As Nissan works out details of its new worldwide purchasing plans, two facts are clear:
1. Key purchasing decisions will remain largely a Japanese affair.
2. Cost will rule the day.
Japan always has led the decision-making for Nissan suppliers around the world.
But over the past decade, as Nissan expanded outside Japan, its far-flung operations slowly have increased their purchasing duties. In North America, Nissan spent $2.2 billion with U.S. suppliers last year on local parts and materials, much of it managed by U.S. purchasing staffers.
But on Oct. 18, new Nissan COO Carlos Ghosn unveiled a plan to slash 20 percent from the automaker's global buying budget over the next three years.
'Nissan buys parts and materials on a regional basis or even in certain areas on a country basis,' he said. 'This will stop immediately. Purchasing will be centralized and globalized.'
FIND THE BEST
Though it is still a work in progress, the plan calls for Nissan purchasing offices around the world to find the best suppliers for a given contract, then hand off the final selection to a global commodity manager in Japan. At the same time, local procurement offices will be responsible for acquiring components that are unique to a certain market or manufacturing plant.
For example, a manager in Japan will make the fina l decision to choose seat suppliers around the world. Executives at Nissan Motor Manufacturing Corp. U.S.A. in Smyrna, Tenn., will buy their own metal stampings and paint.
Japanese account managers also will pick suppliers of brak es, tires and electrical components, according to Emil Hassan, senior vice president for quality, purchasing and logistics at Nissan North America Inc. in Smyrna.
LOWEST GLOBAL COST
But Hassan said the new policy does not strip p ower from Nissan's non-Japanese operations. To the contrary, he said, it is turning up the heat on local offices to find and qualify new suppliers.
'What we are really doing is taking a more global view of our parts,' he said. ` `If there is a good supplier in the States, he might win more business around the world.'
The quest for worldwide bids could create some interesting scenarios, Hassan acknowledged. 'It's very possible that we could end up paying more for a component in a certain market in order to obtain a price that's lower on a worldwide basis,' he said.
Ghosn emphasized that the drive for lower costs will not jeopardize quality or reliability. But he noted that Nissan will challenge its own specifications to eliminate overengineering.