Nissan pushes suppliers on quality
The Japanese automaker is not afraid to exercise some tough love when it comes to suppliers meeting its quality, cost, and delivery targets.
By James Carbone -- Purchasing, 10/5/2006 2:00:00 AM
Supplier base reduction is an initiative at most OEMs, but not at Nissan North America. There, it’s all about quality.
In fact, Nissan is so focused on quality that in 2007 some quality engineers, who already work closely with buyers, will become part of the purchasing organization.
“We have the number of suppliers we need,” says John Miller, vice president of purchasing at Nissan. “Our goal is to work closely with the ones we have to improve quality, lower cost, and improve delivery.”
Nissan uses about 380 suppliers in North America who provide systems and parts for the Altimas, Pathfinders and other vehicles the company builds at its Smyrna, Tenn. facility. Nissan’s total spend with direct suppliers in North America is about $9.5 billion annually. About 60% of its spend is with just 40 suppliers.
That number has been relatively consistent over the last few years. While the company occasionally adds a new supplier that offers a needed technology missing from the rest of the supply base, it has no qualms about cutting suppliers for poor quality. “Our relationship to a supplier is not a marriage no matter what,” Miller says.
It doesn’t happen often, however. The reason: Nissan works closely with its suppliers to make sure they understand the company’s quality requirements. For example, Nissan sets parts per million (ppm) defect levels for the parts and assemblies it buys from suppliers—and re-sets them every year.
Additionally, Nissan also has a supplier and quality meeting each year to discuss quality issues with key suppliers and to recognize suppliers who have had exceptional quality over the previous year. “We meet with them and show them what the next three year forecast is for quality and what the expectations are,” Miller says.
In general, Miller says, only a small percentage of suppliers cause the majority of quality problems, and in most cases a quality problem is a management issue. “More often than not we find the way the supplier’s management is managing the company is leading to some of the quality issues,” he asserts. He says a supplier’s management has to make sure they find the systemic root cause of a quality problem, and then send the findings to the production line to fix the problem. That doesn’t always happen. “Sometimes a supplier’s management doesn’t listen to the line side on how to fix a problem,” Miller says. “Quality comes down to people and management, not a machine.”
 Automotive Buying Report GM strives for consistent metrics Suppliers tighten their own supply bases Mirroring sales, purchasing emphasizes market research |
Nissan has supplier quality analysis (SQA) teams that will work with suppliers if there are quality problems. The teams will make a site visit to a supplier and evaluate their manufacturing and quality processes and make recommendations on what needs to be done.
Most suppliers who have quality problems need to improve or else they will lose business. “We give them every opportunity to improve,” says Miller. “They have to improve or they won’t get additional business or we will re-source.”
He notes that Nissan’s quality organization can prevent a supplier from being awarded business. “When we make a sourcing presentation and say 'these are the suppliers we are going to buy from,’ a quality representative is sitting in the room and he has the ability to refuse the sourcing to some supplier based on quality. Of course they have to have the data to back it up,” says Miller.
Nissan has so few suppliers because it typically uses only three to five suppliers for a part or assembly. In some cases, the company even sole sources parts, such as windshield glass for the Altima. Additionally, suppliers can get involved in development of multiple Nissan models. “If you are on the panel for brakes, you are not limited to brakes only for one vehicle,” says Miller. “You can quote on all new business.”
Delivery, technology important too
Though quality is paramount, a supplier could eventually lose Nissan business if it can’t meet the company’s delivery requirements. He says most suppliers are good at delivering in sequence and maintaining enough inventory to meet Nissan’s expected demand. Many suppliers have storage facilities within 15 miles of Nissan’s plants.
“But what throws a wrench into it is when we have to build more models than expected,” says Miller. “So maybe we need to build a lot more Altimas, it only takes one part to hold up everything else. If one tool goes down at one supplier it affects everyone else. It only takes one supplier not doing his job and it affects everything else,” he says.
Miller adds he often tells suppliers “we’re all in this together. This is not Nissan and one of you. It is Nissan and 300 of you,” he says.
Technology is critical too. Nissan wants its suppliers to have an aggressive new-technology culture as well as high quality and on-time delivery performance. The company invites some of those 300 suppliers to participate in new product development. “We have early phase development (EPD) that we do on critical technologies or the ones where we need a lot of guidance from suppliers and want their input into the specification,” says Miller. He says often electronics suppliers and suppliers of safety and new features are the ones that are brought into development. “We don’t need to bring in the carpet supplier at concept stage. But if we are considering a lane departure warning system, at the concept stage we want the supplier in there to tell us here’s what we have to consider when designing the system,” he says.
While suppliers are involved in new product development, so are purchasers. “Our role is to say there are two or three suppliers we should talk to, then purchasing works with engineering to get that list to two,” Miller says.
“We’ll ask engineering to work with these two suppliers in early phase development and there will be design and idea competition,” says Miller.
Then Nissan will choose which suppliers it will work with on the new warning system.
“All of this is transparent to the supplier,” he says. “We say you are one of two who is going to compete during early phase development,” he says.
In some cases there may be only one supplier to work with. When that happens, purchasing’s job is to hammer out an agreement with the supplier so Nissan can get the best terms possible. “Purchasing may say to the supplier 'just because you are in early phase development it doesn’t mean you can charge us a million dollars.’ Purchasing will help determine the initial cost and what the cost curve will be for the part going forward,” says Miller.
Simulation essential
Miller says a lot of Nissan’s new vehicle development is still in Japan, but there are engineering centers in the U.S. and Mexico. He says with some models everything is designed in Japan and at a certain point, the design is passed to the U.S. In other cases, the lower body is designed in Japan and upper body is designed in the U.S. “Whether it is in Japan or here, suppliers are involved earlier and earlier in new product development” because product development times are shrinking, according to Miller.
And that shrinking development timetable puts another requirement on suppliers: They must be adept at computer simulation. Nissan is using more computer simulation in design to help determine fit and performance of new models and new vehicle features.
“By using simulation you can take out two to three months in your development. What this means for suppliers is they have to have the capability to do simulation,” says Miller.
While Nissan does not involve all suppliers in new product development, the automaker wants all suppliers to embrace Lean. “In fact, all suppliers have been through Lean, but are they continually refreshing and challenging their operations using Lean?” asks Miller. He says typically suppliers will get serious about Lean for a period of time, “but then they lose the discipline over time.” He says Nissan wants suppliers to employ Lean continuously in its operations.
Now Playing: 
