‘Nissan’s Approach to Supplier Development’ Academic Essay

From Burnes, B. (2014) ‘Managing Change’ 6thed. pp.51-55
Nissan’s Sunderland assembly plant is the most productive in Europe and produces almost one in every four cars built in the UK. However, when it opted for a UK base in 1984, the company faced a major challenge in bringing its European suppliers up to the same standard as those in Japan. Nissan recognised that European – especially UK – component suppliers fell far short of Japanese standards of quality, reliability and cost. Measuring suppliers’ capabilities on a scale of 0 – 100, Nissan rated Japanese suppliers at 100, suppliers in mainland Europe at 80 and UK suppliers were rated at 65-70. Nissan were required by the European Union to produce cars which contained, by value, 80% of local content. Therefore, it needed to improve the capabilities of its European suppliers, if it was to maintain the quality and cost standards achieved by its plants in Japan. To this end, Nissan decided in 1987 to for a Supplier Development Team (SDT) based at its Sunderland plant. The aim of the SDT was and is to help suppliers to develop their business to the stage where they can meet Nissan’s present and future performance requirements. A similar function had been in operation for 15 years in Japan, and this was considered to be a suitable model for its UK operation.
Initially, two engineers were sent to Japan for a nine-week training course. This training included extensive practice in undertaking improvement activities within Nissan’s Japanese suppliers. On their return, based on the techniques learnt in Japan, the engineers developed a ‘ten-day improvement’ activity for use with UK suppliers. Their aim was to establish an approach, which whilst achieving immediate productivity and quality improvements, would convince UK suppliers to adopt the Japanese approach to manufacturing. Consequently, though Nissan was concerned that the outcome of any improvement activity should be positive, its ultimate objective was for suppliers to recognise the value and benefits of adopting the Japanese approach, and to continue with it once the SDT had left.
The SDT approach was officially launched in the UK in November 1988, and involved a group of 12 medium-sized suppliers. Since these small beginnings, the size of the SDT has grown, and it has become an established and important part of Nissan’s operations. It has worked with the majority of Nissan’s suppliers, and has established a reputation amongst them for its expertise and commitment. Though it originally concentrated on shop-floor improvement projects, which still form the core its work, it has provided a broader range of assistance, such as cost reduction initiatives, joint production development, supervisory training and strategic planning programmes. In essence, it offers a consultancy service to Nissan’s suppliers which is, normally, free of charge.

The SDT in Action
The SDT approach is to work co-operatively with suppliers to help them identify areas for improvement, and then to assist them to develop and monitor improvement plans. In particular, the SDT will train supplier personnel in quality and production improvement methods, and support supplier initiatives to improve production and reduce defects. The idea of free consultancy by an organisation such as Nissan sounds attractive, but suppliers can also perceive such an offer as either domineering or patronising. Nissan’s relations with its suppliers were and are very positive; however, given the history antagonism between customers and suppliers in the UK car industry, it tends to tread warily and prepare the ground carefully before offering assistance.
Initial Approach
Before undertaking the first improvement activity with a supplier, the SDT makes a presentation to the senior managers of the company concerned. This is because it regards senior manager commitment and understanding as an essential precondition for success. Unless this commitment is gained, the SDT cannot and does not proceed further. Though the approach is now well established among and valued by suppliers, in the early days of the SDT, some suppliers were sceptical and resistant to such an approach. Nevertheless, most suppliers respond favourably to the initial presentation.
The ST’s standard presentation begins by describing what continuous improvement (Kaizen) is and the benefits it brings. The SDT then outlines a typical improvement activity, including the various tools and techniques used. The team stress that most improvement activities can be carried at little or no cost, provided that the employees working in the area concerned are involved in planning and making the necessary changes. If, after the presentation, senior managers are willing to proceed, the SDT briefs other staff and undertakes a factory assessment.
The Factory Assessment
The length of time devoted to a factory assessment varies, but typically takes a day. Assessments are not compulsory but most suppliers welcome an independent review of their operations, especially by a world-class company such as Nissan. The factory assessment does not form part of Nissan’s formal supplier assessment procedure and, therefore, is less threatening than might otherwise be the case. Factories are assessed under ten headings:
• Company Policy
• Quality Performance and Procedures
• Delivery Control Methods and Performance Productivity
• Equipment Maintenance Procedures
• Stock Control
• Production Process Development
• Housekeeping (how clean and tidy the factory is)
• Health and Safety
• Employee Morale

Each heading is scored out of five and the scores recorded on a factory assessment summary sheet. The assessment is then discussed with and explained to the supplier’s management. From the assessment, the supplier and the SDT can begin to identify areas of concern and possible targets for improvement. The SDT then proceeds to suggest how it might be of assistance and, if this is accepted, agrees an improvement project with the supplier.

Improvement Activities

Though the ten-day improvement activity offered by the SDT is based on the tools, techniques and experience of Nissan in Japan, it has been altered to meet the specific needs of its European suppliers (who are mainly based in the UK). Improvement activities usually include some or all of the following:
• Reducing assembly time and improving methods
• Reducing overhead costs-including reducing inventory and improving equipment availability
• Reducing work-in process
• Preventing defects
• Improving productivity by reducing throughput times and introducing JiT scheduling
As mentioned, most improvement activities are usually achieved at little or no cost to the supplier; however, the supplier does need to commit time and personnel to the activity. The improvement process revolves around a multi-functional team composed of the supplier’s own staff who are assisted by the SDT. The supplier’s team includes operators and supervisors from the production area concerned as well as maintenance, process engineering, quality and sometime administrative staff. The team is led by someone from the supplier. The SDT stress that the most important members of the team are shop-floor employees working on the process which is to be improved. Not only does this prevent change simply being imposed on those who will be directly affected by it, with all the scope for resentment and mistrust that this can cause, but it also ensures that the valuable knowledge of the shop-floor employee is utilised. Perhaps more importantly, it provides them with the skills and motivation to continue to improve the process and even after the SDT have ceased to be involved. An independent study (Lloyd et al, 1994) found that this approach led to greater commitment to the activity, and improved morale in the areas concerned. It also found that improvement activities helped to break down functional barriers, and assisted the development of greater co-operation and team spirit.
Once the process or activity which is to be improved has been agreed, targets for the improvement are then established (e.g. reductions in lead time, improvements in quality). The supplier prepares the ground the ground for by briefing staff and making any necessary resources available, such as dedicated meeting room. If the improvement activity is likely to cause a disruption to production, a stock of components may be built up before the activity commences to compensate for this.
Day One of the ten-day improvement activity is devoted to providing training for the supplier’s team. If it is the first time the supplier has been involved in such an activity, the SDT will take the lead in this. However, if the supplier has previous experience of SDT improvement activities, then a member of staff is expected to take the lead. The SDT sees it its prime purpose as ensuring that: everyone understands the concept of Kaizen; the procedures for the ten-day activity are clear; and the team becomes familiar with the tools and techniques for its task. In this latter respect, the most frequently-used tools are flow charts, work-flow diagrams, pareto charts, cause and effect (fish bone) diagrams, brainstorming and critical path analysis. Where necessary, these are reinforced and supplemented as the ten-day improvement activity develops.
On Day Two of the improvement activity, the team splits into smaller groups to analyse and discuss the process to be improved. The groups use a combination of hard data, such as scrap rates, equipment down time and stock levels, and more subjective opinions, such as comments about layout, ease of use and the provision of information, to identify cause of waste and possible counter-measure. The SDT encourages the use of stop watches and even video cameras to assist the supplier’s team to analyse the process in question, though these can sometimes be viewed with suspicion by operators. Once the individual groups have completed their deliberations, they reconvene as a team. The team usually makes a flow diagram of the entire process in order that everyone can appreciate what is involved and agree the changes which will bring the best benefits. The data that has been collected by the groups is analysed by the entire team. To make this easier, it is ordered and analysed under a number of standard headings:
1. Quality: Are quality problems due to material, process, design or training deficiencies?
2. Technology: Is the equipment appropriate, well maintained and used correctly?
3. Ease of Operation: Can work be made easier through ergonomic improvements such as eliminating the need to bend, or through modifications to the equipment?
4. Layout: Does the layout of the process result in time delays or excessive work-in process?
For each of the above categories, the team proceeds to identify Concerns, Causes and Counter-measures. Most suppliers’ teams find this a demanding approach. In the space of two days, not only do they have to learn new tools and techniques, but they also have to deploy these in a rigorous and constructive fashion. Nevertheless, by the end of the second day, teams have normally identified what the problems are, what is causing them and the measures necessary to correct them. Sometimes, the outcome is a recognition that existing equipment is inadequate for its task but it is more usually the case that the team comes up with a list of low cost/no cost changes which they can implement themselves. In some cases, other members of the supplier’s staff may be called in to discuss the feasibility of some of the ideas generated. However, in the main, the suppliers’ teams are usually capable of making their own judgements.
Days Three to Eight of the improvement activity are spent implementing the agreed improvements. Though the SDT does come back on day six to observe progress and can be contacted for assistance at anytime, the responsibility for this phase of the programme lies firmly with the supplier’s personnel. The changes they make may be small and simple, or may involve the re-arrangement of complete areas of a factory. Where feasible, the team makes the changes in conjunction with personnel in the area concerned. The changed process is then tested, re-analysed and, if necessary, fine-tuned. To minimise disruption, any major changes in layout tend to take place during the weekend which falls in the middle of the improvement activity.
For Days Nine and Ten of the improvement activity, the SDT returns to help the team review what they have learnt and achieved and to ensure that all changes are fully documented. They also discuss outstanding issues and concerns, and potential future improvement projects. The final task is to prepare and deliver a presentation to the company’s senior manager describing the changes achieved and the benefits gained. Not only does this give staff the opportunity to show senior managers what they have achieved (and receive well-earned praise), but it also helps those unused to public speaking to develop their skills in this area.

SUMMARY
The SDT has come to be considered as a valuable resource by Nissan’s suppliers, and there is always a queue for its services. From the suppliers’ perspective, this is understandable. Improvement activities usually meet or exceed their targets. Productivity increases of 20 and 40% are quite common, as are similar improvements in quality and reductions in work-in process. From Nissan’s point of view, it is not the individual improvements per se which are important, but the ability of suppliers to carry on making improvements once the SDT presence is removed. For many, this is the case, and the individual improvement projects act as a catalyst to the development of continuous improvement both on and off the shop-floor. Nevertheless, this does not always occur, and some suppliers do appear to find difficulty sustaining and spreading the SDT philosophy which may affect their longer term position as a Nissan supplier. After all, Nissan is not a charity. It helps its suppliers to improve their competitiveness in order to improve to improve its own competitiveness. Therefore, it would misleading to believe that Nissan was in anyway ‘soft’ on suppliers. It promotes co-operative working with suppliers (and encourages suppliers to work co-operatively with their own staff) because it believes it makes sound business sense. Nissan is prepared to enter into log-term partnerships with its suppliers but suppliers must reciprocate by continuously improving their performance – not an easy task. As Sir Ian Gibson, Nissan’s former Managing Director, stated: ‘Co-operative supply chain relationships are not an easy option, as many imagine, but are considerably harder to implement than the traditional buyer-seller relationships’ (quoted in Burnes and Whittle, 1995:10).

Questions
1. Compare Nissan’s approach to performance improvement with that advocated by F. W. Taylor.
2. What are the benefits of Nissan’s ‘bottom-up’ approach to shop-floor performance improvement compared with the benefits of Taylor’s approach?
3. If Frederick Taylor’s perception of human beings is as ‘greedy robots’, what is Nissans?
4. What are the implications of the Nissan approach for both managers and the managed?

Background reading:C18OB textbook.
Chapter 1; The Nature of Organisational Behaviour
Chapter 2; Approaches to Organisations and Management
Chapter 3; The Nature and Context of Organisations

Answer

Introduction

More often than not, companies, organizations, or individual persons face situations or problems that prompt them to choose between various options in the hunt for a solution. However, the available alternatives have to be assessed as to whether they are correct, hence meeting ethical standards or erroneous, those that do not meet these criteria are otherwise referred to as unethical. The choices taken will, in turn, go a long way to not only determine the success rate of the problem at hand but also help in mitigating similar occurrences in future. The paper draws comparisons between F. W. Taylor’s approach and Nissan’s’ implication to ethics.

Comparison between F. W. Taylor and Nissan’s approaches to performance improvement   

Like Nissan’s approach, F. W. Taylor’s approach to performance improvement appreciates the fact that a company’s overall performance is the collective responsibility of each employee. Thus, training entails not only top officials but also the junior most serving workers (Nieto-Rodriguez, 2016).  Moreover, both F. W. Taylor and Nissan consider individual employee’s efforts towards achieving an assigned workload as a measure of assessing the growth of an entire company (Zuffo, 2013).

Secondly, following an extensive assessment of a factory, the Supplier Development Team determines the flaws and shortcomings that need improvement. The common areas of concern include but are not limited to tools and equipment, operational procedures and employees’ skills. The SDT then sets goals and targets which may entail an overhaul, reshuffle of tools and thorough training of employees. Like Nissan, F. W. Taylor in his principles, emphasizes the need to establish goals that will enable workers to meet the company’s productivity demands (Corbacioglu, 2017).

However, F. W. Taylor is of the opinion that employees are by nature, unwilling to work. Therefore, as much as possible, they would do the least likely tasks just for the sake of working, “in the majority of cases this man deliberately plans to do as little as he safely can” (Snippet, 2015). Unlike the F. W. Taylor’s point of view, Nissan only highlights how Directors find it hard to implement new changes that appear involving and cost-intensive.

Comparison of the benefits of ‘bottom-up’ criterion to shop-floor performance development of Nissan to Taylor’s approach

The Nissan’s bottom-up approach which entails the use of advanced tools does not only help in reducing the production cost initiatives but also place the suppliers in a long-term competitive position. Likewise, Taylor’s approach to rewarding workers by their day’s performance helps to motivate them to meet a predetermined workload and even go an extra mile to better their performance. “A fair day’s pay for a fair day’s work” (Yen Ting, Yee Shee and Sze Choong, 2017).

Both F. W. Taylor and Nissan appreciate the importance and benefits which come along with standardizing and upgrading tools and equipment for use at the shop-floor. Nissan recommends the use of standardized tools to enable every supplier to remain relevant in the market and compete favorably with their competitors. According to an individual study (Salvatore, 2014), Taylor recommends the use of standardization of tools to enable workers to deliver efficiently and per their monetary reward.

On the contrary, while Nissan emphasizes on the use of a joint product development approach which ensures and assures teamwork and co-operation between workers, Taylor advocates for individual allocation of tasks. In Taylor’s plan, he argues that matching laborers to specific functions by their skills and abilities helps to maximize efficiency and reduces time wastage (Bluedorn and Taylor, 2015).

Frederick Taylor perceives humans as ‘greedy robots’ while Nissan perceives people as developmental tools

According to (Bamber, 2013), F. W. Taylor arrogantly refers to human beings as ‘greedy robots’: unresponsive to boredom, pain, fatigue, and loneliness. He claims that their unmatched hunt for the monetary incentive is their ultimate concern. Conversely, Taylor appreciates the fact that different people have varied capabilities. He notes that there is no ‘one best way’ for everyone since selecting individuals by their abilities enables them to work efficiently and achieve a positive outcome.

On the other hand, Nissan treats people as developmental tools which have to continually keep upgrading both to meet the needs and demands of their employer and that of the employer’s customers. For instance, Nissan sends two people to Japan for nine-weeks training to ‘upgrade’ them to the level that meets Nissan’s and Europeans’ prerequisites. Secondly, Nissan trains SDT to teach factory workers and take them through rigorous ten-days training to ‘upgrade’ and make them fit in the competitive market. Thus, making more money and keeping Nissan a force to reckon with at the marketplace.

Implications of the Nissan approach to managers and employees    

Nissan regards senior managers highly and attributes all the factory’s achievements to them while neglecting the value and roles that workers play in making the goals, missions, and visions of the company a reality:

Before undertaking the first improvement activity with a supplier, the SDT makes a presentation to the senior managers of the company concerned. That is because it regards high-level manager commitment and understanding as an essential precondition for success. Unless the SDT gains this responsibility, they cannot and does not proceed further.

Secondly, according to Nissan, managers are the epitomic symbols of power in an organization whose decisions cannot be compromised by anybody whatsoever.  “If, after the presentation, senior managers are willing to proceed, the SDT briefs other staff and undertakes a factory assessment.” Furthermore, the limited chances an employee enjoys to exercise their right only indicate how small a role they are deemed to play. “In some cases, other members of the supplier’s staff may be called in to discuss the feasibility of some of the ideas generated.”

Thirdly, judging from these examples, it is evident that Nissan bestows supreme power to managers and undermines the ‘voice’ of employees serving under them. However, even though Nissan exploits its employees, it offers them a chance to develop themselves and gain a World-class experience with which, they can work in other highly-ranked organizations. Unlike Nissan, F. W. Taylor’s approach makes complete exhaustion of employees merely in reward for money.

Conclusion

In a nutshell, different organizations breach moral codes of standards and fundamental human values to meet their set targets. Companies use people as ‘robots’ to carry out meticulous tasks otherwise designed for machines. However, humans have recurring needs, and because of lack of alternative sources of money, they opt for exploitation as their only means to survive. It is nonetheless, ethical for companies to use people as sustainable developmental resources in areas where machines cannot work. It is even more important when both the worker and the manager meet at a 50-50 balance at which, both of them enjoy equal benefits.

References 

Bamber, M. (2013). Overcoming Your Workplace Stress. Hoboken: Taylor and Francis.

Bluedorn, A. and Taylor, F. (2015). Scientific Management (Comprising Shop Management, the Principles of Scientific Management, and Testimony before the Special House Committee). The Academy of Management Review, 11(2), p.443.

Corbacioglu, S. (2017). INFLUENCE OF TAYLORISM ON DEMING’S QUALITY MANAGEMENT. Inquiry, 2(2).

Nieto-Rodriguez, A. (2016). The focused organization. London: Routledge.

Salvatore, N. (2014). Book Review: Management: Frederick W. Taylor and the Rise of Scientific ManagementFrederick W. Taylor and the Rise of Scientific Management. By NelsonDaniel. Madison: University of Wisconsin Press, 1980. xii, 259 pp. N.p. ILR Review, 35(4), pp.623-625.

Snippet, V. (2015). Volume 23 Title Page. Global Ecology and Biogeography, 24(2), pp.259-260.

Yen Ting, N., Yee Shee, T. and Sze Choong, L. (2017). Internet of Things for Real-time Waste Monitoring and Benchmarking: Waste Reduction in Manufacturing Shop Floor. Procedia CIRP, 61, pp.382-386

Zuffo, R. (2013). Lo “Spirito del tempo” del volume “Principles of Scientific Management” di Frederick Winslow Taylor. Ideologia e scienza. STUDI ORGANIZZATIVI, 16(1), pp.9-31.