Nissan Case Study

The Nissan Canadian that ventures in the motor vehicle manufacturing industry has the high call of meeting customer needs as well as aligning the entire enterprise operations with the overall objectives of the company. The major problem that faces the NCI is vehicle manufacturing and planning in relation to the ordering process. Coordination of the orders and the planning team is not synchronized to ensure that losses are not accrued on excess vehicle inventory that do not meet customer needs and interest. The problem of planning is encountered by the department since there are many dealers who are the ones to come with the customers directly and are operating as an entity on their own. The company has adopted many only one national sales office and three regional sales offices with over one hundred dealerships that all operate independently of Nissan. There is also evidence from the case of long lead times from the time orders are made to the dealer until the time the vehicle is delivered to the dealers. The national and the three regional sales offices do not have the direct contact with the client but the manufacturer endevour to invest heavily on increased incentives with a number of upgrades to the vehicles offered to many disinterested clients.

It is very important to take not that as many dealers are present and all operate by their principles with no relationship with the manufacturer yet the orders are received by the dealers and relayed to Nissan. The main principle cause of these problems is the lack of an all inclusive and integrated order processing system and mechanism. By reference, the first problem in ordering is evident from the fact that dealers depended on the national sales office to gauge the customer demands and current market trends yet the national office was always late in responding to the customer changes requests. An action plan for this problem is to allow the dealers respond to the client request on a timely basis by having a direct link to the manufacturer capability and availability of the parts to ensure an on time delivery of orders and effective communication of any queries relating to the orders. Secondly, a problem of heavy investments on unwanted vehicles results from the fact that no direct link to the customers exists and also increased lead time to determine what the customers would say after getting response from the dealers. The action plan in this case can only be to reduce the lead time give some considerable autonomy of responsibility to the dealers and allowing the customer more time to evaluate the functionality of the product as a result of reduced lead time. A problem is evident with the fact that each dealer is allocated a volume of unwanted and probably rich mix of models since the sales offices apportion the dealers volumes based on the sales rate. The comments of the customers as regarding the models and certain features are always accumulated only to be responded to much later when production is expected by the dealers do have already began.  These are very undesirable characteristic of the analysis and the planning department which both are supposed to coordinate their work with the planning and logistics departments.

There seems to be a problem of supply chain and the accessibility of the manufactured parts by the dealers since changes request are responded to 46days after receipt and can also be frozen a few days prior to the production. With this in mind the customers are definitely not satisfied with the approach of handling their orders since expectations are never met and interest overlooked in order that Nissan can cut on internal costs at the expense of high sales. When steps such as reduction of lead time, bridging the gap between the national sales office and the dealers, can be resolved then a number of goals are inevitable including:

- Increased revenue as a result of satisfied customers hence more sales

- Lower operational cost resulting from less delays in acquisition of parts and also responding to change request timely consequently making few or no unwanted excess vehicle inventory.

- When responses to change request are made on time, then no heavy investments will be made for the free upgrades of non-existent vehicles. The goal of satisfying customer orders by responding to request is also to help minimize the overheads spent on adjustments and a number of manipulations that would have been avoided.

-  Lower finished vehicle inventory

In a bid to resolve these problems and enable Nissan achieve its objectives an approach to adopt is the ICON project that is an Integrated Customer Ordering Network. With this, Nissan would basically be able to achieve on three major goals:

  1. Shift to a more customer centric model by focusing on support of increased customer demands and ability to assist the client more as opposed to distancing themselves from the client.
  2. Aligning the core practices and processed to their global brand initiative
  3. Supporting the goals and objectives of the company.

In spite of the fact that major breakthroughs would be a reality, a number of challenges are going to be realized. The new order processing system will involves a number of steps in different phases are detailed below.

Step 1:

Supply Chain Management Using Manugistics Tool – This tool has been adopted to assist with the sales and forecasting for the Nissan automobile company. The tool ensures a demand plan, demand fulfillment based on attributes. The demand tool predicts and shapes the consumer response by building a business strategy incorporating forecasting and promotional impacts into the demand plan therefore enabling users predict the consumer demand than ever before. Once the demands have been projected a fulfillment plan is drawn based on attributes of the demands, constraints of manufacturing and overall planning strategies. This process improves the inventory turns by aligning supply with demand throughout the entire network. This is ensured by ability of the users to determine optimal material and product quantities from suppliers, to planning and scheduling manufacturing as opposed to before when scheduling was done once an order has been accepted with no regard for the supply and other manufacturing attributes or constraints.

Consideration of the constraints ensures that feasibility of production is projected and no constraints violated. The tool is very efficient such as to use algorithm rules to search for alternative time when all constraints that apply to an order can be satisfied.

Step 2:

The sales forecast in the new process in obtained from the sales offices within the regions based on a three years sales history. The plant will base the forecasts also on the model-mix providing each sales organization and dealers with a percentage restriction by the model of the car, option package and colour hence the dealers would adhere to these during ordering to ensure that the orders are as close to production as is possible. The availability of these model-mixes gives the customers various feasible options of the product models to choose from. The presence of a weekly ordering process also gives a small margin of time for the production process to commence hence the vehicle planning analyst would utilize the demand planning and fulfillment tools to create net vehicle requirements at the individual dealer level for the consecutive months in production. The benefit is such that the dealers who are in direct contact with the customers have minimal time sufficient enough to respond to the customer hence cost saving and satisfactory enough to the customers.

Step 3:

Order submission and subsequent processing follows with the dealers having the option to accept, reject or modify any vehicle orders and then instantly the vehicle planning analyst would attempt to schedule the modified orders within Nissan’s provided restrictions and any orders or modifications that would not be scheduled within the restrictions would be submitted and sent to dealers.

The final order accepted by the dealers would be sent to manufacturer by vehicle planning analyst and dealers would also be in a position to submit online change request for any order for checking against option-package and receive feedback in real-time. This is a major achievement solving the problem of lead time and poor communication channels between the dealer and the national sales office.

The challenges presented by this new order processing system according to the CEO of NCI is the national sales office controlling the production schedule making the dealers uncomfortable since the production is determined by the dealers agreement with the customers based on interest, needs and restrictions of the package options. The dealers do not easily accept the fact that the national sales office recommends vehicle orders to them since they are the direct customer service personnel for the manufacturer. The best solution to this challenge would be to provide an all inclusive option package to the dealers where customers can be able to select or choose from a wide variety that conforms to the plants restrictions and also meets a number of various user needs and interests. With this in mind a production schedule by the national sales office will not limit the options the dealers have since a wide variety is provided and also change or modifications can be made very easily with the provision of instant feedback for any orders submitted to the national sales office.

The second challenge presented by the new process is the plant and the suppliers expected to accommodate up to 20 per cent change in volume on the available option packages. This is unlike the previous instance where the supply chain would receive firm orders three months in advance. It would imply increase in costs but this must not inhibit the process. The dealers are expected to allow a minimal modification range given the fact that a number of expected interests should have been met by the national sales office when option packages are given to the dealers. The solution to help mitigate such cost implications for the plant will be to ensure a small lead time with the suppliers such that all parts can be acquired as soon as the orders are made and any modifications requested. The operation of the supply chain must be integrated and the results in real time communicated to the dealers who can provide alternatives to the customers and also the vehicle planning analyst in the event that supply cannot meet the demand for  a given order at a particular moment.

Overall benefit can be evidently seen by the fact that the new order processing system will ensure that no excess inventory is kept hence low costs of storages and maintenance and that the dealer inventory is always subtracted from the demand to calculate the net dealer demand and hence reducing the number of days for the supply to take place as well as cutting costs on the delivery and scheduling logistics.

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