13-149 August 27, 2013 This case was prepared by .docx

13-149
August 27, 2013
This case was prepared by David Simchi-Levi, MIT Professor of
Civil and Enviornmental Engineering and Engineering
Systems and Co-Director, Leaders for Global Operations, and
William Schmidt, PhD candidate, Harvard Business School.
Copyright © 2013, David Simchi-Levi and William Schmidt.
This work is licensed under the Creative Commons Attribution-
Noncommercial-No Derivative Works 3.0 Unported License. To
view a copy of this license visit
http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a
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Nissan Motor Company Ltd.: Building Operational
Resiliency
William Schmidt, David Simchi-Levi
On March 11, 2011 a 9.0-magnitude earthquake, among the five
most powerful on record, struck off
the coast of Japan. Tsunami waves in excess of 40 meters high
traveled up to 10 kilometers inland
and three nuclear reactors at Fukushima Dai-ichi experienced
Level 7 meltdowns. The impact of this
combined disaster was devastating, with over 25,000 people
dead, missing or injured.1 Governments,

non-government agencies, corporations and individuals in Japan
and around the world responded with
relief teams, supplies and donations to help ease the suffering
and support the recovery.2 In truth, the
disaster was three calamities in one – an earthquake, a tsunami
and a nuclear emergency. Recovering
from such a catastrophe was unprecedented.
The event was not just a humanitarian crisis, but also a heavy
blow to the Japanese economy: 125,000
buildings were damaged and economic costs were expected to
be ¥16.9 trillion.3 In the weeks
following the disaster, approximately 80% of Japanese
automotive plants suspended production and
Mitsubishi UFJ Morgan Stanley Securities estimated utilization
at other plants were below 10%.4
1 Ministry of Foreign Affairs, Government of Japan,
http://www.mofa.go.jp/j_info/visit/incidents/index2.html,
accessed July 15, 2012.
2 Ministry of Foreign Affairs, Government of Japan,
http://www.mofa.go.jp/j_info/visit/incidents/pdfs/r_goods.pdf,
accessed July 15, 2012.
3 Ministry of Economy, Trade and Industry, Government of
Japan,
http://www.kantei.go.jp/foreign/policy/documents/2012/__icsFil
es/afieldfile/2012/03/07/road_to_recovery.pdf, accessed
February 27, 2012.
4 Tsuyoshi Mochimaru, “Auto sector: Our Stance in Wake of
Recent Earthquake,” Mitsubishi UFJ Morgan Stanley Securities
Co., Ltd., April 12, 2011.
NISSAN MOTOR COMPANY LTD.: BUILDING

OPERATIONAL RESILIENCY
August 27, 2013 2
Across the industry, monthly production dropped nearly 60% in
March and April 2011 compared to
2010, and did not fully recover until October.5 Production for
all of 2011 was down 9%.6
Markets outside of Japan were affected as well. Toyota, Honda
and Nissan, the three major Japanese
automotive original equipment manufacturers (OEM), exported
a significant amount of their Japanese
production to serve foreign markets (Exhibit 1). Declines in
Japanese production impacted product
availability in those export markets. In addition, overseas
production had expanded in recent years,
but only 70% - 80% of the production components were sourced
locally with the remaining 20%
coming from Japan.7 Disruption to the Japanese supply base
affected firms and factories around the
world.
Toyota, Honda and Nissan were all impacted by the disaster
(Exhibit 2). In particular, Nissan
suffered damage to six production facilities and about 50 of its
critical suppliers were impaired.
Nevertheless, the company was prepared to withstand the
shocks.
History of the Japanese Automotive Industry
Prior to the 1930’s the domestic automobile manufacturing
capability in Japan was essentially limited
to military-sponsored initiatives, hand-built models and

imported automotive kits.8 The industry’s
nascent steps toward mass production started in 1933 when
Aikawa Yoshisuke established Jidosha
Seizo Company, the predecessor of Nissan Motor Company.9
Around the same time, Toyoda Kiichirō
established an automobile department within Toyoda Automatic
Loom, which would eventually grow
into Toyota Motor Company.10 In spite of protectionist
government policies restricting imports and
direct foreign investment, prior to World War II the Japanese
subsidiaries of Ford and General
Motors dominated the automobile industry in Japan. After the
war, Nissan and Toyota were hobbled
by low production productivity and were at risk of slipping into
bankruptcy if not for a combination
of huge governmental loans and special orders from the United
States Army during the Korean War.11
Japanese automotive firms initially relied heavily on technology
transfer from the United States and
Europe. Toyota was more aggressive in developing internal
research and development capabilities, a
strategy eventually adopted by other Japanese automobile
manufacturers.12 Japanese automotive
manufacturers also concentrated on process improvements, with
Toyota being an early innovator. In
5 “Japan Production by Month, 2005-2011,” WardsAuto Group,
2012.
6 Ibid.
7 Ibid.
8 Koichi Shimokawa, The Japanese Automobile Industry: A
Business History (London: Atlantic Highlands, NJ, Athlone
Press, 2001).
9 Nissan Motor Company, http://www.nissan-

global.com/en/history/, accessed August 3, 2012.
10 Michael A. Cusumano, The Japanese Automobile Industry:
Technology and Management at Nissan and Toyota (Cambridge,
MA., Published by the Council
on East Asian Studies, Harvard University, 1985).
11 Ibid.
12 Ibid.
August 27, 2013 3
the late 1940’s through the early 1960’s, Toyota transitioned
away from push manufacturing
techniques that were ubiquitous in the United States automobile
industry. The firm reduced buffer
stocks and instead adopted the principles of just-in-time
manufacturing. Raw materials and work-in-
process were no longer pushed from early production stages to
final assembly, but were instead
pulled forward only when needed. Components were produced
and received in lots as small as
possible, with no stockpiling and Toyota modified its equipment
to allow for rapid set-up so it could
be quickly transitioned to different jobs.13
The manufacturing principles pioneered by Toyota were also
adopted, in varying degrees, by other
manufacturers inside Japan and globally. Toyota remained at the
vanguard of refining and
formalizing these principles into what would eventually be
known as the Toyota Production System

(TPS). TPS required close coordination across manufacturing
processes and helped identify problems
that could otherwise go unnoticed in a system with a larger
buffer. The system, however, was not risk
free. If something disturbed the flow of information or material,
it could idle manufacturing stages
downstream of the disturbance.
The Japanese automotive industry began to hit its stride. By the
late 1960’s, both Toyota and Nissan
had rapidly increased both their production and exports. By the
late 1970’s, exports accounted for
over 50% of Japanese production and by 1980 Japan overtook
the United States as the world’s top
automobile producing country.14 Japanese automobile
companies began building manufacturing
facilities in North America, with Honda, Nissan and Toyota
moving first and Mazda, Mitsubishi,
Suzuki, and Isuzu eventually following. The rapid appreciation
of the yen after agreements made at
the G-5 meeting in September 1985 led to further expansion of
foreign production in both advanced
and developing countries.15 The three largest Japanese firms
globalized their operations at different
paces, however, with Honda and Nissan expanding their foreign
manufacturing footprint much more
aggressively than Toyota.16
Nissan’s Supply Chain Philosophy: A Focus on Flexibility
In contrast to the close supply chain control that is a hallmark
of TPS, Nissan leveraged a regional,
decentralized supply chain structure, but imposed strong central
control and coordination when crises
affecting global operations occurred. Maintaining a flexible
organization and integrating a variety of

perspectives were important cultural attributes at the company.
As an indication of the way the firm
embraced diversity, Nissan’s corporate officers represented a
range of nationalities and most of them
had extensive experience in overseas operations – traits that
were not shared by other Japanese
13 Ibid.
14 Ibid.
15 Ibid.
16 Ibid.
August 27, 2013 4
OEM’s.17 Nissan considered this diversity to be a source of
strength in managing a large global
operation and it valued that the executive team could speak
first-hand to the unique constraints and
opportunities that were present in each market.18
Complementing this focus on flexibility, Nissan maintained a
simplified product line compared to its
competitors. The company adopted a build-to-stock strategy for
just a few SKUs in each model and a
build-to-order strategy for the rest. Management believed that
this strategy had not only helped it to
simplify its operations and product offerings, but it actually
contributed to a significant increase in
sales. As explained by John Martin,19 the company’s SVP of

manufacturing, purchasing and supply
chain management:
Nissan was a company reborn from crisis. In 1999 Nissan was
rescued from impending
bankruptcy by Renault who put in place a revitalized
management team led by Carlos Ghosn.
This sense of crisis persists in the organization to this day. This
‘crisis mentality’ was critical to
our recovery from the 2007/2008 Global Liquidity Crisis, the
Great Japan Earthquake and
subsequent Thai Floods in 2011. Our supply chain philosophy is
one of vigilance and extreme
responsiveness allied with single point responsibility. It is the
supply chain management
organization’s responsibility to keep the production plants
running. This clarity of purpose and
responsibility engenders confidence and decisiveness both of
which are crucial to disaster
recovery.
Risk Management at Nissan
Nissan’s attitudes toward risk and emergency response emerged
through the company’s experience in
overcoming daunting challenges. In 1999 the company faced
severe financial difficulties that were
only resolved when it formed an alliance with Renault. Under
the terms of the alliance, Renault
bought 36.8% of Nissan’s outstanding stock and Nissan agreed
to buy into Renault when it was
financially able to do so.20 This deal forced Nissan to confront
entrenched practices and biases and to
take proactive action to ensure the company’s survival and
ultimate success. (See Exhibit 3 for

financial performance.)
Nissan’s risk management philosophy was born out of its near-
death experience. It focused on
identifying and analyzing risks as early as possible, and
planning and rapidly implementing
countermeasures. The company established a dedicated risk
management function which was
responsible for these activities. There was also an executive-
level committee that made decisions on
corporate risks, designated “risk owners” to manage the specific
risks, and regularly reported to the
17 Interview with John Martin, February 25, 2012.
18 Interview with John Martin, May 28, 2012.
19 At the time of the crisis John Martin served as Corporate
Vice President for Nissan’s Global Supply Chain division in
Japan.
20 Nissan eventually bought a 15% stake in Renault. Renault
has subsequently increased its stake in Nissan to 44.4%.
August 27, 2013 5
Board of Directors on progress. Each division was empowered
and expected to take preventive
measures to minimize the realization and impact of risks that
did not require corporate coordination.
Nissan’s continuous readiness process included activities such
as ongoing seismic reinforcement of

facilities, improvement to its business continuity planning
(BCP), and disaster simulation training.21
Nissan had an earthquake emergency-response plan in place
well in advance of the 2011 earthquake,
which was described in its 2010 annual report (Exhibit 4).22
The principles of Nissan’s emergency-
response plan included a priority on human life, prevention of
follow-on disasters, rapid disaster
recovery and business continuity, and support for the
neighboring community, companies, and
government. It designated a Global Disaster Headquarters that,
in the aftermath of a disaster, was
responsible for gathering and distributing information
concerning employee safety, facility damage,
and business continuity planning for Nissan’s operations and
those of its suppliers. In addition, the
plan required that Nissan conduct earthquake simulation
training to test and improve upon the
effectiveness of the organization and its contingency plan.
Nissan’s Response to the Disaster
Nissan’s actions after the earthquake and tsunami adhered to the
principles detailed in its earthquake
emergency-response plan. Immediately after the disaster,
Nissan’s Global Disaster Control
Headquarters, headed up by the chief operating officer, was
convened to evaluate the impact on
operations and to oversee the restoration of activities. A
Recovery Committee was established to
coordinate the global recovery actions, in particular the work of
optimizing the entire supply chain.
As Nissan’s Chief Recovery Officer Colin Dodge wrote in the
company’s 2011 Annual Report,

The impact on our business [of the disaster] was felt in all
regions. Nissan’s manufacturing
operations are thoroughly global in nature, and disruption to the
supply structure in Japan spreads
quickly through our supply chain all around the world. In the
past months Nissan has been
implementing countermeasures in every region where it does
business.
In Europe, for example, where we maintain production bases in
the United Kingdom, Spain and
Russia, we took steps immediately after the quake to ensure
supplies of needed parts. The
European regional team worked closely with the Japan side to
share information about the status
of the Japan-sourced parts supply, swiftly reflecting these
updates in the regional supply side. The
level of depth and accuracy of this information sharing has been
truly amazing. It has allowed us
to constantly update our regional production forecast, so that we
can align our production
calendar with conditions in production sites in Japan.23
21 Nissan 2011 Annual Report.
22 While similar response plans may have been in place at
Honda and Toyota, neither organization provided visibility of
them in their annual reports.
23 Ibid.

August 27, 2013 6
The Recovery Committee emphasized a few simple yet
meaningful practices in coordinating the
company’s response to the disaster:
1. Sharing information – Nissan brought all of their global
regions into the response process.
Management recognized that the non-Japanese operations would
want information, but the
effort to provide it would be a distraction to those on the ground
handling the crisis. They
also recognized information might be used selfishly by
dependent facilities optimizing
against its own needs. To address these two concerns, each
region was asked to send two staff
members to Japan to gather their own information and to help
solve problems holistically.
Instead of becoming a drain on the local response effort, the
other regions and plants
contributed to solutions. In addition, the regions had complete
visibility into what was
happening in Japan and could help the organization improve the
response.
2. Allocating supply – Given the capacity constraints in the
weeks and months after the
disaster, and the dependencies that existed across the Nissan
operational network, allocation
of component parts was critical. The sales, marketing, and the
regional supply chain

management functions were brought together to identify how to
globally allocate supplies to
focus on highest margin goods. For example the supply of
integrated Global Positioning
System (GPS) units was constrained by the disaster. Nissan
identified which car models
required integrated GPS to meet customer demands, and
allocated resources accordingly.
Low-end models did not receive the allocation of available GPS
since they did not have
commensurately high margins, and customers were willing to
purchase those models without
an integrated GPS. This process was completed within two
weeks of the earthquake and
continually updated as the supply situation became clearer.
3. Managing production – Nissan slowed their production lines
in a targeted way.
Management closely considered in-stock and in-transit
inventory within their network and
slowed production upstream and downstream of anticipated
bottlenecks. For example, the
company was able to ramp down production, and thereby
decrease costly overtime, for
operations that were expected to be bottlenecked. Management
also pulled vacation time into
April and May in order to free up capacity later in the summer
when upstream bottlenecks
were projected to have cleared.
The company used the time bought by having in-transit
inventory to identify and implement
supply alternatives. For example, the lead-time for ocean
transport from Japan to the west
coast of the United States was 15 days, plus five days to move

material to plants in Tennessee
and Mississippi. This meant that management had as many as 20
days to identify how to
access alternative supplies of critical components. They were
also able to secure air freight
out of Japan so they could get critical parts out of the country
faster and mitigate the
reduction of in-transit stocks.
August 27, 2013 7
4. Empowering action – Nissan emphasized rapid and flexible
action. Management was
empowered to make decisions in the field without lengthy
analysis from a central authority.
To speed critical decision-making process on recovery-related
issues, the company modified
its delegation of authority rules for a limited period. The
decisions were iterated upon as new
information surfaced so that the company could course correct,
if necessary. As Nissan’s
Chief Operating Officer Toshiyuki Shiga explained,
The disaster response simulations we have carried out regularly
served us particularly
well. By envisioning a full range of potential situations arising
from a major disaster and

preparing for them, we successfully enabled ourselves to take
prompt actions when the
time came.
At a time of disaster, it is essential to make speedy decisions
while grasping the latest
situation, including details on employees’ safety and damage
caused, and to take
appropriate actions based on this. We launched the Global
Disaster Control Headquarters
just 15 minutes after the earthquake occurred. The team
immediately gathered and
assessed damage while overseeing restoration efforts at various
facilities.24
Recovery by the Big Three Japanese Auto Manufacturers
In the six months following the earthquake, production across
all auto manufacturers in Japan
declined 24.3% compared to forecast.25 The big three Japanese
manufacturers each contended with
different issues associated with the disaster. Toyota had
significant exposure due to its large size and
its high rate of Japanese production (including for export).
Nissan had several plants in close
proximity to the disaster area. While Honda was partly insulated
due to its large localized U.S.
production, recovery from the disaster was still slow. Honda
attributed its production problems to
constraints in its supply chain,26 a problem that Nissan had
successfully insulated itself from. As
Nissan’s Chief Financial Officer Joseph Peter remarked,
Most of the steps we have taken in response to the March 11

disaster have been continuations of
strategies, priorities and plans that were already in place. One
example of this is the localization
strategy we have been pursuing to better balance our
manufacturing and sourcing footprint to our
sales footprint. Our actions in this area date back to the start of
the financial crisis in 2008, when
our primary objectives were to reduce volatility from foreign
currency movements, particularly
the appreciating yen, and to reduce cost.27
24 Ibid.
25 “Japan Production by Month, 2005-2011,” WardsAuto
Group, 2012.
26 Q2 2012 Honda Motor Co Ltd Earnings Presentation.
27 Ibid.
August 27, 2013 8
Going Forward
In January 2012, Nissan announced that it would increase the
localized production of its cars in the
Americas from approximately 70% to 90% by 2015.28 The
company also set aggressive targets to
reduce its reliance on Japanese-made components in its foreign
factories. For instance, the company
was hoping to reduce the number of components brought in to
North America from Japan by 50% by

the end of fiscal 2013.29 The company, according to Peter, was
also making a concerted effort to
better understand critical dependencies that exist within its
supply chain beyond the first tier of
suppliers:
We are learning fresh lessons from the earthquake, too. Moving
forward we will be modifying
our purchasing process to enhance our business continuity plan
at the parts level, particularly for
critical components, and to mitigate potential supply risk
concentration beyond the Tier 1 level.
These are evolutionary kaizen changes, though, as opposed to
fundamental shifts in our sourcing
strategy.30
As COO Shiga pointed out, despite its preparedness, Nissan had
work to do to be even better
protected the next time disaster struck:
Many challenges still lie ahead. Some parts suppliers have yet
to restore their operations. Our
supply chain requires rehabilitation. This experience has
instructed us in the necessity of an
actionable BCP (business continuity plan) that encompasses all
our suppliers, including those in
the second and third tiers. Development of a more robust supply
chain and comprehensive risk
management are imperative in making our business more
sustainable.31
Case Discussion Questions

1. The case identifies several aspects of the Nissan response
that were particularly beneficial.
Expand on the points made in the case to identify the potential
costs and benefits of these actions.
2. What else could Nissan have done to prepare for and respond
to the disaster? Try to articulate the
costs and benefits of your suggestions.
3. What could Nissan have done to assess the risk of disruption
in their supply chain?
4. How did Nissan’s product line strategy help or hurt its ability
to respond to and recover from the
disaster?
28 Chester Dawson, “Nissan Aims to Boost North American
Production,” The Wall Street Journal, January 9, 2012.
29 Ibid.
30 Ibid.
31 Ibid.
August 27, 2013 9
5. How will the operational changes announced in 2012 affect
Nissan’s exposure to future
disruptions? How will it affect its steady-state operations? What
trade-offs is management

making and why?
August 27, 2013 10
Exhibit 1 Production to Sales Ratios for Select Japanese OEMs
Source: Chester Dawson and Neal E. Boudette, “Too Big in
Japan, Toyota Struggles,” Wall Street Journal, May 12, 2011.
Exhibit 2 Initial Damage Reports from Major Japanese
Automotive OEMs
Company Damage
status
Nissan
broke
out
at
Tochigi
Factory
and
a
foundry
in
Iwaki

to
the
Tochigi
Factory,
Iwaki
Factory
(engines),
Yokohama
Factory
(engines,
etc.),
Oppama
Factory
and
Zama
Works
(lithium-‐ion
batteries,
etc.)
will
take
some
time
before
the
Iwaki
Factory
is
repaired
Toyota

damaged
facilities
at
the
Iwate
Factory
(subsidiary
Kanto
Auto
Works),
Miyagi
Factory(subsidiary
Central
Motor),
and
Tohoku
Factory
(parts)
Honda
damage
in
to
facilities
in
Tochigi
Prefecture
Mazda
major
direct
impact

Suzuki
major
direct
impact
Source: Kohei Takahashi, “Autos and Auto Parts,” J.P. Morgan
Equity Research, March 22, 2011.
August 27, 2013 11
Exhibit 3 Select Nissan Financials, 2009-2011, (millions of yen)
2009 2010 2011
Revenue 8,436,974 7,517,277 8,773,093
Cost of Goods Sold 7,118,862 6,146,219 7,155,100
Gross Profit 1,318,112 1,371,058 1,617,993
Operating Expenses
Sales, General & Administrative 1,456,033 1,059,449
1,080,526
Operating Income (137,921) 311,609 537,467
Net non-operating income (34,819) (103,862) 347
Net special gains (losses) (46,031) (66,127) (57,673)
Earnings Before Taxes (218,771) 141,620 480,141
Total Income Taxes 36,938 91,540 132,127

Income (loss) attributable to
minority interests
(22,000) 7,690 28,793
Net Income (233,709) 42,390 319,221
Source: Nissan 2011 Annual Report.
Exhibit 4 Excerpts from Nissan 2010 Annual Report
Risk Management Measures & Actions (Related to Earthquakes)
Nissan is assuming earthquake (EQ) as the most critical
catastrophe. In case of EQ which intensity is
5-upper or over in Japan, First Response Team (organized by
main functions of Global Disaster
Headquarters) will gather information and decide actions to be
taken based on the information. If
necessary, Global Disaster Headquarters and Regional Disaster
Headquarters are set up and gather
information about employees’ safety and damage situation of
facilities and work for business
continuity.
At the same time, efforts to develop Business Continuity Plan
(BCP) are being done involving
suppliers, such as, each and every function assessed its priority
work, develop countermeasures to
continue the priority works. BCP will be reviewed annually in
the process of rotating PDCA cycle.
Policy & Principle in Case of EQ
1. First priority on human’s life (Utilization of Employees’

safety confirmation system, EQ
preparedness card to be carried on a daily basis)
2. Prevention of second disaster (In-house firefighting
organization, stockpiling, provision of
disaster information)
August 27, 2013 12
3. Speedy disaster recovery and business continuity (Measures
for hardware, improvement of
contingency plan and development of BCP)
4. Contribution to local society (cooperation / mutual aid with
neighboring community,
companies, local and central government)
Global Disaster Headquarters and Regional Disaster
Headquarters conduct simulation training
assuming large EQ to prepare catastrophe. The drill tests the
effectiveness of this organization and
contingency plan, and clarifies the issues to be improved. The
contingency plan is reviewed based on
the feedback.
Nissan Global Headquarters Building where Global Disaster
Headquarters is supposed to be set up
(built in August 2009) has EQ resistant structure by vibration
controlling brace damper. The safety is

assured even in case of maximum level of EQ assumed at the
site.
EQ: Earthquake
OPERATIONS MANAGEMENT
1
OPERATIONS MANAGEMENT
12
Operations Management
Angela Fasoli
Southern New Hampshire University
Operations Management
Operation management is very critical, and it helps an
organization to be able to deal with different forms of disasters.
A company should be able to face any disaster so that it can
have a mechanism to protect its operations and also a
mechanism which ensures that the smooth flow of operations
has been maintained. In the case of Nissan, the tsunami and
earthquake disasters affected the operations of the company,
and since the company is a multinational corporation, the
supply chain was badly affected. It is, therefore, important to
consider the various techniques and factors which should have
been considered for Nissan to be prepared for the disasters.

Disaster management and preparation is very essential, and it is
part of operations management. A company should be able to
invest in operations management and there various steps which
should be taken to ensure that a company is safe and ready to
face any disaster and also to ensure that there will be business
continuity after a disaster (Bhattacharya, 2014). The discussion
below will help Nissan to recover from the massive earthquake
and tsunami effects and also to prepare for future disasters. The
paper also examines the different ways of achieving business
continuity.
Generating value
The use of operation management functions to provide products
and also to provide value to Nissan customers
The case study in question is about the Nissan Company. This
company can be seen to have used operation management
functions to ensure that the customers continued to receive
products of the company and also they were able to receive
value for their money. The company used an operation
management function which is planning. The company planned
for the disasters, and it can as be seen to have carried out
previous drills and simulations on disaster management. This is
planning and preparation on how a disaster can be handled.
Planning, therefore, ensures that a company is ready for any
disaster and that after the disaster the product provision will
continue since the company will be able to recover faster from
the disaster.
Another operation management function which was applied by
Nissan is staffing and controlling. Nissan Company took the
lead and tried to organize its workers from different plants to
help with the situation in Japan (Birmingham, McNeill, 2014).
The Nissan firm can, therefore, be seen to have taken the
necessary steps to ensure that products have been provided. It

took only a month for the plants in Japan to fully recover and
fully go back to their operations. The company also used
operation management like providing the funds which are
required to prepare and also to deal with the challenges which
are brought by the disaster. This shows that the Nissan
Company acted in good faith to ensure that products were
provided and also customers were able to get value.
Competitive advantage
The Nissan Company was able to show that it is very
competitive even amidst the disaster of the earthquake and
tsunami of 2011. The company was able to use operation
management to achieve competitive advantage. One of the ways
in which the company was able to achieve a competitive
advantage is by setting a recovery committee. The company
created a recovery committee to deal with the disaster situation.
This helped the company to recover in a faster manner. The
company was, therefore, to go back to business in a faster
manner which makes the company more competitive. The
company was also able to help the community members who
were affected by the earthquake and the tsunami. This shows
that the company is concerned with its customers and this gives
the company a good reputation. The positive public image
created is, therefore, given the company a competitive
advantage.
The company also carries drills and simulations which make the
employees and the company ready for disaster. The company
also have been able to set a certain amount of money to deal
with the crisis. This makes the company concerned, and it also
makes the recovery process to be swift and efficient. Another
reason why the company gains a competitive advantage is
sharing of information. During the disaster, the company invited
staff from other regions to come and collect information.

The company was also able to manage its production activities.
This means that the company was able to control the production
of its plants. This is because the disaster affected the sale and
also production of the company’s products. The company was,
therefore, able to use its in-transit and in-stock as a way of
managing its production. The company is also able to obtain
competitive advantage due to its strong financial base. The
company has a strong financial background which makes it able
to support its operations hence it is easy to gain competitive
advantage.
Compare and contrast service operations and manufacturing
operations
Both the service operation and manufacturing operations are
customer focused which means that they are similar. They are
focused at ensuring that the customer has been able to receive
value. The two types of operations are also meant to ensure that
the customer has been able to get a high level of satisfaction.
Therefore service and manufacturing operations are similar.
Service operations use different techniques from manufacturing
operations. The Nissan Company uses service operations to
manage manufacturing operations. A service like funding is
very critical for the success of manufacturing operations.
Theories and techniques
Compare and contrast the critical path method (CPM) and the
program evaluation and review technique (PERT)
The critical path method and the program evaluation and review
technique are two statistical tools which are used in business
management of projects. PERT is a tool which is aimed at
planning and reducing the time of completing a project. On the
other hand, CPM is a statistical tool which is aimed at
controlling time and cost of a project. PERT is a technique
which is favored by projects which involve events. The projects

which involve events do not favor the use of CPM (Hill, Hill,
2011). This is because PERT uses the probalistic model to
manage a project while CPM depends on a deterministic model
hence not easy to deal with events. For example, for disaster
planning and preparation, the Nissan Company should use CPM
since it deals with activities. Predictable activities also favor
the use of CPM. For example, the fall of sales can be
determined through the use of CPM while PERT should be used
for unpredictable activities like an earthquake or a tsunami.
Developing a forecasting system
There are various steps which Nissan will have to take when
developing a forecasting system. At step one, the Nissan
Company will have to define the problem. This is where the
reason for developing the forecasting system is defined. The
second step is data collection. The Nissan Company will gather
information which will be required in the forecasting process.
The Nissan Company will, therefore, take step three and sort the
necessary data. The fourth step is a preliminary analysis which
shows whether the data collected is essential. The Nissan
Company will, therefore, move to step five where a forecasting
model is selected and then step six is where the forecasting is
done. The Nissan Company will also evaluate the effectiveness
of the forecasting system as the last step.
Supply chain risk
There are various risks which the supply chain of every
company which has a long supply chain faces. One of the risks
which the Nissan Company faces is the risk of inadequate
supply to meet the high demand (Zsidisin, Ritchie, 2008). This
would be caused by low production as a result of a natural
disaster. The Nissan Company can mitigate this through
engaging different plants in providing products and also through
the use of in-stock and in-transit inventory. Another supply

chain risk is the disruption of supply operations where the
parties involved with the distribution of products have been
affected hence the operations are affected. The Nissan Company
can be able to mitigate this problem by immediate
reinforcement of workers.
The above strategies and functions of operations management
will help the Nissan Company to be able to recover from a
natural disaster and also to ensure that there is business
continuity even after a disaster. It is, therefore, critical to use
these techniques for effective operation management in the
Nissan Company.
Theory of Constraints
The policy constraints can be eliminated easy after developing
key skills required for an organization. To ensure that the
organization achieves the key skills, the following five steps of
theory of constraints is necessary:
Theory of Constraints Steps
Identification of the constraint: this step addresses the question
of what needs to change. It is an old and popular technique or
step that individuals can use in an organization to arrive at the
cause of the problem and address the core problem (Tulasi &
Rao, 2012). It therefore focuses on arriving at the root problem
by identifying the causes of an issue at every step. From these
problems, the organization will be able to identify the
constraints.
Exploitation of the constraint: the step involves making use of
the available resources to get most out of the constraints
identified. The constraint’s productivity and utilization is
maximized to achieve the intended results rather than acquiring
more constraints like purchasing machinery and employing

more workers.
Subordinating all other things to the identified constraint: it is
true that some non-constraints can have a larger capacity of
producing more results than the constraint itself. In this step,
the organization should focus on making the non-constraints to
be subordinate of the constraints (Tulasi & Rao, 2012). This
will avoid the situation where the non-constraints are producing
more than the constraints can handle. It will avoid elongated
lead times, bloating of the WIP inventory and firefighting.
Elevating the constraint: this step comes after the system has
exhausted the capacity of a constraint. The constraint is then
elevated by expanding it and investing in additional machinery,
more land and hiring more people.
Preventing inertia from becoming another constraint: this step
involves elevating other weak resources and links so that the
old constraints are retained and maintained. Introducing a new
constraint implies that additional resources are required due to
the need to have a completely new system (Tulasi & Rao, 2012).
Processes that Nissan can Apply TOC
Supply chain management: the company can apply the Theory of
Constraints in the supply chain structure. Implementing the
TOC on this process will help the organization to achieve a
stronger central coordination even in times of a crisis in the
global operations. Through TOC, the company would strengthen
the constraints in the supply chain structure where it will
leverage decentralized and regional supply methods sustainably.
Production process: in the production process, Nissan Company
can utilize the TOC in ensuring that the product lines are very
simple and easy to maintain. The TOC processes will help the
company identify the major needs of the market and help it

simplify the product lines (Tulasi & Rao, 2012). This is
advantageous because simpler product lines compared to the
competitors will lead to achieving of a competitive advantage.
TOC will also help the company to establish the exact SKUs
requires building a better stock strategy for each product model.
Using TQM tools to Improve Quality
TQM tools and principles are generally aimed at ensuring the
organization becomes customer-focused by involving all the
employees in the process of continuous improvement of
products. Nissan will use data, strategies and effective
communications between customers, employees, suppliers and
other stakeholders to develop effective and high performance
relationships (Goetsch & Davis, 2016). These effective
communications will form the foundation for integrating the
high quality discipline into the production process and the new
lines of products. The communications will provide feedback to
help improve product quality and make continuous quality
improvement part of the organizational culture.
The common tools and principles in TQM that Nissan Company
can use in its latest lines of products include quality control,
quality planning and quality improvement. Through quality
planning, Nissan will gather the customer feedback, set goals
and develop a plan to achieve the goals based on the customer
feedback and need to improve product quality. Through quality
control, the company will be able to meet the goals in terms of
quality and customer needs (Goetsch & Davis, 2016). Finally,
the quality improvement tool will show a breakthrough for all
the other levels of performance and meet the needs of
customers.
PART II: Data Analysis
Cause-and-effect Diagram

From the cause-effect diagram above, it is clear that the
struggle in implementing the new material was caused by the
complexities in the new materials. This led to unavailability,
high cost and struggling to handle the materials.
Hypothetical Process Map
A hypothetical process map with a time function for the X-trail
SUV product from Nissan can be developed as shown below:
As an operations manager, I will use the value map to evaluate
and analyze the current state of the X-trail SUV project. The
map provides a number of critical elements that can provide
details on the state of the current project. The details include
the development, production technology and production. In
addition, I will use the value map to project the future
requirements of the product.
Company Location
Based on the data provided, it would be appropriate to locate
the company at Mexico City because the operation costs at this
location would be very minimum as compared to the other
location. The only challenge with this location is the low
productivity of labor that can be easily solved through proper
strategies like outsourcing. Transportation costs is the major
consideration in the location of the firm because of the high
weight and it is a fixed variable. The organization could end up
with reduce the costs by more than half if the location was at
Mexico city hence making Mexico City a favorable location.

Other risks like political risks have a small probability variation
while the rest are less significant due to low weighting.
The impact of disaster either natural or manmade can be
detrimental to not only individuals, but also corporations and
the overall economy. It is due to this fact that the availability of
contingency strategies and escape plans has become a norm and
a priority in the day to day operations of most people and
organizations. The Nissan Case was an eye opener and they
came up with a number of theories that would help them cope in
case of disaster.
Just in time manufacturing
Just in time manufacturing was a move away from production
practices that were viewed ubiquitous in the United States
automobile industry. It basically meant reducing buffer stocks;
raw material and the work in progress were no longer pushed
from early production to final assembly but, were instead pulled
forward only when they were needed (Monden, 1993). Just in
time manufacturing further meant that component was produced
and received in lots as small as possible with no stockpiling at
all and the equipment was generally modified so that they could
not only allow quick setup but also rapid transmission to the
different jobs in the manufacturing process.
The advantage of this method was that it was synchronized and
it was technology driven. This makes it convenient for the
company which runs many operations at any given time. It
makes it easier to track raw materials usage. (Only need
disadvantage)
Toyota Production System
The main aim of this method was to ensure that there was close
coordination across the manufacturing process and it made it
easier to identify the problems that would otherwise go

unnoticed in a system with a larger buffer (Monden, 1993).
The Toyota production system had its pros and cons. The fact
that it aimed at achieving world class operations by reducing
waste and lead times was a major advantage. The disadvantage
of the system was that it was not risk free. If the flow of
material was disturbed, it could idle manufacturing states
downstream.
Lean
This was a burn mode that primarily aimed at reducing
throttling losses. This was an engine modification that meant
eliminating anything that did not result to value. This ultimately
translated into automatic improvement and profitability. It also
led to better performance and fuel use. Another advantage is the
fact that it resulted to low exhaust hydrocarbon emissions
(Shang, & Low, 2014).
The main disadvantage of lean is the fact that the more work
done in pumping the air through the throttle reduced the
efficiency of the engine.
There is a general relationship between these three methods. It
is evident that they all aim at eliminating unwanted cost,
ensuring that there is continuous and positive improvement,
respecting humanity and ensuring quality in production.
Triple Bottom Line
This is aimed at creating greater business value by evaluating
the performance of an organization. It comprises three major
components that must all be considered to achieve success.
They are the social, financial and environmental aspects

(Henriques & Richardson, 2004).
The triple bottom line approach enhances the operations of an
organization through income gained by offering employment
opportunities to the social enterprises and the whole community
where it operates. This forms part of the corporate social
responsibility of the organization. The environmental aspect is
met by recycling and ensuring the environment is protected
against all sorts of pollution for the safety of the people. The
financial aspect of the TBL is achieved by making sure all
activities in the organization result to efficiency and
profitability.
Integration of the ISO 14000 Standards in Manufacturing Plants
The International Organization for Standardization (ISO) came
up with a series of frameworks that provide guidance to
organizations that ultimately systematize and improve their
environmental management strategies. Adherence to these
standards is voluntary since the laws are not really meant to
regulate any environmental activities of the organization or aid
in any way the enforcement of environmental laws (Pride,
Hughes & Kapoor, 2014). The main focus of the ISO 14000
standards is on how the product comes into existence and not
the product itself. This is emphasis on the production process.
The organizations integrate the ISO standards by first of all
having a publicly available environmental policy articulated by
the top management which indicates its commitment towards
pollution and continuous improvement of the environment.
Second is putting in place procedures that will enable identify
important environmental aspects and their associated impacts.
This will lead in formulation and documentation of aims and
objectives towards maintenance of consistent environmental
management policy. Each individual’s role in continuous

improvement and overall pollution prevention should be clearly
defined.
ISO standard integration further require the necessary
information needed to achieve EMS be always available in the
organization. Finally, continuous monitoring and evaluation
accompanied with documentation of organizations
environmental efforts should be done periodically and it should
always ensure effectiveness and nonstop development.
Integration of Corporate Responsibility Principles
First, organizations have to make environmental protection
efforts in pursuit of fulfilling their corporate responsibility.
This is done by reducing the emission of dangerous waste and
other harmful substances. The organization must therefore take
control and determine whether their impact in the environment
is either positive or negative.
Corporate social responsibility can also be manifested by
treating employees fairly and in an ethical manner. This is down
to following the labor laws though they may differ from what
the organization is used to. Volunteering and basically
participating without expecting any favors in return
demonstrates an organizations’ support and concern for certain
issues in society. Philanthropy is the biggest indicator of
especially when it is toward the community that surrounds the
organization. This may include donating to charities and any
other community programs (Moon, 2014).
I believe that these organizations should do more to protect the
environment that sustains their existence, they get raw material,
labor and other inputs necessary for operation. They should
therefore ensure that pollution and degradation is minimal or
completely stopped since it has a lot of complications that range
from health issues to the bigger global warming problem.

References
Bhattacharya, S. (2014). Operations management. Place of
publication not identified: Prentice-Hall of India.
Birmingham, L. & McNeill, D. (2014). Strong in the rain:
surviving Japan's earthquake, tsunami, and Fukushima nuclear
disaster. New York, NY: Palgrave Macmillan.
Goetsch, D. L., & Davis, S. B. (2016). Quality Management for
Organizational Excellence: Introduction to Total Quality.
Pearson. https://doi.org/British Library Cataloguing- In
Publication data
Henriques, A., & Richardson, J. (2004). The Triple Bottom
Line: Does It All Add Up. London:
Earthscan.
Hill, A. & Hill, T. (2011). Essential operations management.
Basingstoke: Palgrave Macmillan.
Monden, Y. (1993). Toyota Production System: An Integrated
Approach to Just-In-Time.
Boston, MA: Springer US.
Moon, J. (2014). Corporate social responsibility: A very short
introduction.
Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2014). Business.
S.l.: South-Western Cengage
Learning.
Shang, G., & Low, S. P. (2014). Lean construction management:
The Toyota Way.
References
Tulasi, C. L., & Rao, A. R. (2012). Review on theory of
constraints. International Journal of Advances in Engineering &
Technology, 3(1), 334–344. https://doi.org/10.2307/25148735
Zsidisin, G. & Ritchie, B. (2008). Supply chain risk: a
handbook of assessment, management, and performance. New

York: Springer.
Unavailability of materials
Cost of Materials
Complexities in the materials
Strain in handling materials
Developing a Forecasting System:
Forecasting follows seven basic steps: (1) Determine the use of
the forecast; (2) Select the items to be forecasted; (3) Determine
the time horizon of the forecast; (4) Select the forecasting
model(s); (5) Gather the data needed to make the forecast; (6)
Make the forecast; (7) Validate and implement the results
Identify at least three supply chain risk:
Supply Chain Risks and Tactics
RISK
RISK REDUCTION TACTICS
EXAMPLE
Supplier failure to deliver

Use multiple suppliers; effective contracts with penalties;
subcontractors on retainer; pre-planning
McDonald’s planned its supply chain 6 years before its opening
in Russia. Every plant—bakery, meat, chicken, fish, and
lettuce—is closely monitored to ensure strong links.
Supplier quality failures
Careful supplier selection, training, certification, and
monitoring
Darden Restaurants has placed extensive controls, including
third-party audits, on supplier processes and logistics to ensure
constant monitoring and reduction of risk.
Logistics delays or damage
Multiple/redundant transportation modes and warehouses;
secure packaging; effective contracts with penalties
Walmart, with its own trucking fleet and numerous distribution
centers located throughout the U.S., finds alternative origins
and delivery routes bypassing problem areas.
Distribution
Careful selection, monitoring, and effective contracts with
penalties
Toyota trains its dealers around the world, invoking principles
of the Toyota Production System to help dealers improve
customer service, used-car logistics, and body and paint
operations.
Information loss or distortion
Redundant databases; secure IT systems; training of supply
chain partners on the proper interpretations and uses of
information
Boeing utilizes a state-of-the-art international communication
system that transmits engineering, scheduling, and logistics data
to Boeing facilities and suppliers worldwide.
Political
Political risk insurance; cross-country

TQM:
seven concepts for an effective TQM program: (1) continuous
improvement, (2) Six Sigma, (3) employee empowerment, (4)
benchmarking, (5) just-in-time (JIT), (6) Taguchi concepts, and
(7) knowledge of TQM tools.
Cause and effect diagram:
Hypothetical Process Map:

Lean Manufactured:
Look it up and add a little more.
Triple Bottom Line:
Managers must consider how the products and services they
make affect the people and environment in which they operate.
Certainly firms must provide products and services that are
innovative and attractive to buyers. But customers and policy
makers are savvier than ever in obtaining information about the
companies that make these products.
Internet-based technologies today allow consumers,
communities, public interest groups, and regulators to be well
informed about an organization’s performance. As a result,
these stakeholders have strong views about firms that fail to
respect the environment, take advantage of less fortunate
societies, or engage in unethical conduct. Firms need to
consider all the implications of a product—from design to
disposal.
Many companies now realize that “doing what’s right” and
doing it properly can be beneficial to all stakeholders.
Companies that practice corporate social responsibility (CSR)
introduce policies that consider environmental, societal, and
financial impacts in their decision making. Operations
functions—from supply management to product design to
packaging—play a profound role in meeting CSR goals.
Sustainability is often associated with corporate social
responsibility. The term sustainability refers to meeting the
needs of the present without compromising the ability of future
generations to meet their needs. Many people who hear of
sustainability for the first time think of green products or
“going green”—recycling, global warming, and saving
rainforests. This is certainly part of it. However, it is more than
this. True sustainability involves thinking not only about
environmental resources but also about employees, customers,
community, and the company’s reputation. Three concepts may

be helpful as managers consider sustainability decisions: a
systems view, the commons, and the triple bottom line.
Managers may find that their decisions regarding sustainability
improve when they take a systems view. This means looking at
a product’s life from design to disposal, including all the
resources required. Recognizing that both raw materials and
human resources are subsystems of any production process may
provide a helpful perspective. Similarly, the product or service
itself is a small part of much larger social, economic, and
environmental systems. Indeed, managers need to understand
the inputs and interfaces between the interacting systems and
identify how changes in one system affect others. For example,
hiring or laying off employees can be expected to have morale
implications for systems in an organization, as well as
socioeconomic implications for external systems. Similarly,
dumping chemicals down the drain has implications on other
systems. Once managers understand that the systems
immediately under their control have interactions with systems
below them and above them, more informed judgments
regarding sustainability can be made.
Many inputs to a production system have market prices, but
others do not. Those that do not are those held by the public, or
in the common. Those resources held in the common are often
misallocated. Examples include depletion of fish in
international waters and polluted air and waterways. The
attitude seems to be that just a little more fishing or a little
more pollution will not matter, or the adverse results may be
perceived as someone else’s problem. Society is still groping
for solutions for use of those resources in the common. The
answer is slowly being found in a number of ways: (1) moving
some of the common to private property (e.g., selling radio
frequency spectrum), (2) allocation of rights (e.g., establishing
fishing boundaries), and (3) regulation. As managers understand
the issues of the commons, they have further insight about
sustainability and the obligation of caring for the
commons.Triple Bottom Line

Firms that do not consider the impact of their decisions on all of
their stakeholders see reduced sales and profits. Profit
maximization is not the only driver by which to measure
success. A one-dimensional bottom line, profit, will not suffice;
the larger socioeconomic systems beyond the firm demand
more. One way to think of sustainability is to consider the
systems necessary to support the triple bottom line of the three
Ps: people, planet, and profit (see FigureS5.1), which we will
now discuss.
Companies are becoming more aware of how their decisions
affect people—not only their employees and customers but also
those who live in the communities in which they operate. Most
employers want to pay fair wages, offer educational
opportunities, and provide a safe and healthy workplace. So do
their suppliers. But globalization and the reliance on
outsourcing to suppliers around the world complicate the task.
This means companies must create policies that guide supplier
selection and performance. Sustainability suggests that supplier
selection and performance criteria evaluate safety in the work
environment, whether living wages are paid, if child labor is
used, and whether work hours are excessive. Apple, GE, Procter
& Gamble, and Walmart are examples of companies that
conduct supplier audits to uncover any harmful or exploitative
business practices that are counter to their sustainability goals
and objectives.
Improving the Triple Bottom Line with Sustainability
Recognizing that customers increasingly want to know that the
materials in the products they buy are safe and produced in a
responsible way, Walmart initiated the development of the
worldwide sustainable product index for evaluating the
sustainability of products. The goals of that initiative are to
create a more transparent supply chain, accelerate the adoption
of best practices, and drive product innovation.
Walmart found a correlation between supply-chain

transparency, positive labor practices, community involvement,
and quality, efficiency, and cost. Walmart is committed to
working with its suppliers to sell quality products that are safe,
that create value for customers, and that are produced in a
sustainable way. The firm is accomplishing this in four ways:
1. Improving livelihoods through the creation of productive,
healthy, and safe workplaces and promoting quality of life
2. Building strong communities through access to affordable,
high-quality services such as education and job training that
support workers and their families
3. Preventing exposure to substances that are considered
harmful or toxic to human health
4. Promoting health and wellness by increasing access to
nutritious products, encouraging healthy lifestyles, and
promoting access to health care
Walmart’s CEO has said that companies that are unfair to their
people are also likely to skimp on quality and that he will not
continue to do business with those suppliers.
Accordingly, operations managers must consider the working
conditions in which they place their employees. This includes
training and safety orientations, before-shift exercises, ear
plugs, safety goggles, and rest breaks to reduce the possibility
of worker fatigue and injury. Operations managers must also
make decisions regarding the disposal of material and chemical
waste, including hazardous materials, so they don’t harm
employees or the community.Planet
When discussing the subject of sustainability, our planet’s
environment is the first thing that comes to mind, so it
understandably gets the most attention from managers.
Operations managers look for ways to reduce the environmental
impact of their operations, whether from raw material selection,
process innovation, alternative product delivery methods, or
disposal of products at their end-of-life. The overarching
objective for operations managers is to conserve scarce
resources, thereby reducing the negative impact on the
environment. Here are a few examples of how organizations

creatively make their operations more environmentally friendly:
· ▶ S.C. Johnson, the company that makes Windex, Saran Wrap,
Pledge, Ziploc bags, and Raid, developed Greenlist, a
classification system that evaluates the impact of raw materials
on human and environmental health. By using Greenlist, S.C.
Johnson has eliminated millions of pounds of pollutants from its
products.
· ▶ Thirty-one public school districts across the state of
Kentucky operate hybrid electric school buses. They estimate
fuel savings as high as 40%, with fuel mileage of 7.5 mpg
increasing to 12 miles per gallon, relative to standard diesel
buses.
· ▶ BMW designs automobiles with recycled materials and with
materials that can be recycled or reused after the vehicle has
reached its end-of-life. BMW recycles and reuses many of its
plastic components for its newer automobiles to reduce the
amount of waste headed for landfills.
To gauge their environmental impact on the planet, many
companies are measuring their carbon footprint. Carbon
footprint is a measure of the total greenhouse gas (GHG)
emissions caused directly and indirectly by an organization, a
product, an event, or a person. A substantial portion of
greenhouse gases are released naturally by farming, cattle, and
decaying forests and, to a lesser degree, by manufacturing and
services. The most common greenhouse gas produced by human
activities is carbon dioxide, primarily from burning fossil fuels
for electricity generation, heating, and transport. Operations
managers are being asked to do their part to reduce GHG
emissions.
Industry leaders such as Frito-Lay have been able to break down
the carbon emissions from various stages in the production
process. For instance, in potato chip production, a 34.5-gram
(1.2 ounce) bag of chips is responsible for about twice its
weight in emissions—75 grams per bag (see Figure S5.2).
Social and environmental sustainability do not exist without
economic sustainability. Economic sustainability refers to how

companies remain in business. Staying in business requires
making investments, and investments require making profits.
Though profits may be relatively easy to determine, other
measures can also be used to gauge economic sustainability.
The alternative measures that point to a successful business
include risk profile, intellectual property, employee morale, and
company valuation. To support economic sustainability, firms
may supplement standard financial accounting and reporting
with some version of social accounting. Social accounting can
include brand equity, management talent, human capital
development and benefits, research and development,
productivity, philanthropy, and taxes paid.

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