SCM Assignment 2

- Group 3
 Proactive
• Having a dedicated post of Chief
Recovery Officer
Resilience is about • Applying seismic retrofitting and
requirements in earthquake prone
“balancing proactive facilities and plants
mitigation capabilities • Setting up evacuation centre and escape
with reactive routes.
capabilities in order to • Conducting drills and simulation every
keep the company’s year for past 5-6 years.
supply chain as
• Having a uniform functional and
efficient and profitable operational implementation across
multiple plants which allows workers
as possible.” from one plant to work at another plant
In the light of the above without any downtime
statement, comment on • Rumoured bulk order of parts (keep an
the resilience of emergency stockpile) of component
Nissan. parts.
• Creating new evacuation centres and
routes, stockpile of food and other
essential resources.
Reactive
• Quick setup of Global Disaster Control
Headquarters, to update and control
flow on information on disaster
management..
• Shifting from email to web access based
confirmation system for safety and status
of employees, suppliers and vendors.
• Calling upon hundreds of employees
from other sites to work and assist in the
recovery of damaged plants.
• Shifting to night time operations, in-
house generation of electricity, change in
work week to overcome the effects of
power shortages.
• Focusing and prioritizing on best selling
cars and the two largest car consumption
markets, i.e. U.S. and China
• Urging Tier 2 and 3 suppliers to use
alternate sourcing for parts, thus moving
away from the barrel shaped supplier
network.
“Automakers Toyota, Nissan, Honda, and Suzuki were adversely affected due to triple disaster in 2011 and made their respective recovery efforts. Of the
top automotive firms, Nissan was acknowledged by analysts and industry experts for the company’s recovery and resilience strategy.”
Comment.
• In March 2011, a 9.0 magnitude earthquake hit Japan followed by tsunami and nuclear disaster, which costed Japan around US$235 billion (estimated by World Bank)

• Every company including Toyota, Nissan, Honda and Suzuki were severely impacted by the triple disaster.

• Following the disaster, Nissan immediately closed 5 plants: the Iwaki Plant, the Tochigi Plant, the Yokohama and Oppama Plants, and the Zama Operations Center

• The Tochigi engine and vehicle assemble plant and the Iwaki engine were both severely damaged.

• Nissan lost 17 family and 5 staff members.

• More than 50 of its dealers and 40 of its component suppliers were damaged.

• Renesas Electronics, the sole supplier of microcontrollers for automobiles, was also severely hit and would take months to recover completely.

• In the disaster, Nissan lost 2,300 vehicles which were ready and waiting to be shipped.

• Each day of lost production was costing Nissan $25 million in profits (estimated by Money Morning)

• The resilience of Nissan is proved by the fact that, the Tochigi plant was back on line in April 2011, and the Iwaki plant was fully recovered to pre-disaster level by mid-May 2011.

• Nissan had a unique post of Chief Recovery Officer, not found in any other automaker, which helped streamline and speed up the recovery process.

• Withing 15 minutes of the disaster, Global Disaster Control Headquarters was setup in Yokohama to update information on disaster management. This helped the company have a centre for flow of information and
prioritize the activities required for recovery and act in a swift and decisive manner.

• First and foremost priority was the safety and status of its employees, suppliers, and vendors. The safety confirmation system was shifted to web access from the earlier email bases system, which sped up the process of
information gathering and dissemination.

• Nissan had been conducting drills and simulations for past 5-6 years, so when the disaster hit instead of panic and mayhem, there was a clarity and preciseness in the recovery plan. The CEO was able to survey the
impact and was quick and precise in communicating when the plant would be back in operation. This kind of openness and clarity was rare in Japanese corporate arena.

• Since 2003, Nissan had been applying seismic retrofitting and requirements in its plants and facilities located in earthquake prone areas and also had evacuation centres and routes well prepared in advance. This helped
mitigate the damage caused by the disaster to begin with.

• Hundred of employees from other sites were called upon to assist in recovery. These employees worked together in cross-functional and cross-regional manner.

• Shifting to night time operation, in-house generation of electricity and change in work week was done to overcome the effect of power outages.

• Focusing production only of best selling models while the part shortage continued, allowed Nissan to regain a significant portion of revenue as this ensured that the most popular models were always available for
delivery.

• Prioritising the U.S. and Chinese markets, the 2 largest car markets in the world, meant that Nissan mitigated its losses in the two largest car markets.

• Urged Tier 2 and 3 suppliers to use alternate sourcing for their parts which would an uninterrupted supply of component parts in the future.

• Prepared new evacuation centres and routes, stockpiled food reserve and other required resources.