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Nissan Motor Company: Operational Resilience Case Study

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Updated: Jun 13th, 2020

Potential costs and benefits of Nissan actions

Nissan Motor Company responded to the 2011 earthquake disaster using several actions. These targeted actions presented numerous benefits and costs to the corporation. Such actions presented unique benefits and costs. The main focus after the disaster was to use a powerful emergency-response strategy.

The first action was to improve the level of information sharing. Many experts from different regions came to Japan in order to solve the targeted problem in a holistic manner (Schmidt & Simchi-Levi, 2013). This effort made it easier for the firm to deal with the disaster. The firm was on the right path towards recovery. However, the effort affected the performance of other subsidiaries in different parts of the world. This was the case because every manager concentrated on the disaster.

The “second practice was the allocation of supply” (Schmidt & Simchi-Levi, 2013, p. 6). This approach brought together different teams in order allocate various supplies. The firm’s resources were allocated in a proper manner depending on the targeted demands. This effort supported the firm’s supply chain. This strategy was critical towards supporting Nissan’s business model.

The third approach was to manage Nissan’s production. The firm “considered in-transit and in-stock inventory within its networks” (Schmidt & Simchi-Levi, 2013, p. 6). This approach addressed the bottlenecks that might have affected the firm’s recovery process. These actions made it easier for the firm to recover from the disaster.

The fourth approach was “to support a rapid action” (Schmidt & Simchi-Levi, 2013, p. 6). Every person in the firm was part of the decision-making process. A Global Disaster Control Headquarters (GDCH) was created a few minutes after the disaster (Schmidt & Simchi-Levi, 2013). This team formulated the best strategies in order to restore Nissan’s operations. The company was forced to incur more costs in order to support the above actions. The important thing was to support the firm’s business goals.

These four approaches encouraged the firm to restore its global activities. The main goal was to optimize the company’s supply chain. Nissan used its production plants in Europe to supply the required spare parts. The European team collaborated with different counterparts in Japan. This action made it easier for the firm to support its business strategy. The action also supported the needs of the company’s customers.

What else could Nissan have done to prepare for and respond to the disaster?

It is agreeable that Nissan used a powerful strategy to respond to the disaster. However, the existing supply chain could not support the company’s recovery efforts. Nissan had always maintained a simple product line. The firm also “used a build-to-stock approach for its SKUs” (Schmidt & Simchi-Levi, 2013, p. 4). The company’s supply chain philosophy was “characterized by extreme vigilance associated with single point responsibility” (Schmidt & Simchi-Levi, 2013, p. 4). That being the case, Nissan should have implemented a Disaster Management System (DMS) before the earthquake took place. The DMS model would have ensured more facilities were in place across the country. Such facilities should have been constructed in the mainland. The facilities would produce different supplies, spare parts, and critical components. The targeted supplies would support Nissan’s business model even after the disaster.

The DMS model would have made it possible for the firm to respond effectively to the disaster. The firm would not have undertaken the above actions after the disaster. Nissan would have used the right resources to deal with the disaster (Schmidt & Simchi-Levi, 2013). The firm should have also established a powerful Disaster Response Team (DRT). Such DMS models are usually expensive to implement. However, it would have supported the firm throughout the crisis period. The above GDCH would not have been created after this earthquake.

What could Nissan have done to assess the risk of disruption in their supply chain?

The recovery process did not assess the risk of disruption in the firm’s supply chain. A proper strategy could have made it easier for Nissan to assess this risk. The firm should have collected relevant data from different departments. The sales and marketing department would have presented the best information (Schmidt & Simchi-Levi, 2013). The finance department should have analyzed the risks associated with this disruption. A proper inventory would have highlighted most of the disruptions in the company’s supply chain. Nissan should have also interviewed different customers in order to assess the level of disruption. The managers should have used the gathered information to make the best decisions.

How did Nissan’s product line strategy help or hurt its ability to respond to and recover from the disaster?

Nissan’s product line strategy had produced the best goals for many years. However, the strategy hurt the company’s ability to deal with the disaster. To begin with, the firm could not have reproduced the strategy after the disaster. It also paralyzed the company’s operations because most of the supplies were obtained from Japan. The strategy made it impossible for the firm to support its consumers in different parts of the world. This disaster forced Nissan to identify new actions (Schmidt & Simchi-Levi, 2013).

The process of recovery was also affected. For instance, Nissan had to collaborate with many managers from different parts of the world. The corporation identified new responses that had never been tried before. The level of interdependence in the supply chain affected the expectations of many customers. The firm decided to stop its local operations for two months (Schmidt & Simchi-Levi, 2013). This move eventually affected the company’s goals. The next step was to undertake a new path towards recovery. The lessons learned from the disaster encouraged Nissan to embrace new practices.

How will the operational changes announced in 2012 affect Nissan’s exposure to future disruptions?

The operational changes announced in 2012 affected Nissan’s exposure to any future disruption. The first approach focused on “seismic reinforcement of its production facilities, disaster simulation trainings, and improved Business Continuity Planning” (Schmidt & Simchi-Levi, 2013, p. 4). These strategies would have insulated Nissan from the existing constraints in its supply chain. Nissan also decided to maximize the production of its quality products in North America (Schmidt & Simchi-Levi, 2013). This strategy “was critical towards reducing reliance on Japanese-made components in different foreign plants” (Schmidt & Simchi-Levi, 2013, p. 8). These efforts would ensure the company maintained its steady-state operations.

The important goal was to reduce the level of interdependence in Nissan’s supply chain. A powerful Business Continuity Plan (BCP) was also required in order to produce an effective supply chain. This approach would eventually make Nissan’s business more sustainable. The proposed changes would also support Nissan’s steady-state operations. Such changes would also minimize the risks associated with similar disasters. The managers at the firm also made several trade-offs. For instance, the managers were focusing on different countries in Europe and North America. The approach could support the needs of every foreign customer. The firm should also develop a powerful supply chain supply (Schmidt & Simchi-Levi, 2013). This effort is relevant towards producing a powerful Risk Management Plan (RMP). The strategy will eventually make Nissan’s business model more sustainable.

Reference List

Schmidt, W., & Simchi-Levi, D. (2013). Nissan Motor Company Limited: Building Operational Resiliency. MIT Sloan Management, 13(1), 1-12.

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