2. What are the operational strategies for managing supply chain disruptions?

Evaluate Nissan
on each one.

The 3/11 earthquake and tsunami that struck Japan had a significant impact on the global supply
chain. It is fundamental to have efficient operational strategies in place to manage supply chain
disruptions.

Stockpile inventory: This concept refers to accumulating inventory that can be used to meet
customer demand even if supply is disrupted. Nissan stockpiled 2300 ready-to-ship vehicles that
could have been used in the event of a disruption. Unfortunately, all vehicles they had ready to ship
were either damaged or destroyed. 
It was also speculated that Nissan bought parts in bulk and the delivery window fell right before the
earthquake which contributed to Nissan’s fast recovery. Nissan also had a robust risk management
strategy in place, which offered a significant advantage in stockpiling goods during a crisis.
 
Diversify supply: This concept refers to sourcing parts from multiple vendors/facilities so that a
problem at one vendor/facility does not affect the entire supply. Though Nissan used common parts
on a global scale and standard parts worldwide resulted in low-cost manufacturing and gave the
company an advantage in dealing with the crisis. However, Nissan realized that its supply chain was
not diversified enough and driven by a single route, with certain components coming from specific
suppliers.
Nissan believed in diversity; its board had members from different nationalities; unlike other
Japanese automakers whose board members were exclusively Japanese. We are optimistic that the
diversity of its supply chain will also improve over time. 

Backup supply: This concept refers to having an emergency supplier (or logistics provider) that is not
normally used but that can be activated in the event of a supply problem. Due to a shortage of
backup sources, the parts like automotive electronics were delayed. Nissan didn't seem to have any
backup sources to help with the prompt delivery of delayed parts. 

Manage demand: This concept refers to influencing demand to better match the actual supply, for
example, adjusting prices or offering incentives to encourage customers to purchase products that
are less supply constrained. During the crisis, Japan's automotive production nearly ceased,
triggering an overnight rise in demand. Nissan decided to produce only the bestselling models and
prioritized vehicle deliveries to the US and Chinese markets. This approach helped Nissan since this
prioritization allowed it to deliver automobiles when its competitors couldn't resulting in better
sales.

Strengthen the supply chain: This concept refers to working with suppliers to reduce the frequency
or severity of supply chain problems. The majority of Nissan's supply chain was in Japan, even
though the company had a worldwide presence. During the crisis, they found that many of its Tier 2
and Tier 3 suppliers were concentrated in a single location. Later, they requested Tier 2 and Tier 3
suppliers to expand into other areas so that, in the event of a crisis, the entire supply chain is not
impacted, and lag times are minimized.