Case study: Strategic procurement through build to order
system an analysis of Japanese auto-manufacturers.
CASE STUDY#2 : Strategic procurement through build to order system
an analysis of Japanese auto-manufacturers :-
• This study focuses strategic procurement practices of Nissan.
• In this paper, we presents Nissan’s BTO methods, Nissan Production Way (NPW)
with BTO.
• examines the further challenges of NPW from the standpoint of strategic
procurement.
• Comparison of procurement strategy among Nissan, Toyota and Honda.
STRATEGIC PROCUREMENT: Strategic procurement is cross-functional work. It has
following functions:
Conduct an Internal Needs Analysis.
Conduct an Assessment of the Supplier’s Market.
Collect Supplier Information.
Develop a Sourcing/Outsourcing Strategy.
Implement the Sourcing Strategy.
Negotiate with Suppliers and Select the Winning Bid.
Implement a Transition Plan or Contractual Supply Chain
Improvements.
Build-to-Order Requirements Model of the Japanese
Auto-manufacturer's Supply Chain:
BTO CHARACTERISTICS
LOWER INENTORIES.
PRODUCTION FLEXIBILTY.
SUPPLY CHAIN COLLABORATION.
E-BUSINESS.
STRATEGIC ALLIANCE.
REAL TIME.
PULL MARKET.
CUSTOMIZATION.
RELIABILITY.
NISSAN’S STRATEGIC PROCUREMENT:
This study focuses on Nissan’s strategic procurement practices –particularly its insourcing practices through
Nissan Production Way (NPW).
The basis of NPW is drastic cost reductions on all levels in all divisions to be implemented by numerous
cross-functional teams.
NPW focuses on reducing Nissan’s cost-per-unit by minimizing internal costs, Nissan’s
respect for
eliminating unnecessary corporate functions, and avoids pressuring suppliers. Diversity.
Model of procurement strategy that integrates:
(1) push and pull type. Cost
Career
Design
reduction.
(2) short and long delivery. support.
According to this model, we can classify 4 types: NPW
• A type (stable production – short delivery)
• B type (stable production – long delivery) Stronger
Internal A culture of
• C type (Market Responsiveness – short delivery) Communicati learning.
on.
• D type (market responsiveness – long delivery).
Change in business concept: Nissan’s BTO and
adoption of ANSWER programme:-
• In 1991, Nissan’s switched from MTS type of production to BTO.
• Nissan made major redesign of production planning processes, scheduling and
information systems changes and adopted a new programme called ANSWER (all
Nissan say welcome to every customer).
• The primary focus of ANSWER system was to reliable delivery to the customers.
• In 1997, Nissan announced pull production and the goals of NPW became more
obvious.
• In December 2001, Nissan established supply chain management (SCM) office
that coordinated the overall order-receipts and order fulfilment processes.
• Nissan’s pull production concept expanded the changes in monozukuri system
structure that aims to effectively respond to the demand changes.
PRODUCTION PROCESS BY DEMAND:
• The NPW of Nissan’s focuses on production according to demand.
• “to coordinate what’s produced in manufacturing with the actual
customer order, thereby synchronizing all aspects of operations and
materials.”
• Auto-production requires complex collaboration with suppliers which
deal with 20,000–30,000 component parts.
• This reality dictates auto-manufacturers to integrate MTS (forecast-
planning based) and BTO (customer-order based) into their production
system.
BTO for NPW and issues:
• Operations benefits allows for the manufacture of more than three different models on a single assembly line.
• Production of diverse product lines by customer orders may extend production lead time.
• Uses computer-generated input schedules to identify production bottlenecks and produce Work-In-Process
schedules.
• Effective throughout entire Supply Chain from design freeze to final delivery.
• The NPW delivers direct consumer value.
• New models can be:
Introduced within 18 months of design freeze.
Customized and ordered by final consumer via Nissan website.
Assembled and delivered to customer within two weeks of order.
Reduces cost to manufacturer, ideally allowing for lower new product prices.
• Toyota and Honda finalize production volumes by each car category of the month. Nissan adjusts monthly
production volume based on the demand order fluctuations from the dealerships.
Comparison of procurement strategy among Nissan, Toyota
and Honda:
Toyota & Nissan have same goals of delivering products according to customer orders
and yet their approach shows somewhat different operational emphasis and strategic
focus.
Production Planning (Push type)
LONG-TERM SHORT-TERM
FAST TOYOTA. NISSAN.
Market
responsiveness.
HONDA.
SLOW
