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
NISSANS 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 NISSAN COMPETITOR COMPETITOR COMPETITOR

(USA) (China) 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 Developed and applied by the Renault-Nissan Alliance

S Deployed at the Suppliers facility and its supply chain,

if necessary
I Focused on QCD Improvement through effectiveness and
efficiency
P Programmed, structured, team-based approach

Adopt the NPW principle and focus to implementation

(not to investigation)
ASIP SCOPE
is
... an approach for continuous
improvement of the QCD:
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 not
An audit to verify
A project to reduce the
suppliers 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
O/H Discussion about future supplier plans and
Profit production policies
Analyze and find potential in production and
production control
Raw

Analysis
To clarify the attainable / ideal condition

Value
Material
and to make an achievement plan
Realize actual cost-down by R/N and
Improvement
SC Process

B/O supplier
parts
SUPPLY CHAIN PROCESS IMPROVEMENT
Supplier member will lead it with R/N
Improvement

Logistics
Process

VA
Clarify ongoing ideas
Production Drive current idea
Realize visual control way
Rise new item
Cost / Price
Activity area
 PROCEDURE FOR FIXING
ATTAINABLE CONDITION

ATTAINABLE CONDITION
Describe the attainable
ASIP activity
3 condition using flow chart,
4
line-spec and W/S

1 2 ASIP CLOSING GAP STYLE

1 Opportunity identification by
flow chart, line spec, W/S

2 Potential
Attainable
Supplier

Potential

Ideal
condition

condition
identification
current

Benchmark
condition
3 Make attainable a
common understanding

4 Potential gap Industrial

Engineering tools
 ASIP ACTIVITIES

FY06 activities = 872% ROI

# of activities

64*

40*

9
9 8 10

CY 2005 2006 2007

(planned)

MEXICO U.S.

* Including kaizen expert companies

EXPECTED BENEFITS

RENAULT/NISSAN SUPPLIER
Cost reduction, which is Realizes price down by
caused by exact cost cost-down requested
improvement by R/N
implementation Carry-over of QCD
Understanding of supply chain improvements on other
structure products, enhancing
competitiveness and margins
Gains from Supply Chain
Management
Acquires improvement
program

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 24.628 min Real Improvement

Line Balance 67% Output 66 pcs/hr

Operators 45
+13.6%
Shifts/Day 2
Total Element Time 25.77 min Productivity 1.46 pcs/hr/op
Line Balance 80.60%

+28.7%

Operators Difference
12
(Potential Target)
Output 66 pcs/hr
Operators 35
Shifts/Day 2

Operators Difference Productivity 1.88 pcs/hr/op

10
(Gap Agreed)
INITIATIVES FOR BETTER
PERFORMANCE
3-3-3

Alliance Supplier Improvement

Program (ASIP)

Leading Competitive
Countries (LCC)
LEADING COMPETITIVE
COUNTRIES
Global LCC
utilization ratio
30
24%
20

10 15%
12%

Hungary 0
Romania FY05 FY06 FY07
China
India Vietnam
Egypt
Thailand
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
Curitiba, Brazil*
Cuernavaca, Annual capacity
Mexico 50,000
Annual capacity
200,000

* Nissan and Renault vehicles

THREE-STEP LCC
ANALYSIS PROCESS
Step 1: Action

If tier 1/2/3 component is

Benchmark against PRC,
already localized, is it globally
THI, BRA, etc.
competitive?

Step 2:

Benchmark supply chain

If tier 1/2/3 is not currently
against other Nissan and
localized or LCC, can it be?
non-Nissan suppliers

Step 3:

If tier 1/2/3 cannot be localized Benchmark against price

or LCC, is the price globally paid in other Nissan
competitive? 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