Establishment of Nissan Motor Company in Spain and Construction of the Parts Logistics System

This paper aims to trace the process of setting up a parts logistics system for a Japanese overseas car assembly plant focusing on linkages with its suppliers. The case of the manufacturing plant of Nissan Motor Company in Spain (Nissan Motor Iberica, S. A., NMISA) is examined as an example of Japanese assembly plants established by acquisition, since previous studies related to Japanese overseas production paid little attention to these kinds of acquisitions compared to green-field investments.<br> In 1980, Nissan acquired manufacturing plants in Spain by purchasing shares in Motor Ibérica, S. A. and started production in the Franca plant (Barcelona) in 1983. However, incompetent production management in that plant caused grave problems that weakened productivity; an excessive number of suppliers and surplus stock impeded its smooth and efficient production.<br> From the late 1980s, NMISA embarked on the reconstruction of the parts logistics system of the Franca plant. First, it drastically reduced the number of suppliers by selecting them in terms of quality, cost, and delivery, and aimed to establish stable relationships with a limited number of suppliers. Then it implemented a new parts procurement strategy (Materials Requirement Planning, MRP) to perform periodic parts delivery from their suppliers based on “just-in-time” (JIT) production.<br> The geographical distribution of suppliers has been considered to be the key element in the implementation of JIT. The locations of suppliers that NMISA had inherited from Motor Iberica were spread among the remote preexisting core areas of automobile production in Spain. Furthermore, NMISA has expanded its parts supply network outside Spain since the early 1990s, especially in Germany and the UK; due . to both the enforcement of common certification in the European Union and the development of joint parts procurement with Nissan Motor Manufacturing UK in Europe. However, the production volume of NMISA was too small to request suppliers to deliver frequently from a distance. Therefore NMISA had to construct a new logistics system that would optimize the performance of JIT under such conditions.<br> From 1990, NMISA implemented new parts delivery methods such as the milk-run system and the use of warehouses to regulate parts delivery to the assembly plant (i.e., regulator warehouse). Suppliers within a radius of 100km were requested to deliver directly to the plant as before, while others with smaller deliveries were incorporated in the milk-run system to combine their deliveries. On the other hand, suppliers located outside that area were asked to deliver their products to the regulator warehouse; the increased frequency of deliveries from the warehouse to assembly lines permitted suppliers to achieve JIT delivery from a distance. In addition, the development of transportation infrastructures in Europe was another factor facilitating frequent, long-distance delivery. From the late 1990s, when the decline in demand in Europe including Spain caused NMISA to decrease production volumes, NMISA intended to improve production efficiency by reducing the total logistics cost. It therefore decided to apply the milk-run system to suppliers at a distance both in Spain and other countries in Europe.<br> Detailed analysis of NMISA's logistics system shows that NMISA utilizes these different delivery methods based on conditions such as locations of suppliers, types of parts, volume of the product, the nature of the manufacturing process in which parts will be used, and the degree of relationship with suppliers, in particular with potentially large ones. The findings of this study suggest that spatial proximity between assembly plants and parts suppliers is not in itself crucial to the effectiveness of JIT; whether a spatial cluster of suppliers is established depends on the production volume in the assembly plant.