Productivity
Productivity is a way of assessing efficiency. Nissan uses just-in-time technology to reduce costs and increase productivity. With a just-in-time approach, specific vehicles and their components are produced just-in-time to meet the demand for them. Sub-assemblies move into the final assembly plant just as final assemblers are ready to work on them, components arrive just in time to be installed, and so on. In this way, the amount of cash tied up in stocks and in work-in-progress is kept to a minimum, as is the amount of space devoted to costly warehousing rather than to revenue-generating production.
Nissan's just-in-time process depends on machine precision. When, for example, the transponder sends a message to the production system at a supplying company to produce a seat in a particular colour and trim, this triggers the relevant response and a seat to the required specification is produced. Further along the production line the specifically produced seat arrives to meet the vehicle to which it belongs - just in time.
Quality
Total Quality Management is a very important aspect of the Nissan production line. Everybody is responsible for product quality. To achieve this, Nissan has to understand customer requirements, consider the processes involved in providing quality, not just the end result, prioritise and standardise tasks to deliver quality, and to educate all employees to work in this way. TQM also focuses on satisfying customer needs and preferences. So furthermore, TQM involves identifying customers and their requirements, establishing and using objectives (targets) for all areas of activity, basing decisions on researched hard facts rather than on hunches, identifying and eliminating the root causes of problems and educating and training employees.
This system also involves a certain aspect of quality assurance, as product quality is checked at every stage of the design, production and marketing process. TQM is an ongoing process; a way of thinking and doing that requires an improvement culture in which everyone looks for ways of doing better. Building this culture involves making everyone feel their contributions are valued and helping them to develop their capabilities.
Investment
Nissan uses a ‘Kaizen’ method to continuously improve the quality of their products. It can involve the smallest change in everyday working practice as well as a major change in production technology. Teams of employees sit down together and share ideas for improvements and look to initiate these improvements. Small steady changes are maintained to make sure that they actually work. No improvement is too small. Everyone at Nissan is responsible for thinking about the current way of doing a job and finding a better way of doing things. At Nissan, ‘Kaizen’ can save money, time materials and labour effort. In addition, ‘Kaizen can improve quality, safety, job satisfaction, and productivity.
Economies of Scale
When the Nissan production factory was built, it was located in a favourable climate for growth allowing external economies of scale. An example of an external economy of scale in Sunderland is the skilled labour force. Manufacturing has a long tradition in the area. A decline in other local manufacturing meant that skilled labour was readily available.
Another factor was a good infrastructure as Sunderland had good road and rail links to all major UK areas. This makes it relatively easy to bring in supplies from separate UK component and sub-assembly suppliers, and also to distribute completed vehicles. A nearby deep-water port gives ready access to export markets and for the import of vehicles to the UK. Furthermore, Nissan had government support to locate near Sunderland. The government provided financial and other incentives to manufacturers who set up in an area where employment opportunities had reduced sharply and new jobs were needed.
The average total cost is the total costs, divided by the number of units produced. Takes into account overheads – likely to be higher than the production of unit cost.
