Nissan Canada Case Analysis

Nissan Canada Case Analysis

DeVos Graduate School of Management

Northwood University

June 19, 2018

Michael Heater

Problem Statement

Eric Caldwell, the director of vehicle ordering for Nissan Canada, has proposed a new vehicle ordering process as part of the new Integrated Customer Order Network (ICON). His span of control includes the vehicle planning department which is subordinate, Dave Richardson, is reviewing the proposed new ordering system in the eyes of the stakeholders. These stakeholders include the dealers, Nissan manufacturing operations and suppliers.  This will affect the plants, and dealers ordering time for allocation and specific customer orders. Residual inventory and increased closing rates motivates Dave to find a process that will reduce the amount of excess inventory on dealership lots to reduce incentives, or money lost, on the vehicles. Ultimately this will increase revenue for the company. The new ICON ordering system proposed by Caldwell will need to align production with customer demand while also meeting Nissan’s business objectives.

Analysis

The problem became evident in the entire automotive industry due to consumers having to make compromises on vehicles that were not their top choice. If there was a wider range of product, the consumer would buy without feeling that they gave something up due to lack of inventory and options.

Vehicle allocation was done three months prior to production. This was based on previous sales history and was tracked by the sales team and the analyst. Long lead times contributed to longer waits for the dealer, but most importantly, the customer. The dealership could also be waiting on average 46 days to hear a response about modifications that were made by the dealer for retail sold vehicles.

The new plan would follow the three-month planning process but allow modifications to orders by dealers with responses in real time. This would give the dealership the advantage to find the right vehicle for the customer based on restrictions from the manufacturing plant. This process would generate higher percentage of sales for the dealership.

By having higher closing rates, the manufacturer would be able to put less incentives on the vehicles due to excesses/unwanted inventory. The reduced incentives would result in higher profit margins for the company.

Analytical Tools

Lean management was used to reduce waste (excess inventory). By utilizing a new ordering process based on consumer wants and needs, the plants would be able to build vehicles as they are ordered from the dealerships as well as allocations by national sales teams. The dealerships may think that they are losing control of what vehicles they are getting. However, they would be able to make changes to ordered vehicles and receive responses in real time from plant analysts. These responses would help increase dealership trust in the manufacturing plant as well as reduce unwanted inventory on dealership lots.

Process mapping was used to identify problem areas in the allocation and ordering process. By having a clear and set process for vehicle ordering it will be possible to utilize ICON in the new ordering process. Caldwell has identified that there is unwanted inventory on dealership lots due to poor communication between national sales teams, the manufacturing plant, and dealerships. By identifying problem areas within the current process, it is possible to find solutions that positively affect the business stakeholders.

Kaizen learning was used to continuously improve on customer needs and demand. Utilizing ICON will allow stakeholders to continuously update and improve upon vehicle ordering processes. Since there will be real time communication between the manufacturing plant and the dealership as well as suppliers, simple, effective improvements can be made on the fly.

Solution

Since finances are an issue in determining whether to use the new process of ICON and implementing it would cost the company $6.5 million there has to be evidence to back up the new process.