Bill KruegerSenior Vice President, Manufacturing, Purchasing and Supply Chain Management for the AmericasNissan North America Inc.

Senior Vice President, Manufacturing, Purchasing and Supply Chain Management for the AmericasNissan North America Inc.

Global Sourcing Global Sourcing StrategiesStrategies

Supply ChainSupply Chain

15,000km, 150km …or 15km? Bill KruegerBill Krueger

Automotive News Manufacturing ConferenceMay 17, 2007

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

INDIA

INDIANA

IN THE PLANT…or

What’s the correct answer?

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Low cost of labor availability

349 M807 M

2,600 M

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Source: The Economist, June 24th 2000, p.81

Technology map of the world

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Sillicon Alley,

NY

Boston, MA

Austin, TX

Cambridge,England

Stockholm, Sweden

Helsinki, Finland

Sophia Antipolis,France

Munich,Germany

Tel Aviv, Israel

Bangalore,India

Singapur

Hsinchu-Taipei,Taiwán

Silicon Valley,CA

MonterreyMEX

Technology centers

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Japan – Local

130km

Europe - Local

600km

Lower labor→JPN 　　　

2400 - 6500Km 18-50 x 　

Lower labor → NA 　　　　　

2000 - 15000Km 　

4-30 x

US - Local

500km

Average Distance 350 Km →4,600 Km(13 x)

Logistics Distances for Global Parts

Lower labor → EUR 　　

2500 - 8000Km

4-13 x 　　

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Order Lead Time – Firm Horizon

U.S. Mexico Japan China

86

40

16

4

DAYS

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Risks associated with Global sourcingFinancial 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

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

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

Risks associated with Global sourcing

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

•

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

SCM process map

Manufacturing

Material Handling CCR

Parts Arrangement

SchedulingInventory Control

Parts Ordering

Production Material

Transport

Nissa

n an

d In

finiti

Dea

lers

Veh

icles

Vehicle Orders & Forecast

M&SVehicle Orders & Forecast

Production Part

Suppliers

Parts Orders & Forecast

Service & Accessories

Service Part

Suppliers

Service Parts

International Logistics

Domestic Logistics

Service/ Accessory

Parts

Service/ Accessory

Parts

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

MANUFACTURING PURCHASING

DESIGNSUPPLY CHAIN

MANAGEMENT

STRONG BUT STRONG BUT INDEPENDENTINDEPENDENT

CustomersSuppliersCONSEQUENCESCONSEQUENCES??

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Sub-optimalLogistics

OptimalPurchasing

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

MONOZUKURI – “MAKING THINGS”

MANUFACTURING

DESIGN

PURCHASING

SUPPLY CHAIN MANAGEMENT

CUSTOMERQUALITY

NOWNOW

CONSOLIDATEDOBJECTIVESREGIONAL

INTEGRATIONNNA, NMEX, NBA

CUSTOMERRESPONSIVENESS

CustomersSuppliersVALUE NETWORK

OPTIMIZATION

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

MONOZUKURI’S Overarching Goal:

Value creation by reducing the total delivered cost of high quality products to our customers.

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

• Parts assembly level optimization

• Development of efficient packaging

• Transportation filling optimization

• Build the logistics corridor

Regional Supply Chain Management(Americas)

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

NGNG

OKOK

Utilization of Efficient Packaging

0.00

0.50

1.00

- p

art

s p

er

m³

+

- logistics cost (pkg & freight) +

• 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.

Best practice

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

Transportation fill optimizationModular

Modular packaging

packaging““okok””

Non modular

Non modular

packaging

packaging““ngng””

Dimensions according to AIAG standards(48” x 45” pallet footprint) to get

maximum transport utilization

NGNG

Key elements to succeed:• Use of modular packaging (AIAG)

• Standardized transportation equipment

• Supplier responsibility as shipper of their own products

(per piece)

OKOK

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

NNA-SNNA-S

NNA-DNNA-D

NNA-CNNA-C

NMEX-ANMEX-A

NMEX-CNMEX-C

Aguascalientes (MEX)•Stamping•Engine & Transaxle•Vehicle

CIVAC (MEX)•Vehicle•Production of service parts Canton, MS (USA)

•Stamping•Vehicle

Decherd, TN (USA)•Engine & Transaxle

Smyrna, TN(USA)•Stamping•Vehicle

Nissan Mexico & USA plantsNissan Mexico & USA plants

Laredo, TXLaredo, TX

VeracruzVeracruz

AltamiraAltamira

Lazaro CardenasLazaro Cardenas

ManzanillManzanilloo

AcapulcoAcapulco

Eagle Pass, TXEagle Pass, TX

Logistics corridor

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

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

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

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.

Bill KruegerBill Krueger Global Sourcing Strategies – Supply ChainGlobal Sourcing Strategies – Supply Chain

VALUE NETWORKOPTIMIZATION

MONOZUKURI – “MAKING THINGS”

MANUFACTURING

DESIGN

PURCHASING

SUPPLY CHAIN MANAGEMENT

NOWNOW