Nissan Motor Company Ltd.

:
Building Operational Resiliency
William Schmidt, David Simchi-Levi

Abstract: The case study investigates Nissan Motor Company's operations management
resilience during the aftermath of one of Japan's worst natural disasters. The disaster had a
negative impact on the Japanese economy in general, and Nissan in particular. The crisis had
a significant influence on Nissan's workforce and operations, both structurally and
managerially. When confronted with difficulty, the authors detailed Nissan's actions and
realignment. The authors have also highlighted the lessons learned from a previous crisis that
the organization encountered and how this enabled them to successfully crisis manage the
scenario.

Keywords: operations management, risk management, crisis management, disasters,

1. Introduction
Nissan Motor Company Ltd explores the profound impact of the 2011 earthquake and
tsunami in Japan on Nissan Motor Company Ltd. and the broader Japanese
automotive industry. This catastrophic event, characterized by a 9.0-magnitude
earthquake, devastating tsunami waves, and nuclear emergencies, resulted in
widespread loss of life, infrastructure damage, and economic repercussions. The
automotive sector, including major Japanese manufacturers such as Nissan, faced
unprecedented challenges, with production disruptions, damaged facilities, and
impaired supply chains. This article delves into the historical context of the Japanese
automotive industry, tracing the origins of Nissan and Toyota and their strategies for
growth and success. It highlights the significance of Nissan's flexible supply chain
philosophy and its approach to risk management, which were instrumental in
navigating past crises. Furthermore, the article sheds light on Nissan's response to the
2011 disaster, outlining its emergency preparedness measures, information sharing
practices, supply allocation strategies, and production management approaches. By
examining Nissan's experiences, this article provides valuable insights into the
resilience and adaptive capabilities necessary for organizations to withstand and
recover from such devastating events.
 2. Literature Review
Figure 1 depicts the sales ratios of the three businesses following the earthquake; Toyota had
the highest ratio for production to sales at 1:1.9 (42.2%), while Nissan and Honda were tied
for overall sales in Japan at 1:1.3 (28.9%). Table 1 describes the early damage status,
demonstrating that Nissan suffered the most damage as compared to the other automobile
manufacturers.

In the face of such challenges, Nissan developed a supply chain philosophy that emphasized
flexibility and decentralized regional supply chain structures. The company recognized the
strength derived from diversity, with a corporate officer team representing various
nationalities and extensive experience in overseas operations. Nissan's simplified product
line, combining a build-to-stock strategy for select SKUs and a build-to-order strategy for the
rest, streamlined operations and contributed to increased sales (Christopher, 2011).
 3. Results and Discussion
Nissan's supply chain philosophy, characterized by regional decentralization and strong
central control during crises, played a crucial role in enhancing operational resiliency. By
maintaining a flexible organization and embracing diversity, Nissan leveraged the expertise
and perspectives of its global team members to effectively manage its operations in various
markets. The company's simplified product line and build-to-order strategy allowed for
streamlined operations and increased sales. This flexibility in supply chain structure and
product offerings enabled Nissan to adapt quickly to disruptions and mitigate the impact on
production and customer satisfaction.
Their management philosophy emerged from its near-bankruptcy experience in 1999 and
emphasized early identification and analysis of risks, proactive planning, and rapid
implementation of countermeasures. The establishment of a dedicated risk management
function, executive-level committee, and designated risk owners ensured a systematic
approach to risk mitigation and recovery. By continuously reinforcing facilities, improving
business continuity planning, and conducting disaster simulation training, Nissan
demonstrated its commitment to preparedness and the ability to respond effectively in times
of crisis.
Nissan's response to the 2011 disaster exemplified the importance of information sharing and
collaboration in building operational resiliency. The company encouraged the participation of
its global regions in the response process, sending representatives to Japan to gather
information and contribute to holistic problem-solving. This approach enabled effective
coordination and resource allocation across regions, ensuring that the right information
reached the right stakeholders at the right time. The depth and accuracy of information
sharing facilitated agile decision-making and helped align production forecasts with the
evolving supply situation.
To address capacity constraints in the aftermath of the disaster, Nissan adopted a strategic
approach to supply allocation and production management. The company collaborated
closely between sales, marketing, and regional supply chain management functions to
prioritize the allocation of component parts based on profitability and customer demand. By
slowing production lines in targeted areas and leveraging in-transit inventory, Nissan
effectively managed bottlenecks and optimized resource utilization. Empowering decision-
making at the field level and modifying delegation of authority rules expedited recovery-
related decisions and enabled prompt course corrections as new information emerged.
The combination of these strategies and practices enabled Nissan to demonstrate remarkable
operational resiliency in the face of the 2011 disaster. By embracing flexibility in its supply
chain, adopting a proactive risk management philosophy, fostering information sharing and
collaboration, and implementing effective supply allocation and production management,
Nissan successfully navigated the crisis and minimized its impact on operations and global
supply chains. The lessons learned from Nissan's experience provide valuable insights for
organizations seeking to build operational resiliency and effectively respond to and recover
from major disruptions and crises.
 4. References
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 Schmidt, W., & Simchi-Levi, D. (2013). Nissan Motor Company Ltd.: Building
Operational
 Resiliency. MIT Sloan management review, 13-149.`
 Dalavagas, I. (2011). The impact of Japan’s disaster on Toyota, Honda, and Nissan.