1. Bill Krueger
Senior Vice President, Manufacturing, Purchasing and Supply Chain Management for the Americas
Nissan North America Inc.

2. Global Sourcing Strategies Automotive News Manufacturing Conference
Supply Chain
15,000km, 150km …or 15km?
Good evening and welcome to Nashville.
As all of the speakers will likely mention in one form or another, every aspect of our industry has a global orientation. Supply chains can reach 15,000 km, 150 km or just 15 meters.
Bill Krueger
Automotive News Manufacturing Conference
May 17, 2007

3. What’s the correct answer?
INDIA
INDIANA
…or
IN THE PLANT
Another way of looking at it is, do we want to source our parts from India, Indianapolis or inside the plant. Which is right for the situation? It depends…
Contrary to popular belief, global sourcing isn’t just about cost. If we can’t create a win-win situation with a suppliers -- wherever they’re located – it’s not a good deal for us. The new enemy of success is complacency – it’s stagnating our thought process and thinking we’ve made all the improvements we can make.

4. Low cost of labor availability
2,600 M
349 M
807 M

5. Technology map of the world
Source: The Economist, June 24th 2000, p.81

6. Technology centers Stockholm, Sweden Hsinchu-Taipei, Taiwán
Helsinki, Finland
Cambridge,
England
Silicon Valley, CA
Munich,
Germany
Boston, MA
Sillicon Alley, NY
Monterrey
MEX
Austin, TX
Sophia Antipolis,
France
Singapur
Tel Aviv, Israel
Bangalore,
India

7. Average Distance 350 Km →4,600 Km(13 x)
Logistics Distances for Global Parts
Europe - Local
600km
US - Local
500km
Japan – Local
130km
Our positive opinion of the many advantages of global sourcing was tempered with a realization that our average distances were thirteen times what they had been with a local sourcing strategy.
Lower labor → EUR　　 Km
4-13 x　　
Lower labor→JPN　　　 Km
　18-50 x　
Lower labor → NA　　　　　
Km　
　4-30 x
Average Distance 350 Km →4,600 Km(13 x)

8. Order Lead Time – Firm Horizon86 D A Y S 40
Of course, the whole game changes as you go from local supply chains to global and LCC sourcing. The difference is obvious when you have lead times go from less than a week to three months. 16 4
U.S.
Mexico
Japan
China

9. Risks associated with Global sourcing
Financial Risks
Obsolescence-Commitment for Fab & Raw materials due to extended supply pipeline.
Currency Fluctuation/Stability-price adjust agreements
Premium Freight-recovery & refilling the pipeline
Inventory Carrying Cost
Non-Price related Supply Chain Costs
Warehousing
Repackaging
Expendable packaging disposal
Sequencing parts
Transportation Price Fluctuations
Supplier Management & Oversight Cost

10. Risks associated with Global sourcing
Supply Risks
US Customs Delays due to lack of C-TPAT certification
Transit Delays –
Weather
Carrier route changes
Port of call cancellation
Port labor or Customs disruptions/ strikes
Freight Damage
Systems failures
Raw Material Supply Control & Stability
Design Change & Engineering Change Coordination
Global Supplier Capacity

11. And some of these supply lines are picturesque, but very different…

12. …and sometimes crowded….

13. VERY crowded!

17. Production Part Suppliers Parts Orders & Forecast
SCM process map
Production Part Suppliers
Parts Orders & Forecast
M&S
Vehicle Orders & Forecast
Parts Arrangement
Scheduling
Inventory Control
Parts Ordering
Vehicle Orders & Forecast
Material Handling
Production Material
Manufacturing
CCR
International Logistics
Domestic Logistics
Transport
Service Parts
Nissan and Infiniti Dealers
Vehicles
I’m going to show kind of a slow-motion diagram of what our supply chain looked like not too long ago. Behind this inefficient process map were silos – business units that didn’t have common goals or a culture of communication. Not too long ago we actually had separate trucks delivering the same part from the same supplier to two buildings about 100 yards apart in Smyrna. On different days!
It was more than communication… the problem was we had a system – shown here, that had a silo mentality and not an organizational efficiency point of view. We were getting the work done, but we weren’t working as a team in the big picture.
Service Part Suppliers
Service/ Accessory Parts
Service & Accessories
Service/ Accessory Parts

18. STRONG BUT INDEPENDENT
MANUFACTURING
PURCHASING
CONSEQUENCES?
Suppliers
Customers
Not long ago, each of these separate organizations within Nissan was producing very good work. But because they had no common culture for communication and because each reported up to a different executive there was little synergy taking place. A basketball analogy I like to use for this is Ohio State’s team. They had the best scorer, the best rebounder, best assist man – and they were very successful… but they eventually couldn’t stack up against an excellent, cohesive TEAM.
SUPPLY CHAIN
MANAGEMENT
DESIGN

19. Optimal
Purchasing
Sub-optimal
Logistics 10

20. MONOZUKURI – “MAKING THINGS”
NOW
MANUFACTURING
PURCHASING
VALUE NETWORK
OPTIMIZATION
REGIONAL
INTEGRATION
NNA, NMEX, NBA
CONSOLIDATED
OBJECTIVES
CUSTOMER
RESPONSIVENESS
CUSTOMER
QUALITY
Suppliers
Customers
The concept of Monokuzuri is optimizing your value chain by setting team goals and creating a culture of synergy and communication that systematically squeezes waste out of the sytem.
From silos we’ve evolved to a functional focus – and we’re moving toward real-time functional optimization of the value chain. Cost savings, quality gains and better efficiency are going to continuously occur as a result of a total system focus of monokuzuri.
DESIGN
SUPPLY CHAIN MANAGEMENT

21. MONOZUKURI’S Overarching Goal:
Value creation by reducing the total delivered cost of high quality products to our customers.

22. Regional Supply Chain Management
(Americas)
Parts assembly level optimization
Development of efficient packaging
Transportation filling optimization
Build the logistics corridor

23. P O Utilization of Efficient Packaging - parts per m³ +
1.00 P
Packaging must guarantee parts QUALITY during transportation and handling.
To achieve max. quantity of parts per m³.
Use of returnable or disposable packaging based on optimum logistics cost. OK
Best practice
- parts per m³ +
0.50 O NG
0.00
- logistics cost (pkg & freight) +

24. P O Transportation fill optimization NG OK Key elements to succeed:
Modular packaging
“ok”
Non modular packaging OK P
“ng”
(per piece)
Dimensions according to AIAG standards
(48” x 45” pallet footprint) to get maximum transport utilization NG O
Key elements to succeed:
Use of modular packaging (AIAG)
Standardized transportation equipment
Supplier responsibility as shipper of their own products

25. Logistics corridor Nissan Mexico & USA plants United States Mexico
NNA-S
Smyrna, TN(USA)
Stamping
Vehicle
NNA-D
NNA-C
Aguascalientes (MEX)
Stamping
Engine & Transaxle
Vehicle
Eagle Pass, TX
Laredo, TX
Decherd, TN (USA)
Engine & Transaxle
Mexico
NMEX-A
Altamira
Veracruz
Manzanillo
NMEX-C
Lazaro Cardenas
CIVAC (MEX)
Vehicle
Production of service parts
Acapulco
Canton, MS (USA)
Stamping
Vehicle

26. Critical success factors
Manage the supply network, not just suppliers
Effective supplier relationship management and supplier development
Focus on total delivered cost, not price
Involve all functions in the value network
Develop parts commonization strategy – reduce complexity
Seamless global processes, program discipline and efficient way of working
KPIs and Goals aligned across all functions
Perhaps the easiest way to illustrate our objectives is to show you how we determine success. As I mentioned earlier, we take a more holistic view of the network and strive to make our suppliers partners in managing the network.
Talk to the slides

27. The Americas SCM Mission is to ….
Support Regional Purchasing sourcing activities which result in the optimum Delivered Duty Paid (DDP) parts cost.
Support the manufacturing process with the packaging designs, logistics routes and facilities which optimize the delivery of globally, regionally, and locally sourced parts.

28. VALUE NETWORK OPTIMIZATION
MONOZUKURI – “MAKING THINGS”
NOW
MANUFACTURING
PURCHASING
VALUE NETWORK
OPTIMIZATION
The concept of Monokuzuri is optimizing your value chain by setting team goals and creating a culture of synergy and communication that systematically squeezes waste out of the sytem.
From silos we’ve evolved to a functional focus – and we’re moving toward real-time functional optimization of the value chain. Cost savings, quality gains and better efficiency are going to continuously occur as a result of a total system focus of monokuzuri.
DESIGN
SUPPLY CHAIN MANAGEMENT