Monday, January 2, 2012

Supply Chain Analysis of Why Nissan’s Disaster Recovery Bested Rivals

The “Big Three” automakers in Japan--Toyota, Honda, and Nissan--all suffered immensely from the devastating earthquake and tsunami that struck northern Japan on March 11, 2011.  Although most Japanese automakers did not see their factories heavily damaged, most were forced to halt a large portion of their production, both inside and outside Japan, when deliveries of hundreds of parts from the country’s devastated northeast were cut off.   Followed by the widespread November flooding in Thailand that impacted numerous assembly and component manufacturing companies, the disruption to the industry’s complex automotive supply chain has spread well beyond Japan’s borders.  These natural disasters wreaked havoc on the bottom lines of auto giants Toyota, the world’s largest automaker and Japan’s biggest company, and Honda, Japan’s fourth largest company.  However, Nissan, the perennial “also-ran” of the Big Three, has overcome the crisis much quicker and gained market share at the expense of its two most acclaimed rivals.

As industry analysts tracked recovery during the following months, they noted that Nissan fared better and more effectively than Toyota and Honda.  No one action by Nissan’s management stands out as a determining factor in its successful recovery during the past year, but rather a series of deft moves set Nissan apart from its rivals almost from the outset of the twin catastrophes.  Almost immediately after feeling the effects of the earthquake at its Yokohama headquarters, Nissan key executives gathered for a crisis management meeting.  Teams were quickly dispatched to different Nissan outlets to help the company determine which Nissan models would be most affected by the disaster (Curtis, 2011).  Additionally, within a week, Nissan’s CEO Carlos Ghosn was on television decisively assessing the damage at one of Nissan’s two severely damaged engine plants and telling reporters precisely when the plant would reopen.  Although Ghosn’s comments most likely served to stir local authorities into action, such transparency is rarely seen in Japan’s corporate world.

Analyst Rebecca Lindland of HIS/Global Insight pointed out that unlike its competitors, Nissan “got its assembly plants and suppliers up and running sooner.”  Nissan benefitted greatly from its standardizing parts worldwide and from its strategy of using common parts such as its low cost, V-platform for vehicles in emerging markets.  Lindland also commented that Honda was hampered in restarting production because although it had two first-tier suppliers, both sources were hit by the same shortage of materials (Levin, 2011).  Even Toyota noted that Nissan seems to have been less affected than its major rivals.  As pointed out in a recent Wall Street Journal article, a senior Toyota executive made the statement that the auto giant could “learn a thing or two from Nissan’s handling of [supply chain] disruptions in Thailand. . . ” (Simms, 2011).  Such a compliment is unprecedented in a culture that goes to great lengths not to praise or criticize peers, much less fierce rivals.  A writer for Procurement Leaders responded by commenting, “. . . but the compliments are well deserved and should have been extended to how Nissan handled the Japan quake, after which it restarted production months before its rivals” (Rae, 2011).

Other factors cited by industry analysts that have worked in Nissan’s favor during the crisis include the fact Nissan’s corporate organization is structured differently from that of Toyota and Honda, whose boardrooms are exclusively Japanese.  With Brazilian-Lebanese-French businessman Carlos Ghosn as CEO and several foreign-born executives on Nissan’s board, including British-born Colin Dodge, Nissan’s Chief Recovery Officer after the post-Lehman financial world, Nissan’s crisis management team appeared more streetwise and quick-thinking than that of its major rivals.  A top spokesman at Nissan’s Yokohama headquarters stated that one of Nissan’s strengths that helped meet the disaster challenges so successfully was the company’s working together cross-functionally for quick and focused recovery actions.

 Nissan, also supplemented with a strong portfolio of products and the advantage of broad, efficient global “monozukuri,” (a Japanese word that means manufacturing), has managed to outdo its rivals in dealing with the catastrophic adversities of 2011.  However, Nissan cannot count on Toyota and Honda floundering forever.  As Levin (2011) succinctly summarized,  “being the underdog was easy.  Maintaining the lead—that’s the hard part.”

Copyright 2012 James L. Alyea. All Rights Reserved.


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