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Improving and Sustaining UK, Assessment Example

Pages: 13

Words: 3453

Assessment

Executive Summary

Nissan is one of the leading manufacturers in the UK/EU global business environment. The company has led the industry not only in production but with overall sustainability as well. The company is striving to find ways to improve their methods of operation and the impact of their vehicles on the environment. Acknowledging the existing strengths through a critical assessment of lean thinking, quality leadership, and environmentally sustainable leadership allows for a better understanding of areas of improvement. There will also be an analysis of the challenges and pressures that the UK/EU carmaker is facing. Finally, a recommendation will be made for areas where Nissan can improve in various areas of operation. With the growing awareness of sustainability and lean thinking, it is important to continue to find new ways to evolve and improve the current organizational process in a global business environment.

Improving and Sustaining UK/EU Carmakers in a Global Business Environment

The performance of UK/EU carmakers in a global business environment has required manufacturers to adopt new approaches to improve and sustain process performance. Current manufacturing operations in the UK include major brands such as Toyota, GM Vauxhall, Jaguar Land Rover Aston Martin, Bentley, and Nissan. The focus of this paper is the Nissan factory in Sunderland; it is considered the most productive car factory in Europe. In the past few years, the economic situation has required the manufacturers to evaluate the impact of globalization and to adopt new operational management principles. It has also brought to light new concepts and methods of thinking. The global recession has sales declining, but total production was increasing. It has led to the demise of mid-range and low-cost manufacturing. The focus will provide a critical assessment of the Nissan manufacturing plant that includes lean thinking, quality leadership, and environmental sustainability leadership. The challenges and pressures of the UK/EU carmaker’s market will be analyzed. Finally, the paper will make recommendations for improvement in the sustainability and operations of the UK/EU car manufacturers. Remaining competitive and financially stable in an ever-changing global business environment require manufacturers to improve their overall practices while reducing their costs.

Critical Assessment

There have been many lessons learned and influences that the Japanese car manufacturers have had on organization performance in UK/EU, automotive manufacturers. The primary focus of this paper is the manufacturing leader Nissan. “Sunderland is one of Nissan’s most productive plants and the UK’s biggest car plant ever by annual volume. By the start of 2014, when it begins operating both its production lines around the clock, it will directly employ 6,500 people. It has never had a strike” (Tighe, 2013). The success in production has been based on many different factors such as lean thinking, quality leadership, and environmental sustainability leadership. The expectations for manufacturers such as Nissan has continued to increase as standards evolve. It is no longer about the quality of the cars; it is also based on how sustainable the business operation is.

Britain is now Europe’s fourth largest vehicle producer, making an estimated 1.58 million vehicles. The UK production line has a car, bus, van or truck rolling off the line every 20 seconds. Of the vehicles produced, 80 percent are exported to over a 100 different countries. It creates a challenge in maintaining the pace while improving long-term considerations such as research and development on ultra-low emission vehicles. There is a long-term strategy in place that will require 20 to 30 years for implementation. The time frame for total completion is not favorable for necessary changes. In 2009, there were foundations established for long-term partnership between the government and the industry. The strategy dictated a unified version for the UK manufacturing industry that included dynamic, diverse, growing and globally competitive. According to the Automotive Counsel the strategy also included, “making a large and increasing economic contribution to employment and prosperity in the UK. Playing a decisive role in developing and manufacturing low and ultra-low emission vehicles and technologies. Supported by a highly skilled workforce and a strong supply chain. And inspiring young people to pursue rewarding careers in engineering and manufacturing” (Automotive Counsel, 2013, p.7).

There are weaknesses in the UK auto-manufacturing market as well. “The analysis showed that the most salient weaknesses of the automotive industry in the UK are relative labor costs, availability of skilled labor and environmental regulation” (Holweg, Davies, &Podpolny, 2009, p.51). Environmental regulations are important as is skilled and cost-efficient labor. The Nissan’s Sutherland plant between 2001 and 2006 received £586 million in investments and witnessed a reduction of 15% in the workforce during that period. “Moreover, both unions and companies agreed that the application of technology to the industry, and in particular IT, had increased and would continue to increase productivity significantly, with a resulting decline in the labor force” (Success, 2015, p. 50). Nissan was able to decrease their labor cost while improving their output.

A BERR survey conducted of the Japanese OEMs along with the suppliers who operate in the UK stated that the proximity to customers was the second most important factor in location decisions, right after cost and workforce quality. Due to the market size, UK has attracted more investments from Japanese OEMs than other EU nations. “This has had a positive impact on the UK industry as Japanese manufacturers have demanded higher quality from the supply base, raised standards and established benchmark production sites in the UK, such as Nissan’s plant in Sunderland” (The Future, 2010, p. 4). The Nissan plant growth has mirrored the success of the company in EU markets. “We have found a winning formula made up of this plant’s operational excellence, coupled with the best product line-up we have ever had, and a cross-functional team working throughout the company towards the same goals” (Nisan Motor, 2015). Nissan has found a way to maintain their quality, improve standards while growing their production and reputation.

Lean Thinking

Nissan has been a leader in the lean thinking manufacturing initiative. Many authors have proposed that the adoption of lean thinking “can directly improve the public good by improving the environmental performance of adopting firms” (see King and Lenox, 2001). Consumers want the companies they support to have a solid lean process in place. Nissan uses the just-in-time or lean manufacturing approach. “This innovative approach to car manufacture has resulted in the development of core competencies that were not present in the mass production system developed by the Ford Motor Company” (Sweeny, 2005). It requires manufacturers to establish a foundation for the core competencies in critical resource management strategies. These strategies include reliable processes and high productivity that include greater knowledge and skills. The two resource management strategies provide a foundation of the world-class manufacturing capabilities.

Superior performance can be traced to a manager’s emphasis on their long-term growth with market shares and will lead to larger production accumulations and volumes of experience. It is responsive to the market conditions and applies creative techniques that were originally developed in the U.S. It ultimately seeks to find a better solution to the underlying problem. The Japanese has created a new standard of efficiency and revolutionized the manufacturing practice and theories. “While companies and management-labor relations have evolved differently in the U.S., the unique quality of Japanese workers in Japan can no longer be used as an excuse in the U.S. for a lack of efficiency, innovation, and improvement in manufacturing” (Cusumano, 1988). It requires company’s like Nissan to reinvent their lean thinking and processes.

Some take for granted the effectiveness and importance of lean production. The debate regarding its effectiveness is based on a small domain of instrumental rationality. “That is a rationality that is concerned only with the most efficient means of achieving a given end. Economic externalities such as traffic congestion, pollution, and the human cost of lean methods consistently fall outside the adopted frame of reference” (Green, 1999, p.22). The lean thinking advocates ignore the debate regarding the degree of ‘lean methods’ that are transferable past the context of the Japanese manufacturers. There are others who are critical of Japan’s lean system.

Rehder (1994) gives little cause to believe that conditions have since improved: “Japan’ s industrial work hours are among the longest in the world, and the quality of life is poor and not improving.” The belief is that the lean system is draining natural and human resources that are stressful and a waste of resources. Further doubts about the human cost of lean methods were suggested by Sugimoto (1997), “who confirms the Japanese regime of long working hours and further points to a widespread absence of provision for paid sick leave.”

Quality Leadership

Nissan is one of the top manufacturing leaders in the UK/EU. The UK car industry exports an estimated 8 out of 10 vehicles that are built in the UK. They are then sold abroad. “Although, the UK is the huge exporter of cars, most car sales in the UK car industry are from imports” (Milmo, 2012). There is no real value to the fact that the imports are low to mid-range models, and they are no longer economical for UK manufacturing. “Every car that rolls off the line is another contribution to jobs and prosperity in my constituency and across the North East, so the next big milestone can’t come soon enough” (Warburton, 2014). Quality leadership requires manufacturers to evaluate what the best option is for their company. Nissan has used their quality leadership to ensure that their manufacturing is cost-efficient among other important factors.

The annual production figures for Nissan is 501,756 and is expected to increase over the next few years. Kevin Fitzpatrick, Nissan’s Vice President for Manufacturing in the UK, said: “Building over a million cars in two years is a further sign of Nissan’s growing brand presence in one of the most competitive markets in Europe” (Warburton, 2014). The company has exceeded the expected output of 500,000 units for the second year in a row. It is a great achievement for the company, and it shows the quality of their leadership. Nissan has set goals, and they have been able to meet or exceed the expectations of the company.   

Environmental Sustainability Leadership

Environmental sustainability leadership is important for the Nissan manufacturer in UK/EU. Nissan is a leader to the global automaker and also in the solutions to humanity. The company has established its commitment to all of the stakeholders including shareholders, customers, employees, and the communities in which they operation. They also focus on delivering valuable, engaging and sustainable mobility for everyone. “Through its business activities, Nissan aims to create economic value and to actively contribute to the development of a sustainable society” (Sustainability, 2014, p.6). The company has defined eight different sustainable strategies to form its CSR approach. The leading automaker has positioned themselves uniquely in efforts to further actions in three different strategies for Philanthropy, Environment, and Safety.

While helping to find solutions to issues involving automobiles and contribute to the realization of a truly sustainable mobility society, Nissan aims to be an engine for CSR activities across the entire corporate sector. To remain trusted and needed by society, the company must also pursue the other five strategies—Quality, Value Chain, Employees, Economic Contribution, and Corporate Governance & Internal Control. By steadily advancing these eight sustainability strategies and being transparent on its progress and challenges, Nissan fulfills its responsibilities to society and builds trust. (Sustainability, 2014, p.6)

Nissan has shown their growing concern for the environment where they operate and manufacture.  The company has established a self-imposed Nissan Green program with provides very tough targets for the company to meet. “The current NGP 2016 – the company’s third environmental mid-term plan – demands some significant improvements in its products and its operations: it’s a holistic approach that will allow the company to continue providing sustainable mobility for all” (Charging, 2012). The company has committed to a thirty-five percent improvement by 2016 in their corporate fuel economy figures for all new Nissans that will sell in the United States, Japan, China, and Europe. They are committed to leading a low corporate carbon footprints in their markets.

Challenges and Pressures

The challenges and pressures facing the UK/EU automotive manufacturers is to continue to source supplies globally from low-cost countries. “In essence, cars made in the UK account for one in seven of the domestic sales” (BBC News Business, 3/10/13). It requires manufacturers such as Toyota, GM Vauxhall, Jaguar Land Rover Aston Martin, Bentley, and Nissan have all secured source supplies from low-cost countries. Madslien (2012) suggests “that both premium carmakers, such as BMW (i.e. seeking to add capacity in many countries) and Jaguar Land Rover in the UK (i.e. strong export market with major operations in Birmingham, Liverpool and since 2011 in Pune, India), and budget manufacturers, such as Hyundai, are doing rather well.”

The change in demand has established a need for these manufacturers to need more not less in their production capacity. “The carmakers that are finding it extremely more difficult include Mid-market players such as Renault and PSA Peugeot Citroen, as well as Ford of Europe, Opel/Vauxhall and Fiat” (Madslien, 2012). It opens the door for rivals such as South Korea’s Kia and Hyundai to create competitive model designs in Germany and manufacture them at a lower cost in Slovakia and Czech Republic. Madslien (2012) also reports, “that high-end marques such as Jaguar Land Rover, Audi, Mercedes and BMW are expanding above the mass-market players, with “aggressively priced premium models, or with downsized luxury cars that are making land-grabs in already crowded segments of the market.”  It provides challenges for auto manufacturing to compete effectively.

The challenges and pressures also involve manufacturing in the future. The global growth and innovation of the future will be dependent upon how the manufacturer contributes to the global economy. It requires company’s like Nissan to establish and evolutionary plan for the future. It can be difficult to know how far competitors will evolve, challenging Nissan to be one step ahead of other manufacturers. There is a change in the role of manufacturing.  “The way it contributes to the economy shifts as nations mature: in today’s advanced economies, manufacturing promotes innovation, productivity, and trade more than growth and employment. In these countries, manufacturing also has begun to consume more services and to rely more heavily on them to operate” (Manyika et al., 2012). It is important for Nissan to take into consideration that manufacturing is not monolithic, and manufacturing must enter a dynamic new phase. There are always new substantial opportunities available even in an uncertain environment.

Recommendations

Continual improvement in Nissan’s Lean Processes

Nissan’s manufacturing success has been strongly attributed to their lean processes that they currently use. “…the lean approach percolates into ever wider circles of operations, it ceases to be about best practice and starts to become a part of the fabric of doing business” (Corbett, 2007, p.96). Nissan has found the success with employing their lean processes as a norm for business, instead of considering the best practices. The recommendations would be to continue to use what works best for them in their lean practices, however not to be complacent. It is important for them to continue to search for improvement.

Leadership Training

Nissan’s leadership and management are important for maintaining order and standards within the company. Involving employees in feedback and evaluation of the current management processes can provide a guide to improve the leadership direction. “This involves allowing everyone in the organization to take part in the strategy process and encouraging everyone to get involved in delivering the actual change and reducing fire-fighting and non-value adding work. A leader inspires their organization to change from a typical organization to a sustainable one” (Hines et al., 2008, p.9). The recommendation for improvement for leadership training will be to utilize the feedback from the subordinates to find what works and what needs improvement.

Environmental Impact

The environmental impact is a growing area of concern in any manufacturing operation. According to the United Nations, “the world’s projected population in 2050 will be 9 billion, up from 7 billion today, and 70% of people will live in urban areas” (US Energy, 2011). Nissan has been aggressive with their green initiatives. “In the Nissan Green Program 2016 (NGP2016), the company aims to reduce CO2 emissions from corporate activities by 20% compared to fiscal 2005, focusing on manufacturing, logistics, offices and sales companies in Japan” (Nissan Motor, 2015). There is a need to maintain and preserve all sustainable resources when possible. It is recommended that Nissan uses the environmental expectations in their planning, design, and execution for continued success in the future. “Nissan remains at the forefront of zero-emission technologies, producing and selling vehicles that contribute to a cleaner environment” (Message, 2015). Manufacturing new car lines, like the Nissan LEAF, provides consumers with all-electric vehicles. It is recommended that Nissan continues to focus their initiatives to producing lines of zero-emission vehicles and improve the overall environment impact.

Streamline Manufacturing

Nissan’s UK manufacturing success has been strongly depended on their capabilities to streamline their processes and ultimately make it more cost efficient. There are expectations for the UK industry to maintain an efficient position in the automotive design while increasing employment and revenue. “The UK’s strength in automotive design also puts it at the cutting edge of several important growth niches, such as green motorsport, alternative fuels, hi-tech manufacturing techniques, and powertrain refurbishment” (The future, 2014, p. 8). The recommendation for Nissan is to evaluate their current manufacturing processes and find methods that can be streamlined. With technological changes and improvements, there is always new methods that can be more effective for the company’s desired outcome.

Reducing Labor Cost

The final recommendation ties in with streamlining their manufacturing processes, and reducing labor cost. The more efficient a factory operates; the greater the outcome is for the organization. “With no plants running under capacity it has no reason to go into a central European location unless there is a big driver in the cost of labor, and the Sunderland plant is recognized to be extremely efficient” (Tovey, 2015). Improving labor cost will allow them to continue to streamline their processes and avoid unnecessary expense for employees.  The savings made by reducing labor cost can roll over into customer savings as well.

References

Automotive Council UK, Driving success – a strategy for growth and sustainability in the UK automotive sector 2013, accessed 14 Oct. 2015 <www.gov.uk/government/uploads/system/uploads/attachment_data/file/211901/13-975-driving-success-uk-automotive-strategy-for-growth-and-sustainability.pdf>

‘Charging into the Future: How Nissan, World Leader in Zero-Emission Probability, is Changing Perceptions Among Fleet and Corporate Buyers’,  2012, accessed 14 Oct. 2015 <http://www.europeanfinancialreview.com/?p=1344>

Corbett, S. 2007, ‘Beyond manufacturing: The evolution of lean production’, The McKinsey Quarterly, Vol 3, pp. 95-105.

Cusumano, Michael A. 1988, ‘Manufacturing Innovation: Lessons from the Japanese Auto Industry’ accessed 11 Oct. 2015 <http://sloanreview.mit.edu/article/manufacturing-innovation-lessons-from-the-japanese-auto-industry/>

‘The future of UK manufacturing: Sector-by-sector analysis’, 2014, accessed 10 Oct. 2014 <www.pwc.co.uk/assets/pdf/uk-manufacturing-report-sectors.pdf>

Green, Stuart D. 1999, ‘The Dark Side Of Lean Construction: Exploitation And Ideology’, University of California, Berkeley, CA, USA, p. 26-28.

Hines, Peter; Pauline Found; Gary Griffiths; & Richard Harrison 2008, ‘Staying Lean Thriving, not just Surviving’, Lean Enterprise Research Center.

Holweg, Dr Matthias; Philip Davies; & Dmitry Podpolny 2009, ‘The Competitive Status of the UK Automotive Industry’, PICSIE Books, accessed 15 Oct. 2015 <www.innovation.jbs.cam.ac.uk/research/downloads/holweg_competitive_status.pdf>

King, A., A. and Lenox, M., J. 2001,‘Lean and Green? An Empirical Examination of the relationship between lean production and environmental performance’,Journal of Production and Operations Management, Vol. 10 Iss. 3, Fall.

Madslien, J. 2012, ‘Gloomy carmakers gather in Paris, BBC News’, accessed 10 Oct. 2015 <www.bbc.com/news/business-19634422>

Manyika, Jame; Jeff Sinclair; Richard Dobbs; Gernot Strube; Louis Rassey; Jan Mischke; JaanaRemes; Charles Roxburgh; Katy George; David O’Halloran; & Sreenivas Ramaswamy 2012, ‘Manufacturing the future: The next era of global growth and innovation’, accessed 9 Oct. 2015 <www.mckinsey.com/insights/manufacturing/the_future_of_manufacturing>

Message from CEO 2015, accessed 9 Oct. 2015 <www.nissan-global.com/EN/IR/MESSAGE/>

Milmo, D. 2012, ‘UK car industry enjoys 22% rise in production’, accessed 11 Oct. 2015 <www.theguardian.com/business/2012/aug/16/uk-car-industry-rise-production>

Nissan Motor Corporation Sustainability Reports 2015, accessed 12 Oct. 2015 <www.nissan-global.com/EN/CSR/SR/2015/>

Nissan Motor Manufacturing UK (NMUK), Nissan Newsroom Europe 2015, accessed 11 Oct. 2015.

Rehder, R.R. 1994, ‘Saturn, Uddevalla and the Japanese lean system: paradoxical prototypes for the twenty-first century’,Intl. J. Human Resource Mgmt., 5(1), 1-31.

Success and failure in the UK car manufacturing industry, House of Commons Trade and Industry Committee13 Mar 2007, accessed 14 Oct. 2015.

Sugimoto, Y. 1997, ‘An Introduction to Japanese Society’, Cambridge University Press.

Sustainability Report Nissan Global 2014, accessed 11 Oct. 2015 <http://www.nissan-global.com/en/document/pdf/…/SR14_E_All.pdf>

Sweeney, Mike 2005, ‘The Japanese Automotive Industry: Lessons Learnt’,accessed 10 Oct. 2015 <www.som.cranfield.ac.uk/som/som_applications/somapps/oepcontent.aspx?pageid=13273&apptype=think&article=154> The future of UK manufacturing: Sector-by-sector analysis, Industrial Products 2010 accessed 10 Oct. 2015 <http://www.pwc.co.uk/assets/pdf/uk-manufacturing-report-sectors.pdf>

Tighe, Chris 2013, ‘UK Manufacturing: Nissan has led Renaissance in Car Production’, accessed 09 Oct. 2015 <http://www.ft.com/intl/cms/s/0/0bdb80d6-4ad8-11e3-ac3d-00144feabdc0.html#axzz3ofk6vUnN>

Tovey, Alan 2015, ‘Nissan to invest £100m in Sunderland plant as new Juke gets the green light’, accessed 09 Oct. 2015 <www.telegraph.co.uk/finance/newsbysector/industry/engineering/11840148/Nissan-to-invest-100m-in-Sunderland-plant-as-new-Juke-gets-the-green-light.html

US Energy Outlook 2011, EIA accessed 8 Oct. 2015 <//www.eia.gov/todayinenergy/detail.cfm?id=1110#>

Warburton, Dan 2014, ‘Nissan becomes first ever UK car plant to produce 1,000,000 cars in two years’, accessed 10 Oct. 2015 <www.thejournal.co.uk/business/business-news/nissan-sunderland-becomes-first-ever-6482737>

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