pres miller nissan

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

Automotive News Manufacturing Conference

John Miller

Vice President, Purchasing Nissan North America, Inc.

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

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

INITIATIVES FOR BETTER PERFORMANCE • 3-3-3 • Alliance Supplier Improvement Program (ASIP)

• Leading Competitive Countries (LCC)

INITIATIVES FOR BETTER PERFORMANCE • 3-3-3 • Alliance Supplier Improvement Program (ASIP)

• Leading Competitive Countries (LCC)

3-3-3 CONCEPT 3 Partners

Suppliers Acceleration

3-3-3 Nissan Nissan Purchasing Promotion Engineering Office

Technical information

Cost information

3-3-3 CONCEPT 3 Partners 3 Regions 3 Years • 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

3-3-3 AND PDT PRODUCT DEVELOPMENT TEAM PROCESS PDT ensures good communication (Engineering, Purchasing, Suppliers) related to part changes and/or opportunities • 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.

30% annual cost-reduction savings since 2000

3-3-3 EXAMPLE: VEHICLE TEARDOWN Engineering, Purchasing and Suppliers (PDT Team) conducting part investigation review

Generating Cost Savings Proposals (CSPs)

3-3-3 EXAMPLE: SEAT FRAME BENCHMARKING NISSAN (USA)

NISSAN (China)

COMPETITOR COMPETITOR COMPETITOR A B C

INITIATIVES FOR BETTER PERFORMANCE • 3-3-3 • Alliance Supplier Improvement Program (ASIP)

• Leading Competitive Countries (LCC)

ASIP MISSION STATEMENT ASIP is a cost-reduction program based on activities that promote continuous improvement of Renault-Nissan and its suppliers, applying the NPW methodology DEFINITION:

A S I

Developed and applied by the Renault-Nissan Alliance

P

Programmed, structured, team-based approach

Deployed at the Supplier’s facility and its supply chain, if necessary

Focused on QCD Improvement through effectiveness and efficiency

Adopt the NPW principle and focus to implementation (not to investigation)

ASIP SCOPE is

is not

... an approach for continuous improvement of the QCD: • Developed for key RenaultNissan 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

• 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

WHAT IS THE ACTIVITY AREA?

Process Improvement

B/O parts

Logistics

Production

Cost / Price

SC Process Improvement

Raw Material

Activity area

Value Analysis

O/H Profit

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

PROCEDURE FOR FIXING ATTAINABLE CONDITION ATTAINABLE CONDITION 3

1

ASIP activity 4

Describe the attainable condition using flow chart, line-spec and W/S

ASIP CLOSING GAP STYLE

2

1 Opportunity identification by

flow chart, line spec, W/S

Ideal condition Benchmark

Attainable condition

Potential identification

Supplier current condition

2 Potential 3 Make attainable a

common understanding

4 Potential gap – Industrial

Engineering tools

ASIP ACTIVITIES

# of activities

FY06 activities = 872% ROI

64*

40*

CY

9 9

8

10

2005

2006

2007 (planned)

MEXICO * Including kaizen expert companies

U.S.

EXPECTED BENEFITS RENAULT/NISSAN •

•

Cost reduction, which is caused by exact cost improvement implementation

SUPPLIER •

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

Understanding of supply chain structure

Common understanding quality issues, delivery characteristics and product cost

MUTUAL COMMITMENT & COOPERATION 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

ASIP EXAMPLE: TRUCK SEATS

IMPROVEMENT CONDITION Total Element Time Line Balance

67% +13.6%

Total Element Time Line Balance

Real Improvement

24.628 min

25.77 min

Output

66 pcs/hr

Operators

45

Shifts/Day

2

Productivity

1.46 pcs/hr/op

80.60% +28.7%

Operators Difference (Potential Target)

Operators Difference (Gap Agreed)

12 Output

10

66 pcs/hr

Operators

35

Shifts/Day

2

Productivity

1.88 pcs/hr/op

INITIATIVES FOR BETTER PERFORMANCE • 3-3-3 • Alliance Supplier Improvement Program (ASIP)

• Leading Competitive Countries (LCC)

LEADING COMPETITIVE COUNTRIES 30

Global LCC utilization ratio 24%

20 10

Hungary Romania Egypt

0

China

India Thailand

12%

FY05

15%

FY06

FY07

Vietnam Mexico Mercosur

NISSAN IN THE AMERICAS Vehicle production plants Smyrna, TN Annual capacity 550,000 Canton, MS Annual capacity 400,000

Aguascalientes, Mexico Annual capacity 350,000 Cuernavaca, Mexico Annual capacity 200,000

* Nissan and Renault vehicles

Curitiba, Brazil* Annual capacity 50,000

THREE-STEP LCC ANALYSIS PROCESS Step 1: If tier 1/2/3 component is already localized, is it globally competitive?

Action Benchmark against PRC, THI, BRA, etc.

Step 2: If tier 1/2/3 is not currently localized or LCC, can it be?

Benchmark supply chain against other Nissan and non-Nissan suppliers

Step 3: If tier 1/2/3 cannot be localized or LCC, is the price globally competitive?

Benchmark against price paid in other Nissan regions

CONCLUSION Success in this industry is linked to providing customers with the greatest possible value at the lowest possible cost

Automakers and auto suppliers must collaborate closely to allow both to realize sustainable benefits