Quality Practices at Nissan Motor Company

Management 532

Table of Contents

TITLE PAGE………………………………………………………………………..1

TABLE OF CONTENTS…………………………………………………………..2

ABSTRACT………………………………………………………………………….3

CHAPTER I – INTRODUCTION…………………………………………………4

CHAPTER II – PLAN DEVELOPMENT………………………………………..5

CHAPTER III – ANALYSIS……………………………………………………….7

CHAPTER IV – OUTLINING FINDINGS………………………………………..8

CHAPTER V – SUMMARY AND RECOMMENDATIONS…………………..9

REFERENCES…………………………………………………………………….11

Abstract

Nissan Motor Company, Limited, is a global corporation with three automotive businesses (Nissan, Datsun and Infiniti) and a marine business (Nissan Marine). Nissan Motor Company and its sub-companies practice quality management using a Field Quality Center concept with 7 seven centers located around the world to serve customers. This group project discusses Nissan Motors Corporation’s history, recent quality downturn and their attempt to “expedite improvements that exceed customer expectations” to regain their lost reputation for quality. We will examine what and how quality practices have been developed and implemented by the Nissan Motor Company in response to these recent trends. In addition, we will determine if adopted quality practices have been successful in fostering a recovery from a slump in quality indicators and customer satisfaction rates. Finally, we will outline a way forward for the Nissan Motor Corporation with a possible path to future growth, perceived quality value and customer satisfaction rates that will enable them to become an industry leader.

I. Introduction

Can Nissan’s quality improvement initiatives help to improve its place in the automotive sector? Nissan Motor Company was founded in 1933 out of Yokohama City, Kanagawa Prefecture by Yoshisuke Ayukawa. The company currently manufactures vehicles in 20 countries and offers products and services in 160 countries and areas worldwide. Nissan produces vehicles under multiple brand names including Nissan, Infiniti, and Datsun; additionally the company produces outboard motors in its marine division headquartered in Memphis, Tennessee. The bulk of the company’s sales comes from the automotive division and it is this sector that it has experienced poor customer satisfaction and seen its’ annual ranking for Initial Quality Study(IQS) by J.D. Power and Associates sink against its competitors. A 2011 article in Autoweek proclaims the company is playing catch-up when it comes to quality. “Stung by slumping U.S. quality scores, Nissan Motor Co. will overhaul quality control in a bid to catch Japanese and Korean rivals boasting better customer satisfaction.” (Greimel, 2011).

J.D. Power and Associates, which is the global marketing company that provides rankings for industries from automotive to travel has stated, “In Power's 2011 Initial Quality Study released in June, Nissan slid to No. 24, down from 12 last year and 19 in 2008. In Power's Vehicle Dependability Study, Nissan was No. 25, unchanged from last year but down from No. 18 in 2008. In both, Nissan remained below the industry average, with lower rankings than in 2008 because rivals upped their games.” (Greimel, 2011). It was these rankings that made Nissan look at improving its’ quality initiatives, Kazumasa Katoh, senior vice president in charge of global quality began to look at alternatives that would improve the company’s quality and image problems. In examining the corporation’s history for some root causes to the quality downturn, we find that in 2006 Nissan had several incidents occur that should have indicated the seriousness of the problems they were facing. In January thru May of 2006 Nissan halted all global sales of the Altima and Sentra for engine fires. They also relocated corporate headquarters and operations from California to Tennessee, but only 42% of the 1,300 staffers elected to move, which caused considerable disruption. (Chappell, 2006) Poor quality design and manufacturing and a dysfunctional corporate culture due to a move and replacement of so many personnel explain the results of the dependability studies for the years following 2006.

II. Plan Development

The company recognized that quality improvements must be part of its business plan. This realization was incorporated into Nissan’s Power 88 business plan, developed in 2011 and promoted by the company’s Chief Executive Officer, Carlos Ghosen. This mid-term business plan lays out corporate objectives to be achieved over a 5-year period. “The name of the plan emphasizes key corporate goals: Nissan will renew its focus on the overall customer experience through actions that elevate its brands' power and sales power…by the end of fiscal 2016, the company will aim to achieve a global market share of 8% and increase its corporate operating profit to a sustainable 8%.” (Nissan Motor Corporation, 2011). Power 88 is laid out using six strategies or pillars; it is the third pillar that emphasizes the company focus on quality. It states, “Nissan aims to make steady progress in improving product quality. During the Nissan Power 88 period, we aim to raise Nissan into the top group of automakers in product quality and to elevate Infiniti to leadership status among peer luxury products by fiscal 2016.” (Nissan Motor Corporation, 2011).

Nissan’s quality improvement initiatives have been designed to address three distinct areas. The first focus being product quality, the company believes this is what allows customers to drive their cars in comfort and with peace of mind over a long period of time. Nissan’s focus is on upgrading design quality, producing higher quality parts using a design review method to achieve this goal. Pushing production quality higher is another means used to improve product quality. This involves using precision testing equipment such as digital technology and laser measurement to verify precision assembly and paint condition. Supplier management is important in Nissan’s product quality improvement process; partnering with preferred suppliers in order to cut the defect rate. (Nissan Motor Corporation). Other areas focused on to ensure product quality are using rapid response to cut the breakdown ratio and a system established to reduce the time identifying the defect parts and preparing them for shipment, allowing the company to resolve problems at an early stage. (Nissan Motor Corporation)

The next area Nissan focuses focused on is perceived quality, referring to the quality customers acknowledge via the look, the touch, and the feel of a car. (Nissan Motor Corporation). “Nissan's quality enhancement program clearly illustrates the quality enhancement target and techniques to be employed in achieving them. The aim of this program is to gain a thorough customer understanding, which will allow Nissan to become capable of providing customers with products possessing unparalleled attractiveness. Below are examples of activities exercised at Nissan in achieving these goals (Nissan Motor Corporation):

1. Understand customer sensitivity via meticulous researches of what people find to be attractive to deliver competitive products to customers.

2. Deliver high quality automobiles by paying close attention to the details and to their treatments.

3. Incorporate attractive Perceived Quality items ahead of competitors based on forecast of future technological and market trends.

The final quality area Nissan focuses on is sales and service quality. This initiative is framed by the second pillar of Nissan’s Power 88-enhancing sales power. The goal of this initiative is to provide customer experience excellence. To do this, primary key performance indicators (KPI) are used to measure competitive sales and service in each market. “The results of these Primary KPI measurements are then analyzed, correlation is built to the internal satisfaction surveys conducted by each NSC (Sub primary KPI) and Secondary or Action KPI's are set to monitor and support the progress of the NSC based Action Plan. Within this process, we haveare initiatives such as Rejecter and Defector surveys which allow us to understand the reasons why our prospects and owners do not spend their money with Nissan. These surveys identify our major weaknesses in each area from the perspective of a person who chooses not to buy or receive automotive service from Nissan.” (Nissan Motor Corporation). This is an example of how Nissan is utilizing the principles of the ISO 9000:2000 system in their drive to improve quality and customer satisfaction. Principle 1, Customer Focus: Organizations depend on their customers and therefore should understand current and future customer needs, should meet customer requirements, and strive to exceed customer expectations. In Chapter III, we will further compare and contrast Nissan’s processes to the principles in ISO 9000:2000.

III. Analysis

Nissan has a developed a field quality improvement and analysis job process which has several steps in ensuring that their goals of design quality, higher quality parts, higher production quality and supplier management are met. “This process can be divided into five phases and is a collection of defective parts that ends by formulating a solution”. (Nissan Motor Corporation)

Phase 1, clarifies the issue or incident. Nissan gathers information about the parts repairs and exchange, collect the actual part that is causing the issue, and then the company takes great care to repeat the issue in house and verify the problem. This process allows for a clear identification of the actual failure of the part(s). This is inline with Principle 7 utilized by the ISO 9000:2000 concept: Effective decisions are based on the analysis of data and information.

“The process then goes into phase 2, where the information gathered so far is shared, determining the optimum division of labor and assigning investigation tasks accordingly.” (Nissan Motor Corporation)

A meeting is held where all of the relevant discuss the issue. Each department or supplier will investigate further and test in-line with their expertise. After each group completes their investigation, the next phase begins. This follows ISO 9000:2000 Principle 3, Involvement of People: People at all levels are the essence of an organization and their full involvement enables their abilities to be used for the organization’s benefit.

The third phase begins with a meeting of the affected parties. During this meeting, the data collected is discussed using the Fault Tree Analysis (FTA), a systematic framework for organizing and reviewing the circumstances and environment in which a problem occurs. The process used in making the part is reviewed and analyzed and necessary corrections are outlined and proposed detailing which part of the production process needs to be corrected to avoid the issue in the future. Again demonstrating the use of ISO 9000:2000 Principle 5, System Approach to Management: Identifying, understanding, and managing interrelated processes as a system contributes to the organization’s effectiveness and efficiency in achieving its objectives.

Phase four is a joint analysis meeting with suppliers and Nissan management. During this meeting the countermeasures are discussed and a course of action is decided upon. “We also take steps to ensure that the proposed action has the intended effect-including rapidly introducing necessary changes on factory production lines and distributing the necessary service and maintenance information to vendors”. (Nissan Motor Corporation) This is Principle 8 of the ISO 900:2000 system, Mutually Beneficial Supplier Relationships: An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value.

The fifth and final phase of this process prevents the problem from re-occurring and affecting other processes. During this phase the previous four steps are again analyzed to assure that the corrections made do not have negative impacts on the associated processes. “One step further is taken during this last phase. The data collected contributes to improvements within Nissan’s management systems and manufacturing and development processes.” (Nissan Motor Corporation)

IV. Outlining Findings

Great care is taken by Nissan in their Field Quality Centers to investigate each failure that occurs by using FQIA or Field Quality Investigation and Analysis where the objective is to “make improvements so quickly that we exceed our customers’ expectations” (Nissan Motor Corporation). Additionally each Field Quality Center follows the “three gen” principle (genba, genjitsu, genbutsu) or checking onsite-operating conditions, gathering fact based data, and examining real parts. The data collected is used to duplicate the problem in a controlled atmosphere so that the process can be corrected for the production of future parts. This same data is incorporated into the designs of the next generation of Nissan vehicles.

“The five step process takes into account the demands and concerns of the consumer thus maintaining a satisfied clientele.” (Nissan Motor Corporation) Surveys are conducted, with Nissan going so far as offering incentives to customers, to encourage the documents are completed with the much-desired feedback. To Nissan, quality and customer satisfaction is of utmost importance to retain customer loyalty and to save the company money in recalls, maintenance and warranty claims. (Sabatini, 2011)

Nissan’s field quality improvement and diverse design efforts have resulted in an increase of sales, according to PR Newswire. “Nissan North America, Inc. (NNA) today reported September U.S. sales of 92,964 units versus 74,205 units a year earlier, an increase of 25.3 percent. Nissan Division sales increased 28.2 percent for the month with 84,485 units.” (PR Newswire, 2011)

Further, Detroit News reported there was an increase in car sales in 2013 that was the biggest increase since 2007. (Henkel, 2014) As Table 1 shows, Nissan had an increase to 8% sales, a growth of 0.1%, which compares to one of the Big Three, Chrysler’s 0.1% increase. Consumer Report rated the Nissan Murano SL as the best SUV. “The pleasant and well-rounded Murano has a nicely-constructed and quiet interior and a comfortable ride. The CVT transmission is one of the best on the market. Handling is responsive and secure. Roomy, comfortable rear seats and easy access are pluses.” (Consumer Report , 2013)

From the research, it was evident that the field quality improvement and analysis job process has improved the Nissan product offered to the consumers. This has resulted in customer loyalty and higher sales.

V. Summary and Recommendations

Nissan Motor Company has demonstrated how poor attention to quality practices and a dysfunctional corporate culture can lead to a significant loss of hard-won market position. From humble beginnings in the 1930s to present day, Nissan has led and lagged the industry standards for quality and customer satisfaction. With the implementation of the “Power 88” program, the “three gen” focus and dedicated Field Quality Centers Nissan has embraced the concepts of Six Sigma and ISO 9000:2000 and has recovered valuable market position in the volatile global automotive industry.

The next step in the move towards a total quality (TQ) culture that will allow Nissan to achieve a dominant position in the global market would be to begin the process of earning a Baldrige Award. Starting with the formation of an integrated management system (Figure 1) to address the seven criteria categories of the Baldrige Award, Nissan would begin to see some of the same benefits realized by other corporations utilizing this system. With the benefits including areas such as: accelerating improvement efforts, energizing employees and learning from feedback, Nissan would be consolidating all of their current efforts into a proven established framework to enable future success. In the near term, Nissan will have to take the steps necessary to commit leadership and resources to achieving this goal, but with the benefit to cost ratio for seeking the award estimated to be 820-1 (Link and Scott, 2011) Nissan should begin without delay. Only a long-term examination of Nissan’s attempts to recover from their downturn in quality ratings will show if the corporate culture has been changed to embrace the TQ principles, however the recent sales and customer satisfaction data does seem to indicate that they have found the right formula to achieve partial success. By taking the next step in the TQ process and seeking a Baldrige Award they will continue to move forward from their current position.

References:

Consumer Reports . (2013). Retrieved from Nissan Murano Overview: http://www.consumerreports.org/cro/nissan/murano.htm

Greimel, H. (2011, October 11). Autoweek: Nissan playing catch-up on quality. Retrieved from Autoweek: http://www.autoweek.com/article/20111011/CARNEWS/111019983

Henkel, K. (2014, January 3). U.S. Auto Industry Posts Best Sales Year Since Recession. Retrieved from Detroit News: http://www.detroitnews.com/article/20140103/AUTO01/301030056/-1/rss12

Nissan Motor Corporation. (2011, June). Nissan Power 88 plan announced. Retrieved from http://www.nissan-global.com/EN/NEWS/2011/_STORY/110627-01-e.html

Nissan Motor Corporation. (n.d.). Field Quality Center: Job Process. Retrieved from http://www.nissan-global.com/EN/QUALITY/FQC-SP/

Nissan Motor Corporation. (n.d.). Nissan: Quality Iinitiatives: product quality. Retrieved from http://www.nissan-global.com/EN/QUALITY/PRODUCTS/

Nissan Motor Corporation. (n.d.). Nissan: Quality Initative: perceived quality. Retrieved from http://www.nissan-global.com/EN/QUALITY/SENSIBILITY/

Nissan Motor Corporation. (n.d.). Nissan: Quality Initiatives: sales and service quality. Retrieved from http://www.nissan-global.com/EN/QUALITY/SERVICES/

PR Newswire. (2011, October 3). Nissan North America Sales Rise 25.3% in September. Retrieved from http://www.prnewswire.com/news-releases/nissan-north-america-sales-rise-253-in-september-130978908.html

Sabatini, J. (2011, October 10). Nissan Rushes to Grapple with Poor Quality Survey Scores. Retrieved from Autoblog: http://www.autoblog.com/2011/10/10/nissan-rushes-to-grapple-with-poor-quality-survey-scores/

Chappell, L. (2006, June 26). Losing Steam: Nissan’s six-year upswing shows signs of slowing. Retrieved from http://www.autoweek.com/apps/pbcs.dll/article?AID=/20060626/FREE/60626004/1041

Albert N. Link and John T. Scott Link, A.N., & Scott, J. T, Economic Evaluation of the Baldrige Performance Excellence Program, Planning Report 11-2, National Institute of Standards and Technology, U.S. Department of Commerce, December 16, 2011.