Introduction:

The case talks about natural calamities such as earthquake, tsunami etc posing a great threat to the
functioning of a business and affecting its operations on a large scale. On March 11, 2011 an
earthquake struck off the coast of Japan. The impact of such disaster was devastating. The automotive
industry comprising big Companies such as Toyota, Honda and Nissan were hugely impacted by the
disaster. The case particularly talks about Nissan, damage caused to the Company by the earthquake
and consequently its response to the disaster. Several protective measures were taken up by the
Company post the disaster to gain back the momentum of business operations and generate
considerable flow of income to stabilize situations. These include sharing information with global
regions, allocating supply given capacity constraints and excess dependents across national
boundaries, managing production processes and making speedy decisions without lengthy analysis
which consumes time. Also several operational changes were announced by the Company in 2012,
post the disaster to make the business more sustainable and less prone to severe disruptions.

Response of Nissan to the Disaster and its Relative Costs and Benefits:
As a response to the disaster, the Recovery Committee (established by Nissan to coordinate global
recovery actions) laid emphasis on few meaningful practices such as:

 Sharing information: Since Nissan is a globally operating Company; it ought to share

information with their global operational regions about the disaster affected situations. Non-
Japanese firms associated with the operations of the Company might directly or indirectly get
affected by the mishap. Hence, sharing reasonable information can keep them informed for
the betterment of their own interests. However, there are certain limitations faced by the
Company regarding this. These include, an additional effort to provide information to the
concerned global regions might distract the people handling on the ground crisis and the
information provided could also be used selfishly for their own personal interests. These two
issues were a major concern to the Company. Hence, to overcome these, Company decided
upon asking each region to send two staff members to Japan to gather information concerning
their interests rather than providing them unwanted information which could be later misused.
Holistic approach was adopted by the Company in solving problems which is good for the
Company as a whole. This idea of sharing information led to valuable contribution from
global regions instead of becoming a burden on the Company.
 Allocating Supply: Post the disaster, several consequences were faced by the Company. Such
as: capacity constraints and dependencies across the Nissan operational network. However,
allocating component parts was a critical decision for the Company. Allocation of supplies is
another important area of aspect which is to be considered by the Company and seriously
looked into. This determines continuity of operations and vigilance. The Company
particularly focussed on high margin goods for allocating supplies instead of low margin
goods. For example, the supply of Integrated Global Positioning System (GPS) was confined
to high-end models of cars rather than low-end models. This helps in optimal utilization of
scarce resources available, enables manageable supply allocation in different regions and
further enhances revenue generation of the Company during the time of such catastrophe.
 Managing Production: In such a situation, the production process of any Company gets
affected. Hence, Nissan slowed their production upstream and downstream considering
anticipated bottlenecks. This further saved them from costly overtime. For any Company, in
such a situation, in-stock and in-transit inventory would be the first priority than producing
 new goods. Hence, the Company focussed on these. The Company also used the in-transit
inventory time to identify and implement supply alternatives of critical components. This
indicates effective time management by the Company. The Management of the Company
could also secure air freight to get the critical parts out of their country faster and reduce the
apprehension towards in-transit stocks.
 Empowering Action: The well-developed emergency response plan established beforehand
helped the Company in making quick decisions after the disaster. Foreseeing situations
arising from a major disaster and preparing well for them enabled the Company to take
prompt actions when the time came. Management of the Company was empowered to make
decisions without any lengthy analysis from a central authority. The Company also used
flexible approach by modifying its delegation of authority to speed up critical decision-
making process for recovery concerns. One of these decisions includes launching the Global
Disaster Control Headquarters after mere 15 minutes of the disaster. The team further, worked
upon the situation effectively by assessing damage while overseeing restoration efforts at
various facilities. Latest information including details about employees’ safety and damage
caused was absorbed and appropriate actions based on this were taken. Hence, the Company
used proactive measures post the disaster situations rather than consuming time and delaying
decisions which were indispensable. This was possible only through preparing a backup
recovery plan well before the disaster, integrating tasks and taking several imperative
decisions timely.

Additional Measures as a Response to the Disaster:

Nissan had well developed an earthquake emergency-response plan beforehand. This is extremely
important for any Company to develop an appropriate recovery plan keeping in mind various
unforeseen natural calamities such as earthquakes, floods, tsunami etc. Therefore, several other
measures which could have been undertaken by Nissan to respond to the disaster include:

 Maintaining data centre: Data centre is nothing but a collection of routers, switches,
firewalls, gateways, network and security solutions etc which helps in storing information or
maintaining a physical backup of the information. Therefore, the Company should maintain a
database involving all the information regarding stock details, production processes,
manufacturing operations, materials required, in-transit inventory, employee details and other
business concerned activities. This database should be kept away from the disaster prone area
to ensure safety of critical documents and vital records.
 Involvement of top management or higher level executives: Top management or senior
level executives must actively participate in the disaster recovery planning process. They
should further be responsible towards coordinating various processes of the plan in order to
ensure its effectiveness within the Company. Adequate time and resources should be
committed towards developing such a plan. Resources include both financial as well as efforts
of personnel involved.
 Risk assessment: The recovery committee as established by the Company should undertake
risk analysis and its impact on the business. This involves foreseeing possible disasters,
including natural, technical or human threats. Every functional unit of the organization must
be analysed to determine the consequences or impact of disaster scenarios on them. Even
worst case situations such as destruction of the whole building should be effectively planned
for. Proper measures should therefore, be taken up by the committee to face these catastrophic
situations by assessing the impacts or consequences and further analysing the costs of
reducing potential exposures.
 Organize and document the plan: A formal and detailed plan should be prepared which
follows a standard format and provides for detailed procedures. The plan should therefore,
follow a consistent format to ensure its flexibility. It should further include detailed
procedures which are to be used before, during and after a disaster. These detailed procedures
can be developed by defining backup alternatives. The procedures must also specify methods
for making changes or updating the plan in case of significant changes in the system.
 Test the plan: It is essential to test and evaluate the plan thoroughly on a regular basis
(annually) before implementing it actually when the time comes. Therefore, procedures to test
and evaluate the plan should be formed and documented. Such an effort provides assurance to
the Company whether all the necessary steps are included in the plan or not. Other benefits of
testing the plan include:
 To determine the feasibility of the plan and compatibility of backup facilities within the
Company
 To identify or pin-point red areas in the plan which need proper modification
 To understand the ability of the Company to recover from the disaster
 To motivate the personnel in maintaining or updating the disaster recovery plan

Future Approach:
Post the disaster, Nissan adhered to several operational changes in its business to face the future
challenges of disruption. These involve increasing the localized production of its cars in several
regions of America from approx. 70% to 90% by 2015. Efforts were made by the Company to reduce
dependency on Japanese-made components in its foreign factories. The Company had also put sincere
efforts to better understand the dependency of secondary suppliers apart from primary suppliers
within its supply chain. The disaster taught many lessons to the Company which stimulated them to
adopt a modifying approach for the betterment of the future of the Company. This included
modification of their purchasing process particularly of critical components to enhance continuity of
business and making the supply risk concentration beyond tier 1 level less severe. Every Company
strives to work even better next time; therefore, Nissan had to prepare even better to protect itself
from the next disaster struck. An actionable business continuity plan which comprises of all level
suppliers must be prepared as a response to any natural calamity or threat. Also developing a more
effective supply chain and risk management techniques make the business more sustainable. These
changes, if correctly brought up and executed can clearly contribute towards a better future disaster
recovery plan and make the business less prone to severe disruptions.