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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:
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.