The world’s production gets severely impacted by a number of macro and microeconomic factors daily. They are essential to consider and plan the potential response to any arising issue. However, in the regions most susceptible to natural disasters, such as seismological activity in Japan, these plannings become more challenging due to the unpredictable nature of the cause. As such, a 9.0-magnitude earthquake occurred on the coast of Japan on March 11, 2011 (Schmidt & Simchi-Levi, 2013). Many manufacturers, especially in the automotive industry, were severely hit by it for weeks and months after the hit. Nissan was one of the most adversely affected by the earthquake and suffered through the period of manufacturing reorganization. It raises the question of the readiness and effectiveness of the company’s response to the disaster.
Alternative Options
The disaster in 2011 turned out to consist of three calamities at once – an earthquake that caused a tsunami that led to a nuclear emergency. However, Nissan did not take into account the possible implications of the earthquake, which led to considerable damages and fires in several factories and foundries (Schmidt & Simchi-Levi, 2013). The better option that Nissan could have done to prevent the significant damage considering the situation after its occurrence would have been to create the plans of actions for all possible calamities instead of just the earthquake emergency-response plan (Namdar et al., 2017). The tsunami emergency-plan should have been calculated as well to create and drill evacuation routes and prepare prompt response centers according to the level of risk (Pavlov et al., 2019). The benefits of the following plan vastly exceed the costs and time spent on additional planning. In fact, it could have largely prevented the damages done by fire outbreaks in the factories.
Risk Assessment
Nissan did implement the risk management measures and planned the actions related to earthquakes, according to Nissan 2010 annual report (Schmidt & Simchi-Levi, 2013). The Global and Regional Disaster Headquarters worked on developing the Business Continuity Plan in case of an earthquake. However, they did not identify the risks of the conjoining calamities such as tsunamis and nuclear emergencies. The prevention of a second disaster was considered the second priority after human lives, but due to the lack of strategic planning turned out to be an even more significant threat to people’s lives (Ivanov et al., 2017). Thus, the impact of other disasters was underestimated. The expertise of the particular risks related to Japan’s location as an island and the building’s situation on the coast should have been a priority. It would have allowed the company to evaluate the location as a high-risk zone for tsunamis. Instead, Nissan could have done a more in-depth analysis of disaster probability to create different plans according to risk level and threat type.
Nissan’s Product Line Strategy’s Effectiveness
A product line strategy is an approach to manufacture the products. The strategy improves product performance and avoids potential losses. It changes in response to various factors and disruptions, such as natural disasters. To recover from the disaster, Nissan slowed the production line in a targeted way. The inventory was managed according to in-stock and in-transit production regarding the anticipated problems. To decrease the adverse economic effects, Nissan also applied a build-to-order strategy for less popular models and a build-to-stock strategy for high-demand products. The following rule is also called just in time manufacturing borrowed from Toyota. It allowed Nissan to eliminate large buffer stocks and avoid risks in the irregular flow of resources. The following division allowed the company not to suffer significant economic losses and earn fair revenues even when primarily affected by the disaster.
The Operational Changes and Trade-Offs
With the considerable effect that tsunami and an earthquake had on the company, Nissan came up with the new operational changes in 2012 to prevent the severity of the destruction in the future. The company followed the example of the other manufacturers that primarily had their factories on other lands less affected by natural disasters and were not directly or less impacted by the calamity (Essuman et al., 2020). Nissan reduced its dependency on Japanese manufacture up to 90% by 2015 (Schmidt & Simchi-Levi, 2013). The significant destruction in Japan made the company revaluate the contribution of its other branches in the United Kingdom, Spain, and Russia. Nissan learned the necessity of modifications and organizational changes the hard way of calamities. The manufacture of crucial components was modified and distributed to reduce the supply risk concentration and maintain the constant flow of business (Hosseini et al., 2019). The company also organized many suppliers on all manufacturing revels to prevent the disruption in case of a disaster or other threat to ensure steady-state operations.
All the steps that Nissan passed allowed the company to learn the value of decentralization, timely production of resources, and careful planning. The following situation shows the necessity of in-depth planning of the business structure in all emergency cases. The business needs to be flexible and learn from one’s mistakes when faced with significant challenges as natural disasters. Quickly adapting to the situation and establishing a new organizational structure allowed Nissan to overcome one of Japan’s most tremendous earthquakes and even improve its operation.
References
Essuman, D., Boso, N., & Annan, J. (2020). Operational resilience, disruption, and efficiency: Conceptual and empirical analyses. International Journal of Production Economics, 107-762.
Ivanov, D., Dolgui, A., Sokolov, B., & Ivanova, M. (2017). Literature review on disruption recovery in the supply chain. International Journal of Production Research, 55(20), 6158-6174.
Hosseini, S., Morshedlou, N., Ivanov, D., Sarder, M. D., Barker, K., & Al Khaled, A. (2019). Resilient supplier selection and optimal order allocation under disruption risks. International Journal of Production Economics, 213, 124-137.
Namdar, J., Li, X., Sawhney, R., & Pradhan, N. (2017). Supply chain resilience for single and multiple sourcing in the presence of disruption risks. International Journal of Production Research.
Pavlov, A., Ivanov, D., Werner, F., Dolgui, A., & Sokolov, B. (2019). Integrated detection of disruption scenarios, the ripple effect dispersal and recovery paths in supply chains. Annals of Operations Research, 1-23.
Schmidt, W., & Simchi-Levi, D. (2013). Nissan Motor Company Ltd.: Building Operational Resiliency. MIT Sloan management review, 13-149.