John Miller, vice president of purchasing at Nissan
Interview by Karen Prema -- Purchasing, 4/6/2006 2:00:00 AM
Player: John Miller, vice president of purchasing, Nissan, Smyrna, Tenn.
Study abroad: Miller worked in Japanese operations of both Honda and Nissan.
Challenges to global sourcing: "We look at the most competitive cost structure [including things like] what should be close to your facility for JIT. It's more competitive and makes more sense for a supply chain flow if it's close."
Best change agent: A crisis. Miller says when Nissan was in trouble in the late 1990s, purchasing collaborated more closely with engineers. "We've given more responsibility to suppliers to propose the design and be responsible for the overall product."
Sourcing decisions: "We look at CIF cost (cost, insurance and freight). We may be able to make it $1 cheaper in Mexico, but it may cost $2 to ship."
Don't point fingers: "We hold top management meetings with key suppliers. We have a set of metrics regarding quality costs, delivery development, and scorecards."
Advice for buyers: 1. Focus on basic skills, whether it's managing meetings, or how to do projects. 2. Get some engineering background. 3. Realize you are your customer's advocate. 4. Remember to have fun.
Here is the full interview with John Miller.
John Miller revs up purchasing at Nissan
Before John Miller became vice president of purchasing at Nissan North America, he spent a year in Japan interacting with Nissan executives to learn the “Nissan way.”
Japan was not new to Miller, who started his career with Honda and worked for the company for 17 years until he was recruited by Motorola. During his time at Honda, Miller spent time in Japan. While in Japan at Nissan, Miller became a member of the planning and control strategy group as well as work in the Renault Nissan Purchasing Organization (RNPO), which sets Nissan’s global sourcing strategy. The idea was to get Miller very engaged with the general managers of commodities and interact with the engineers in and the top purchasing people in Japan. “It’s a very unique advantage that you don’t typically get when going to a new job. When I took over the position, it was easy for me to make the transition because I didn’t need to learn how things work in Japan, or the people I had to interact with,” says Miller. Purchasing recently asked Miller about his background and his approach at Nissan.
How are Honda and Nissan similar and different in their approach?
In contrast to Honda, Nissan takes a more global viewpoint in purchasing. There is more complexity to the Nissan model because we have three cultures: American, Japanese and French. Honda is mostly American and Japanese culture.
When you throw in another country and culture, then sourcing becomes more complicated. However, it gives a more global view. It becomes more complex to be sure that when we are making decisions in a particular region that we realize how that decision will affect the world. But, when it’s done correctly, it’s very powerful. We are always communicating.
What are the biggest challenges to global sourcing?
In the automotive industry, global sourcing means global cost structures. We have to ask:
“How do we drive cost and have the lowest global cost structure so that our parts can come from anywhere in the world?”
We have common models and platforms we’re building all over the world. To try to reduce our investment, we only put those tools in several regions and send those smaller parts around the world. We’re looking at what is the most competitive cost structure.
How do you look at total cost?
We look at the cost in two ways. First, we look at how much it costs to make a part. We benchmark how much it costs to make a component in Brazil, Mexico, U.S., China, Thailand, Eastern Europe. Labor is the most simple to understand. We are concerned with labor cost, but we’re looking at the cost of raw materials to show that one region has an advantage.
We also look at CIF, which is the cost delivered to your door. We might think we can make it for $1 cheaper in Mexico, but it may cost $2 to ship. Separately, we look at the total landed cost. We wouldn’t make a decision on how much it costs to make it in a particular region. To make a sourcing decisions we would look at the total cost.
What new regions are you focused on?
For North America, we build over 400,000 cars in Mexico. We’re focusing on a lot on Mexico to increase the local content, and Mexico because we still have historically higher parts coming from Japan.
We’re going to start launching new models and more production volume in Brazil, mainly for the Brazilian market. We’re really focusing on that area of developing the supply base.
Can you explain how purchasing and engineering work together at Nissan?
In the late 1990s when Nissan was having financial trouble, that opened the door for the way purchasing and engineers work together. A crisis is often the best change agent. We’ve given more responsibility to the suppliers to propose the design and be responsible for the overall product, from a system viewpoint.
We’re also working more to identify suppliers for early phase development, and in other commodities we haven’t been doing it in. I’ve seen similar things in the other two regions, where we have supplier panels, and have a limited amount of suppliers we’re quoting the business to, trying to choose those suppliers who can offer up-front engineering expertise.
Who is the perfect purchasing professional?
The perfect purchasing person is an engineer that has good business experience and sense and can deal in the gray area. We’re looking to bring in more people with an engineering background but who have business experience.
For example, in the tooling area we have strengthened our tooling group and brought in engineers, toolmakers and experts in design and tool cost. We spend a lot of money in tooling, so in that area we want technical expertise. We work early on with engineering and the suppliers to design the tool to get the optimum effect.
I think as the purchasing world and supplier world have gotten more complicated, purchasing has to speak clearly from data they can back up. That’s a weak point in purchasing organizations because design changes happen quickly.
One of the main initiatives my team focuses on is improving our ability and skill sets in the engineering area. We determine cost through benchmarking and predictive tools.
What are Nissan’s goals in supplier diversity?
When we built the Canton, Mississippi facility, it was focused on using diverse suppliers. We established joint ventures with minority companies to transfer the expertise. We chose minority companies who had basic core competencies. We wanted them to run the businesses. We didn’t want a figurehead. We’ve been selective to make sure minority companies can be true minority companies and can take the leadership of the business. On the indirect side we had very good success.
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