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John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc.

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Presentation on theme: "John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc."— Presentation transcript:

1 John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc.

2 John Miller Vice President, Purchasing Nissan North America, Inc. Automotive News Manufacturing Conference

3 CURRENT CHALLENGES Increasing price pressure on raw materials Increasing price of oil and ocean freight Impact of global competition Increased outsourcing Financial instability of supply base Bottom Line? OEMs and suppliers must collaborate to provide customers the greatest value at the lowest cost

4 Value network optimization strategy Conducted within a framework of transparency and open communication for mutual benefits – for Nissan and our supplier partners NISSAN’S APPROACH

5 3-3-3 Alliance Supplier Improvement Program (ASIP) Leading Competitive Countries (LCC) INITIATIVES FOR BETTER PERFORMANCE

6 3-3-3 Alliance Supplier Improvement Program (ASIP) Leading Competitive Countries (LCC)

7 3-3-3Promotion Office Office Suppliers Nissan Engineering Nissan Purchasing 3 Partners Technical information Cost information Acceleration CONCEPT

8 PURCHASED PARTS COST REDUCTION ACTIVITY Cost reduction without negatively affecting performance, perceived quality/reliability, brand image “WIN – WIN” FOR NISSAN AND SUPPLIERS Not profit reduction, but base cost structure change Partners Regions Years CONCEPT 3 3 3

9 Key PDT Objective: −Communicate cost saving opportunities based on benchmarking, best practices, specification rationalization, etc. PDT Activities: −Vehicle/commodity teardowns, parts investigations, line walks, “CSP” days, progress review meetings, etc AND PDT PRODUCT DEVELOPMENT TEAM PROCESS PDT ensures good communication (Engineering, Purchasing, Suppliers) related to part changes and/or opportunities 30% annual cost-reduction savings since 2000

10 Engineering, Purchasing and Suppliers (PDT Team) conducting part investigation review Generating Cost Savings Proposals (CSPs) EXAMPLE: VEHICLE TEARDOWN

11 (USA) EXAMPLE: SEAT FRAME BENCHMARKING NISSAN (China) NISSANCOMPETITOR A B C

12 INITIATIVES FOR BETTER PERFORMANCE Alliance Supplier Improvement Program (ASIP) Leading Competitive Countries (LCC)

13 ASIP is a cost-reduction program based on activities that promote continuous improvement of Renault-Nissan and its suppliers, applying the NPW methodology DEFINITION: Developed and applied by the Renault-Nissan Alliance Deployed at the Supplier’s facility and its supply chain, if necessary Focused on QCD Improvement through effectiveness and efficiency Programmed, structured, team-based approach Adopt the NPW principle and focus to implementation (not to investigation) A S I P ASIP MISSION STATEMENT

14 Developed for key Renault- Nissan suppliers Followed by agreed-upon action plans Applied to production, VA, Logistics. in order to be competitive (including Supply Chain) Followed until implementation Accomplished by equal relation between R/N (Purchasing, Design and NPW Dept. ) and supplier is... an approach for continuous improvement of the QCD: An audit to verify A project to reduce the supplier’s margins A measure to get information of cost benchmark and new model planning of R/N A measure for R/N to get information to make negotiation favorable A session to negotiate prices or volumes is not ASIP SCOPE

15 PROCESS IMPROVEMENT Discussion about future supplier plans and production policies Analyze and find potential in production and production control To clarify the attainable / ideal condition and to make an achievement plan Realize actual cost-down by R/N and supplier SUPPLY CHAIN PROCESS IMPROVEMENT Supplier member will lead it with R/N VA Clarify ongoing ideas Drive current idea Realize visual control way Rise new item Activity area Process Improvement SC Process Improvement Value Analysis Production Logistics B/O parts Raw Material O/H Profit Cost / Price WHAT IS THE ACTIVITY AREA?

16 ATTAINABLE CONDITION Describe the attainable condition using flow chart, line-spec and W/S Attainable condition Ideal condition Benchmark Supplier current condition Potential identification Potential Make attainable a common understanding Potential gap – Industrial Engineering tools Opportunity identification by flow chart, line spec, W/S ASIP activity PROCEDURE FOR FIXING ATTAINABLE CONDITION ASIP CLOSING GAP STYLE

17 * Including kaizen expert companies FY06 activities = 872% ROI ASIP ACTIVITIES U.S MEXICO (planned) # of activities * 64* CY

18 EXPECTED BENEFITS RENAULT/NISSANSUPPLIER Cost reduction, which is caused by exact cost improvement implementation Understanding of supply chain structure Realizes price down by cost-down requested by R/N Carry-over of QCD improvements on other products, enhancing competitiveness and margins Gains from Supply Chain Management Acquires improvement program Common understanding quality issues, delivery characteristics and product cost

19 The supplier commits to: Keep promise, commit deadlines and punctuality Provide active top management support Supply the required resources for each phase of the project Nominate a team leader Open its organization in order to create a transparent work environment Renault and Nissan commit to: Keep promise, commit deadlines and punctuality Respect the confidentiality of the obtained information Provide the tools and techniques necessary MUTUAL COMMITMENT & COOPERATION

20 ASIP EXAMPLE: TRUCK SEATS

21 IMPROVEMENT CONDITION Total Element Time min Line Balance67% Total Element Time25.77 min Line Balance80.60% Operators Difference 12 (Potential Target) Operators Difference 10 (Gap Agreed) Output66 pcs/hr Operators45 Shifts/Day2 Productivity1.46 pcs/hr/op Output66 pcs/hr Operators35 Shifts/Day2 Productivity1.88 pcs/hr/op Real Improvement +13.6% +28.7%

22 INITIATIVES FOR BETTER PERFORMANCE Alliance Supplier Improvement Program (ASIP) Leading Competitive Countries (LCC)

23 Thailand China Egypt India Romania Hungary Vietnam Mexico Mercosur FY05FY06FY % 15% 24% Global LCC utilization ratio LEADING COMPETITIVE COUNTRIES

24 Vehicle production plants NISSAN IN THE AMERICAS * Nissan and Renault vehicles Curitiba, Brazil* Annual capacity 50,000 Aguascalientes, Mexico Annual capacity 350,000 Cuernavaca, Mexico Annual capacity 200,000 Smyrna, TN Annual capacity 550,000 Canton, MS Annual capacity 400,000

25 THREE-STEP LCC ANALYSIS PROCESS If tier 1/2/3 component is already localized, is it globally competitive? If tier 1/2/3 is not currently localized or LCC, can it be? If tier 1/2/3 cannot be localized or LCC, is the price globally competitive? Step 1: Step 2: Step 3: Action Benchmark against PRC, THI, BRA, etc. Benchmark supply chain against other Nissan and non-Nissan suppliers Benchmark against price paid in other Nissan regions

26 CONCLUSION Automakers and auto suppliers must collaborate closely to allow both to realize sustainable benefits Success in this industry is linked to providing customers with the greatest possible value at the lowest possible cost


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