From Reactive To Proactive: Nissan's Supply Chain Resilience Program

Forbes

21 hours ago

Eric Elliott. Mr. Elliott us a member of the supply chain Resilience team at Nissan Americas.
At this year's Gartner Supply Chain Symposium, Eric Elliott described Nissan's journey to improve their supply chain resilience. Mr. Elliott is a senior manager for supply cybersecurity at Nissan Americas. The resilience program described at the conference is focused on the US and Mexico.
Not surprisingly, the impetus for beefing up their resilience program was COVID. In 2021, the global microchip shortage, driven in large part by COVID, led to losses of more than $200 billion in the automotive industry. Eleven million fewer vehicles were produced; manufacturing plants across the globe were shuttered.
Events were 'coming from out of nowhere,' Mr. Elliott emphasized. 'We had to learn how to prioritize, learn how to find these and act upon these things before they happen.' The heart of being resilient, Nissan came to realize, meant moving from being reactive to being proactive.
Nissan's Facilities in the US and Mexico
Nissan Motor Company, a multinational headquartered in Japan, manufactures and sells Nissan and Infiniti-branded cars, sport utility vehicles, and pickup trucks.
The Americas resilience team resides at the US headquarters in Franklin, Tennessee. Last year, over 1.2 million vehicles were sold in this region, about 900,000 of them were sold in the US.
Nissan has final assembly manufacturing sites in Smyrna and Decherd, Tennessee, as well as Canton, Mississippi. These sites assemble four different types of sports utility vehicles, a truck, and a sedan. The Decherd plant also makes powertrain engines.
In Mexico, the company operates five manufacturing facilities, three of which are located within a five-mile radius of Aguascalientes. These facilities produce engines and several vehicles for the South American market. Another plant in Aguascalientes, the COMPAS plant, is a manufacturing facility jointly owned by Mercedes-Benz and Nissan. This plant makes the two types of Nissan luxury vehicles. This plant also produces vehicles for Mercedes-Benz. A plant in Cuernavaca, Mexico, does final assembly for a sedan and an SUV that are sold in the US.
The Key Pillars of Supply Chain Innovation
The key pillars for supply chain innovation at Nissan Americas include people, process, and technology.
Having the right people in place was critical. 'We had teams of people that were just sitting on their hands, just firemen waiting to react,' Mr. Elliott explained. And when they did react, they tended to overreact; they just 'hit the panic button.'
From a data analytics perspective, all relevant supply chain data needed to be brought together, and then analytics and workflow needed to be wrapped on top of that data. Data from their finished vehicle system was needed. Core supply chain data came from their Americas warehouse, transportation, and yard management systems. Solutions for complying with the Uyghur Forced Labor Prevention Act and a customs solution were also in place.
But the core application for resilience was a new risk sensing system from Everstream Analytics.
Risk Sensing at Nissan
Nissan wanted to get away from a reactive, fire-fighting approach to risk management to 'a fully proactive state.' They wanted a watchtower that allowed them to continuously monitor and identify risks one to two weeks before they impacted manufacturing operations.
Nissan had to identify people with the requisite innovation skills who were open to working in new ways. The company needed to move from a firefighter mentality to a proactive approach to risk management. Accomplishing this required putting new people in place – 'a dedicated and skilled staff' – that would constantly observe the supply chain health of the organization and react appropriately. This new visibility of what was happening would be based on a cutting-edge risk sensing solution.
Alerts needed to have more 'certainty.' An alert needs to be appropriate to the manufacturing location and prioritized for the potential impact. Alerts needed to be contextualized and actionable; that meant there needed to be a workflow with mitigation steps – a 'playbook' - that was kicked off based on the type of alert. And the alerting needs to support the appropriate coordination of response between Nissan and its suppliers.
External threat monitoring could be based on downtime at one of their immediate suppliers or downtime at a facility in the extended supply chain, which could ripple upstream and affect Nissan production. This is known as the 'N-tier supply.' Every supplier in the N-tier supply chain needed to be mapped, their exact geographic location identified, and the potential impacts identified. If this Tier 3 supplier stops shipping, which Tier 2 parts will be impacted? When those parts stop flowing, which of our products will be affected and by how much?
Failures in the logistics supply chain also needed to be monitored. Planes, trains, and trucks needed to flow the way that they were supposed to flow to do business effectively. Weather is a key driver of whether shipments arrive on time and in full, so weather also needs to be monitored.
Mr. Elliott went on to say that external threat monitoring was 'the biggest thing that we wanted to get a handle on, because this is the biggest challenge we had.'
Cybersecurity threats also needed to be monitored. This involved monitoring all their suppliers' locations in real time to evaluate cybersecurity breaches, which could lead to parts delivery issues.
N-Tier Mapping is Not Easy
Just identifying where Tier 1 suppliers were located 'was a bigger challenge than you might think,' Mr. Elliott said. But after that, Nissan faced the exponentially more challenging task of identifying where their Tier 2 suppliers, Tier 3 suppliers, and N-Tier suppliers were located.
'We had that data. It was part of our purchasing and procurement, but the data was in unformatted spreadsheets, PDFs, PowerPoints,' even written on the back of napkins. 'It wasn't useful. It wasn't digitized. We tried OCR (optical character recognition) and screen scraping. There just wasn't a way to get it in a usable fashion.'
They have worked with their Tier 1 suppliers to get their location data, 'get it centralized, and get it in a usable state. Over the past six months, we've gotten to about 93% supplier participation. In most cases, the auto maker has visibility down to the raw material level. 'That number is going to continue to grow,' and will encompass more of the N-Tier supply chain. Tier mapping is the 'foundation' of their whole resilience program.
Nissan America's N-Tier Network
Weather forecasting alerts work hand-in-hand with N-Tier mapping. In the auto industry, suppliers commonly build facilities close to OEM factories. 70% of Nissan's suppliers for their Tennessee and Mississippi plants are located within a few hundred miles of these facilities. A map of a band of tornadoes that are emerging can be superimposed on the map of where all their suppliers are located.
Why Everstream Analytics?
'All of this is unpredictable,' Mr. Elliott exclaimed. 'A snowstorm that was just supposed to be a dusting, and it turns out to be eight inches of snow.' Then there are cyber-attacks, unexpected regulatory issues, and constantly fluctuating tariffs.
'We needed a way to get ahead of this, and to be able to cast the widest net, to be able to understand where the threats were at, where they would be coming from, and what we needed to do to react.'
Nissan looked at a lot of different vendors. Everstream Analytics was the vendor that best met their needs. To win the deal, Everstream spent a lot of time educating Nissan and developed several proofs of concept. 'They had all of the things that we needed to be successful.'
These capabilities included geographic mapping, configurable alerting, accurate data mapping, advanced weather alerting, the ability to integrate Nissan's internal supply chain data with relevant external data, easy-to-use interfaces, and robust multilingual training.
The Implementation
The initial implementation was completed in the fall of last year. But the ongoing configuration of the system never really ends. 'From the initial implementation, sometime around September/October of last year, to today, we saw 6000 alerts and 66 actionable items,' Mr. Elliott explained. But from September to December, there were only 20 actionable alerts. The system clearly was not configured correctly. Starting in January, they worked to expand their resilience by adding logistics alerts. They also added third-party data on what was occurring in the broader auto industry.
In total, there have been 66 actionable alerts since the system went live. 'That's the easy part. The hard part is, what do you do?' The system 'doesn't tell you how to react. So that's where we built playbooks.' A playbook has a workflow that kicks off a series of cross-functional tasks.
Alerts by Category
'Whenever an alert comes in - depending on the alert type, depending on the severity, depending on the region where a plant is impacted - there's a specific workflow. We've got 10 to 12 different workflows that are built out.' The workflow can differ by supplier because each supplier to a given plant affects production differently.
When an alert is received, it is assigned to a specific person based on whether the alert flags a governmental compliance, cybersecurity, logistics, or other issue. To solve or mitigate an issue may require the participation of someone from inventory control, production control, purchasing, logistics, legal, or corporate communications. The workflow defines who is required to take action.
There is more nuance in the workflows than you would think. For example, there is not a generic cybersecurity alert. What must be done depends on whether it was a ransomware attack or a phishing attack. Most multinationals do a good job of protecting themselves, Mr. Elliott explained. But smaller suppliers, without strong IT capabilities, are connected to Nissan. Actions are taken to make sure that a supplier's connection to Nissan IT systems does not introduce an IT virus.
There is also a cybersecurity workflow to ensure that the supplier will be able to continue to ship. History can inform how a workflow is constructed. Nissan learned that cyberattacks on a supplier location often followed a pattern. 'First, we'd get a call. 'There's something wrong with our EDI. We'll send you manual messages.' A few days later, it's 'we can't print labels. We don't know what's going on, but we'll still get you the parts.' And then three days after that, they say, 'we have had a cyber-attack. Our systems are down. We can't send you parts.'' Knowing this enables Nissan to work with its suppliers to maintain uninterrupted production. This may involve preordering larger amounts or assisting the supplier in resolving the cybersecurity issues.
Moving from a firefighter approach to a more proactive approach did involve pushback. Getting buy-in involved 'coaxing' the 200-plus users who utilize the system to have a proactive mindset toward risk mitigation.
The continued configuration of the system will never really end. 'We are modifying, we're evolving our workflows as we go, to get them to be more comprehensive.'
Benefits
Firefighting is expensive. 'Panic costs money, and ultimately, we wanted to take the panic out of the equation, address things in a calm, collected fashion,' Mr. Elliott explained. By reducing downtime and expensive countermeasures, the company can save money. 'We estimate that, over the first six months of usage, we've had seven-figure cost avoidance (savings).'
For example, 'in April of this year, we had 40-plus tornado alerts come into the platform. There were huge lines of storms' that were coming into the Tennessee-Mississippi Valley, where most of their US suppliers and their own US plants are located. Tornadoes can also trigger flash floods and other severe weather events. 'We had exactly zero manufacturing issues as a result of that. And it wasn't an accident. It required careful coordination of our supply chain team working with the suppliers before the storm, and after the storm, to understand the impact,' Mr. Elliott stated. Constant communication was required to keep the inbound supply chain flowing.
Good alerts were something that was impossible to get beyond Tier 1 suppliers in the past. But another example of what Nissan can now accomplish happened a few weeks before the Gartner conference when a fire happened at one of their Tier 2 suppliers. Not only did Nissan know about the fire, but they also knew that the facility supplied seven of their Tier 1 manufacturing facilities. Getting that information early allowed them to pick up the phone and call their Tier 1 suppliers in the US and Mexico and let them know what the impact might be.
This allowed their suppliers to get ahead of things by ordering from alternative suppliers. Two of these suppliers did have critical issues getting the parts they needed. 'We weren't bulletproof. We still had an issue here. But we estimated (the impact) to be about 5% of what it could have been' if Nissan hadn't had a proactive playbook in place. One of their suppliers had no idea that the Tier 2 supplier had had a fire. So, in addition to protecting production, providing this type of information to suppliers helps improve the relationships.
'About 10% of the alerts that we get within the Nissan network are actionable. And of the ones that we take action on, 90% of those have resulted in zero financial loss. We truly do have watchtowers in place. We have the right people getting the right alerts at the right time to be able to react appropriately. Our production planning is much more stable and consistent.'
Next Steps
Nissan plans to get the solution up and running in Brazil in the next five to six months. They are also going to integrate their supply chain resilience program with their physical security team.
Nissan also wants to continue improving the ease of use. Today, much of the information that feeds Everstream is in different systems – regulatory, security, and interior mapping systems. Nissan wants to integrate that data together into 'a single pane of glass.' Doing this will also allow them to improve the workflows and better leverage new AI capabilities.
'Resilience is not a race; it is a journey,' Mr. Elliott concluded.