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

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

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

John MillerVice President, PurchasingNissan North America, Inc.

Vice President, PurchasingNissan North America, Inc.

Page 2: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

John MillerVice President, PurchasingNissan North America, Inc.

Automotive News Manufacturing Conference

Page 3: John Miller Vice President, Purchasing Nissan North America, Inc. 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

Page 4: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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

Page 5: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

• 3-3-3

• Alliance Supplier Improvement

Program (ASIP)

• Leading Competitive

Countries (LCC)

INITIATIVES FOR BETTER PERFORMANCE

Page 6: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

INITIATIVES FOR BETTER PERFORMANCE

• 3-3-3

• Alliance Supplier Improvement

Program (ASIP)

• Leading Competitive

Countries (LCC)

Page 7: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

3-3-33-3-3

PromotionPromotion OfficeOffice

Suppliers

NissanEngineering

NissanPurchasing

3 Partners

Technical information Cost information

Acceleration

3-3-3 CONCEPT

Page 8: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

• PURCHASED PARTS COST REDUCTION ACTIVITY• Cost reduction without negatively affecting performance,

perceived quality/reliability, brand image

• “WIN – WIN” FOR NISSAN AND SUPPLIERSNot profit reduction, but base cost structure change

Partners

Regions

Years

3-3-3 CONCEPT

3

3

3

Page 9: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

• 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.

3-3-3 AND PDT

PRODUCT DEVELOPMENT TEAM PROCESSPDT ensures good communication (Engineering, Purchasing, Suppliers) related to part changes and/or opportunities

30% annual cost-reduction savings since 2000

Page 10: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

Engineering, Purchasing and Suppliers (PDT Team) conducting part investigation review

Generating Cost Savings Proposals

(CSPs)

3-3-3 EXAMPLE: VEHICLE TEARDOWN

Page 11: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

(USA)

3-3-3 EXAMPLE: SEAT FRAME BENCHMARKING

NISSAN(China) NISSAN COMPETITOR

ACOMPETITOR

BCOMPETITOR

C

Page 12: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

INITIATIVES FOR BETTER PERFORMANCE

• 3-3-3

• Alliance Supplier Improvement

Program (ASIP)

• Leading Competitive

Countries (LCC)

Page 13: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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)

AS

I

P

ASIP MISSION STATEMENT

Page 14: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

• 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

Page 15: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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

Pro

cess

Im

pro

vem

ent

SC

Pro

cess

Im

pro

vem

ent Valu

e

Analy

sis

Production

Logistics

B/Oparts

RawMaterial

O/HProfit

Cost / Price

WHAT IS THE ACTIVITY AREA?

Page 16: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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

Att

ain

ab

le

con

dit

ion

Ideal

con

dit

ion

B

en

ch

mark

Su

pp

lier

cu

rren

t con

dit

ion

Pote

nti

al

iden

tifi

cati

o n

1 2

34

1

2

3

4

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

Page 17: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

* Including kaizen expert companies

FY06 activities = 872% ROI

ASIP ACTIVITIES

U.S.

2005

MEXICO

2006 2007 (planned)

# o

f acti

vit

ies

99 8 10

40*

64*

CY

Page 18: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

EXPECTED BENEFITS

RENAULT/NISSAN SUPPLIER

• 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

Page 19: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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

Page 20: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

ASIP EXAMPLE: TRUCK SEATS

Page 21: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

IMPROVEMENT CONDITION

Total Element Time 24.628 min

Line Balance 67%

Total Element Time 25.77 min

Line Balance 80.60%

Operators Difference12

(Potential Target)

Operators Difference10

(Gap Agreed)

Output 66 pcs/hr

Operators 45

Shifts/Day 2

Productivity 1.46 pcs/hr/op

Output 66 pcs/hr

Operators 35

Shifts/Day 2

Productivity 1.88 pcs/hr/op

Real Improvement

+13.6%

+28.7%

Page 22: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

INITIATIVES FOR BETTER PERFORMANCE

• 3-3-3

• Alliance Supplier Improvement

Program (ASIP)

• Leading Competitive

Countries (LCC)

Page 23: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

Thailand

China

EgyptIndia

RomaniaHungary

Vietnam

Mexico

Mercosur

FY05 FY06 FY07

10

0

20

30

12%15%

24%

Global LCC utilization ratio

LEADING COMPETITIVE COUNTRIES

Page 24: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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

Page 25: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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

Page 26: John Miller Vice President, Purchasing Nissan North America, Inc. Vice President, Purchasing Nissan North America, Inc

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