John MillerVice President, PurchasingNissan North America, Inc.John MillerVice President, PurchasingNissan North America, Inc.Automotive News Manufacturing ConferenceCURRENTCHALLENGESIncreasing price pressure on raw materialsIncreasing price of oil and ocean freightImpact of global competitionIncreased outsourcingFinancial instability of supply baseBottomLine? OEMs and suppliers must collaborate to provide customers the greatest value at the lowest costValue network optimization strategyConducted within a framework of transparency and open communication for mutual benefits for Nissan and our supplier partnersNISSANSAPPROACH3-3-3AllianceSupplierImprovementProgram(ASIP)LeadingCompetitiveCountries(LCC)INITIATIVESFORBETTERPERFORMANCEINITIATIVESFORBETTERPERFORMANCE3-3-3AllianceSupplierImprovementProgram(ASIP)LeadingCompetitiveCountries(LCC)3-3-33-3-3PromotionPromotionOfficeOfficeSuppliersNissanEngineeringNissanPurchasing3PartnersTechnicalinformationCostinformationAcceleration3-3-3CONCEPTPURCHASED PARTS COST REDUCTION ACTIVITYCost reduction without negatively affecting performance, perceived quality/reliability, brand image“WIN WIN” FOR NISSAN AND SUPPLIERSNot profit reduction, but base cost structure changePartnersRegionsYears3-3-3CONCEPT333Key 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.3-3-3ANDPDTPRODUCTDEVELOPMENTTEAMPROCESSPDT ensures good communication (Engineering, Purchasing, Suppliers) related to part changes and/or opportunities30% annual cost-reduction savings since 2000Engineering, Purchasing and Suppliers (PDT Team) conducting part investigation review Generating Cost Savings Proposals (CSPs)3-3-3EXAMPLE:VEHICLETEARDOWN(USA) 3-3-3EXAMPLE:SEATFRAMEBENCHMARKINGNISSAN(China)NISSANCOMPETITORACOMPETITORBCOMPETITORCINITIATIVESFORBETTERPERFORMANCE3-3-3AllianceSupplierImprovementProgram(ASIP)LeadingCompetitiveCountries(LCC)ASIPisacost-reductionprogrambasedonactivitiesthatpromotecontinuousimprovementofRenault-Nissananditssuppliers,applyingtheNPWmethodologyDEFINITION:Developed and applied by the Renault-Nissan AllianceDeployed at the Suppliers facility and its supply chain, if necessaryFocused on QCD Improvement through effectiveness and efficiencyProgrammed,structured, team-based approachAdopt the NPW principle and focus to implementation (not to investigation)ASIPASIPMISSIONSTATEMENTDeveloped for key Renault-Nissan suppliersFollowed by agreed-upon action plans Applied to production, VA, Logistics. in order to be competitive (including Supply Chain)Followed until implementationAccomplished by equal relation between R/N (Purchasing, Design and NPW Dept. ) and supplieris. an approach for continuous improvement of the QCD:An audit to verify A project to reduce the suppliers marginsA measure to get information of cost benchmark and new model planning of R/NA measure for R/N to get information to make negotiation favorable A session to negotiate prices or volumes isnotASIPSCOPEPROCESSIMPROVEMENTDiscussion about future supplier plans and production policiesAnalyze and find potential in production and production controlTo clarify the attainable / ideal condition and to make an achievement planRealize actual cost-down by R/N and supplierSUPPLYCHAINPROCESSIMPROVEMENTSupplier member will lead it with R/NVAClarify ongoing ideasDrive current ideaRealize visual control wayRise new itemActivity areaProcess ImprovementSC Process ImprovementValue AnalysisCost / PriceWHATISTHEACTIVITYAREA?ATTAINABLECONDITIONDescribetheattainableconditionusingflowchart,line-specandW/SAttainableconditionIdealconditionBenchmarkSuppliercurrentconditionPotentialidentification12341234PotentialMakeattainableacommonunderstandingPotentialgapIndustrialEngineeringtoolsOpportunityidentificationbyflowchart,linespec,W/SASIPactivityPROCEDUREFORFIXINGATTAINABLECONDITIONASIPCLOSINGGAPSTYLE*IncludingkaizenexpertcompaniesFY06activities=872%ROIASIPACTIVITIESU.S.2005MEXICO20062007(planned)#ofactivities9981040*64*CYEXPECTEDBENEFITSRENAULT/NISSANSUPPLIERCostreduction,whichiscausedbyexactcostimprovementimplementationUnderstanding of supply chain structureRealizespricedownbycost-downrequestedbyR/NCarry-over of QCD improvements on other products, enhancing competitiveness and marginsGains from Supply Chain ManagementAcquires improvement programCommon understanding quality issues, delivery characteristics and product costThesuppliercommitsto:Keep promise, commit deadlines and punctualityProvide active top management supportSupply the required resources for each phase of the projectNominate a team leaderOpen its organization in order to create a transparent work environmentRenaultandNissancommitto:Keep promise, commit deadlines and punctualityRespect the confidentiality of the obtained information Provide the tools and techniques necessaryMUTUALCOMMITMENT&COOPERATIONASIPEXAMPLE:TRUCKSEATSIMPROVEMENTCONDITIONTotal Element Time24.628 minLine Balance67%Total Element Time25.77 minLine Balance80.60%Operators Difference12(Potential Target)Operators Difference10(Gap Agreed)Output66 pcs/hrOperators45Shifts/Day2Productivity1.46 pcs/hr/opOutput66 pcs/hrOperators35Shifts/Day2Productivity1.88 pcs/hr/opRealImprovement+13.6%+28.7%INITIATIVESFORBETTERPERFORMANCE3-3-3AllianceSupplierImprovementProgram(ASIP)LeadingCompetitiveCountries(LCC)ThailandChinaEgyptIndiaRomaniaHungaryVietnamMexicoMercosurFY05FY06FY07100203012%15%24%Global LCC utilization ratioLEADINGCOMPETITIVECOUNTRIESVehicleproductionplantsNISSANINTHEAMERICAS* Nissan and Renault vehiclesCuritiba,Brazil*Annualcapacity50,000Aguascalientes,MexicoAnnualcapacity350,000Cuernavaca,MexicoAnnualcapacity200,000Smyrna,TNAnnualcapacity550,000Canton,MSAnnualcapacity400,000THREE-STEPLCCANALYSISPROCESSIf 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?Step1:Step2:Step3:ActionBenchmark against PRC, THI, BRA, etc.Benchmark supply chain against other Nissan and non-Nissan suppliersBenchmark against price paid in other Nissan regionsCONCLUSIONAutomakersandautosuppliersmustcollaboratecloselytoallowbothtorealizesustainablebenefitsSuccess in this industry is linked to providing customers with the greatest possible value at the lowest possible cost