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Content

Introduction 3

Overview of Nissan 3

Supply chain management 4

Description of the project 4

SWOT analysis 5

SWOT Nissan and Supplier (Prior to COGENT) 6

Supplier development 8

Stages of supplier development 9

JIT Approach 12

Ownership cost minimization 13

Cogent fast track 15

What is the future? 15

Conclusion 16

Reference 17

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Introduction

Many successful organizations are now following supply chain management as a benchmark for

themselves. In different organizations and firms the operation of supply chain management

varies greatly and it is complex. Supply chain management is practiced by both servicing and

manufacturing industries. Organizations are now adapting SCM to earn more profits and

provide more customer satisfaction. Knowledge quality of a firm is the key factor to success in a

competitive business environment which is now admired by all the successful organizations.

SCM is the management of the raw materials, with proper planning, quality manufacturing and

correct distribution. To develop a product it is crucial to know about the customer demands

and expectations. With this knowledge combined with new technology and marketing a firm

creates successful products. Sometimes companies solely try to improve but most of the time

they discuss with their suppliers to gather knowledge about the customer requirements. This

knowledge exchanging process enables the firms to learn more about their customers and also

about the supplier’s awareness about the market. This is beneficiary to both supplier and buyer

firms. It is a common scene that powerful organizations insist their supplier to adapt their

proposed process to improve the product quality and coordination.

Overview of Nissan

Nissan, established in 1933, is a well-known brand in manufacturing cars of today’s automobile

industry. Nissan Motor Company Ltd, which in short known as Nissan, is a market leading auto

manufacturer with the headquarter in Japan. This multinational automaker was a central part

of Nissan group. But with the reformation under Carlos Ghosn, the CEO of Nissan, it has

become independent automaker. Their main products include, automobiles, outboard motors

and forklift trucks.

Nissan used to market their autos under the brand name of Datsun which is a renowned car

manufacturer. It is affiliated with Renault S.A. which holds its 45% of shares while Nissan has

15% of Renaults shares. Its listed in the top 3 auto manufacturers in asia. It also owns the luxury

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SupplierCustomer

Receiving Packing DistributionManufacture

Demand managementSchedulingPurchasing

Master production plan

Physical Flow

Information Flow

brand called Infinity. With a revenue of over $93 billion (2008) and operating income of over

$1.5 billion (2008) its one of the biggest automaker in the market. It has over 2 hundred

thousand employees with a determination of constant improvement.

Supply Chain management

“Supply chain management (SCM) is the combination of art and science that goes into

improving the way your company finds the raw components it needs to make a product or service

and deliver it to customers.” (Wailgum & Worthen, 2008)

Diagram 1: Supply Chain Management (Basu & Navan, 2008)

Nissan Cogent:

Description of the project

Cogent, the short form of Co development Regeneration Tool, is a research project done by

Nissan with the coalition of Cranfield University and its suppliers. The main purpose of the

research was to improvise the capabilities of the automobile components producers in UK and

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make better designs to sustain in the UK market. The design of a component is helpful to satisfy

the customer demand and expectations.

SWOT Analysis

SWOT is a short form of Strengths, Weaknesses, Opportunities and Threats. It is a tool to

analyze the internal and external environment of an organization (Mullins L. 1996). Strengths

and weaknesses are assessed in internal environment of the organization. External

environment is analyzed by opportunities and threats. By the proper understanding of the

external factors and internal factors an organization decides how to increase its strengths,

minimize the weaknesses, work for its opportunities and eliminate the threats.

SWOT

analysis

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Internal:

Strengths and weaknesses of a company mainly depend on the following issues:

Structure of the organization, representation, culture and key bodies of the

organization.

Accessibility of raw materials and natural resource.

Organizations capacity and effectiveness

Amount of market share

Brand consciousness

Economic situation

External:

Opportunities and threats are external conditions. Opportunities may arise because of changes

in the business or in the environment. Company should know how to take advantage of their

opportunities. But sometimes changes become a threat to the company. So the company

should know how to handle and omit the threats. External factors are:

Rivals

clients

suppliers

Market

Changes in the technology

Economy

Legal and political influence

Social alteration

SWOT- Nissan and the suppliers (prior to COGENT)

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Strength:1. big number of dedicated clients2.good brand image3. long term experience in business4. good quality, lower cost and proper delivery gurantee.

Weakness:1. communication gap with the suppliers2. lower status than some competitors3. suppliers never concerned about performance assessment.

opportunities:1. estublish a codevelopment upbringing2. save the time in the operation3. omit and reduce the waste during production4. supplier relationship management to achieve high quality supplies.

Threats:1. high competition in the market2. customer loyalty in stake3. all the weaknesses stated above are also considered as threats.

S W O T

When the question “where we are now?” was introduced, we got the SWOT of Nissan and the

suppliers in the answer.

Where we are now?

Where we want to go?

The main purpose of the COGENT project was to increase the performance by altering

the relationship in the development and design phase.

Reduce and omit the wastes during the operation.

Achieving an improved QCDDM

Omit the communication gap between Nissan and the suppliers

Making more attractive and featured automobiles.

Reduce the time during the process.

How the company will get there?

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COGENT made a detailed plan to achieve the goals. The process is discussed below with

explanation.

Supplier Development

“Supplier development can be loosely defined as the process of working collaboratively with

your suppliers to improve or expand their capabilities. An example may be teaching a supplier

how to manufacture a type of item that they never manufactured before for the purposes of giving

you the option to buy, rather than make, that item. In recent years, it is has become increasingly

common for buying organizations to train their suppliers in Six Sigma and Lean techniques.”

(Dominick, 2006)

Supplier development makes the suppliers to develop themselves with the help of the buyer

company to make new and more advanced products. We can say that, customers are

responsible for the demand condition, manufacturers are responsible to react to the condition

and suppliers are responsible to deliver the quality goods for the manufacturers to react most

effectively to the demand.

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Stages of supplier development

Supplier development has 4 stages. It includes identifying the supplier base as well as assessing

and rationalizing, problem solving improvement, proactive condition developing and ,

integration development.

Customer and supplier co development:

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Customer and supplier co development can be successful if the customer has the right

capabilities and expand it with the suppliers. According to Henry K. (2001), supplier

development is a joint effort by the suppliers and buyer companies to bilaterally develop the

supplier’s abilities and potentials in one or more of the following areas”

1. Quality

2. Delivery

3. Cost

4. Technology

5. Environmental responsibility

6. Time to market

7. Financial feasibility

8. Managerial capability

Supply chain productivity, superiority and World-class alliance:

Main goal of a successful management system is to boost the profitability by generating more

revenues and by minimizing the cost and waste by omitting useless products and non-valued

products. Schonberger (1986) first commenced about the notion of world class industrialization

and the keys to achieve the world class performance.

Principles of World class supply chain management:

Time to market:

Use of Proper Time to enter in a market with a new product is an important issue. Previous

research proved that more than forty percent of market share can be occupied in a market with

a new product if its been introduced in a proper time. Earny et. Al. (2005) cited that Late entry

is a drawback to gain good market share and sometimes the firm doesn’t get good market and

has to withdraw because of being late.

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It is important to reduce the process time to introduce a new product early so that more

market share can be taken. Researches show that world class organizations reduce their

process time by 30% to introduce a new product to get more market shares.

Quality improvement:

Improvement in quality enables the firm to get more customer loyalty and customers trust.

Quality can be achieved in many ways. A lot of individuals has researched and proved the

importance of quality improvement but it was ignored by the big companies because they could

not see the relationship between good quality and a better competition.

European Perception of Quality

(Southey p. Nissan COGENT case)

But in today’s business world it is mandatory to have a good quality product, good quality

service and a good reputation in order to compete in the market.

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Just in Time Approach

“It is a manufacturing philosophy which refers to the elimination of waste associated with time,

labor and storage space.” (Radisic, 2006). Just in time approach is an important concept for

successful supply chain management. It is the idea to get the right product, in the right time and

in the right amount. Its actually the exact response to buyers order. It helps the supplier to not

make excess supplies and maintain inventory. But it needs a good and fast operational base.

JIT System

Principles:

There are 3 principles of JIT system:

Waste minimization and elimination

Total quality control and

Involvement

of people.

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COGENT – saving time and resource approach

(Southey p. Nissan COGENT case)

Ownership cost minimization

To gain competitive advantage in supply chain management one important issue is to lower

total cost of ownership. Cost of ownership involves the expenses while acquiring, changing,

using, maintaining, or getting rid of anything for an extended period of time. (Cost of

ownership, ROI, and cost/benefit analysis: What´s the difference?, 2007).

How to maintain and lower the TCO?

More attractive design

Negotiating the acquisition cost

Increase efficiency and lowering processing cost

Proper asset usage by sharing the knowledge, resource and materials, removing

obstacles, and waste management.

Quality cost minimization by working with the selected suppliers and continuously

improving the quality.

Reducing the down-time

cost

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(Southey p. Nissan COGENT case)

By reducing the risk costs

By reducing the cycle times with proper collaboration with suppliers.

Time management, asset utilization, reducing labor and utility cost can lower the

conversion cost.

Co-development process of COGENT

(Southey p. Nissan COGENT case)

COGENT fast track

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Cogent fast track system

(Southey p. Nissan COGENT case)

What is the future?

After researching in the websites, in approximately 90 companies who are represented over

100 sites have improved their co development potential by almost 10% within the first year of

their involvement in COGENT. With this supplier co-development the processing time has

reduced to almost 30% with almost 40% reduced engineering cost and almost 30% cost

minimization in parts.

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Appraisal trend by suppliers

(Southey p. Nissan COGENT case)

Conclusion

For the best outcome and performance from the suppliers it is important to maintain a good

communication with them. Supplier integration is also an important issue for a profitable result.

Supplier development is a crucial fact for the benefit of the buyer company. Supply chain

integration and improvisation process of Nissan, which is known as COGENT, has increased the

performance level of the company in various issues such as supply cost reduction, raw material

and inventory maintenance cost reduction and transport cost minimization. As COGENT case

study describes, Nissan achieved NEXT21 goal by taking some initiatives. These were, co-

development and alignment, improved internal consistency for development, involvement of

third party, use of performance measurement system, focusing on a real project and use of

detail while interact and use the events as accelerators.

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Works CitedCost of ownership, ROI, and cost/benefit analysis: What´s the difference? (2007, february 12). Retrieved april 4, 2010, from www.solutionmatrix.com: http://www.solutionmatrix.com/tco-roi-cba-difference.html

Dominick, C. (2006, november 1). Charles' Purchasing Certification Blog . Retrieved february 19, 2010, from www.purchasingcourses.com: http://www.purchasingcourses.com/2006/11/supplier-development-definition.html

Radisic, M. (2006). Just-In-Time concept.

Wailgum, T., & Worthen, B. (2008, november 20). Reflect Changes in Supply Chain Management Technology. Retrieved february 16, 2010, from www.cio.com: http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions

Ron. Basu & J Nevan Wright,(2008)Total Supply Chain Management, 1st Edition.

Southey, P,(2009/2010) Coventry University Module Notes.

Monkzka, Trent & Handfield, (2005) Purchasing & Supply Chain Management, 3rd Edition.

D. Taylor, D. Brunt,(2001) Manufacturing Operations & Supply Chain Management.