information management strategy should be viewed as one of the primary objectives.
The business flow is also likely to become more stable once the supply chain management becomes more stable. Particularly, the issues associated with product quality and deadlines will be handled successfully as long as the organization coordinates its actions with the ones of its retailers and suppliers successfully. Thus, investing in the disaster management strategy improvement and the development of the supply chain, the company is building the foundation for preventing and addressing similar instances in the future.
It should be noted, though, that a better thought-out approach toward crisis management should be designed. Once the preparedness levels are high in the company, Nissan will be capable of reducing the degree of the damage significantly. Therefore, the enhancement of the preparedness levels should also be in the firm’s focus.
References
WardsAuto Group. (2012). Japan production by month, 2005-2011. Hudson, NY: Author.
Ministry of Foreign Affairs, Government of Japan. (2012a). Great East Japan earthquake (details). Web.
Ministry of Foreign Affairs, Government of Japan. (2012b). List of relief supplies and donations from overseas. Web.
Mochimaru, T. (2011). Auto sector: Our stance in wake of recent earthquake. Tokyo: Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Nissan 2011 annual report. (2011). Web.
Schmidt, W., & Simchi-Levi, D. (2013). Nissan Motor Company Ltd.: Building operational resiliency. Cambridge, MA: MIT Press.