IT drives Nissan's growth plan

Car manufacturer uses business performance management tools to generate more profits

Car manufacturer Nissan has successfully exploited technology to sell an extra one million cars without increasing costs.

The company has consolidated global financial management systems and enterprise resource management (ERP) software at sites around the world, following a strategic initiative that started in 2002.

The Nissan 180 strategy set a target of increasing car sales by one million extra units, which it reached in September, while at the same time growing gross annual profits by eight per cent and reducing interest liabilities to zero.

‘From a financial control point of view, when you sign off a very challenging volume objective such as this, you have to carefully manage the profitability side,’ Alain Pierre Reynaud, Nissan global chief control officer, told Computing.

‘We always have to arbitrate between raising manufacturing volume while maximising profitability. And we are very proud that we now have the capability to support this challenge, as well as to maintain profitability and compliance.’

Nissan started examining how to improve financial management and compliance in 2000, when the firm decided to break down its financial results by territory and function.

‘The situation in Nissan before 2000 focused on just the main company results,’ said Reynaud. ‘Consequently, no big resources were allocated to financial consolidation. Almost all processes were manual, based on Microsoft Excel spreadsheets and communicated by email.’

Reynaud says the decision to reorganise the company to allow it to expand and generate greater profits meant the development of business performance management (BPM) capabilities, using more accurate and timely financial data from operations around the world.

‘With our existing procedures we faced a lack of flexibility and reliability because the resulting reports only contained simplified profit and loss information, and did not include balance sheet and cashflow information,’ he said.

It was taking Nissan 42 working days after the publication of the parent company’s results to provide reports on the financial performance of its 240 subsidiaries and affiliates, comprising its dealer network, manufacturing plants and research and development facilities.

The introduction of centrally managed, automated processes removed manually intensive tasks and allowed Nissan to reduce the time it takes to produce reports from 42 to five days.

‘We decided to standardise and consolidate the financial management systems we used at both a central and local level by introducing a standard business performance management platform across the global company,’ said Reynaud.

Nissan has also updated and overhauled its financial management systems, using ERP software from vendor SAP to collect sales and financial data at a local level.

It has invested in business process management software called Magnitude from specialist provider Cartesis, which sits at the central control level, giving Reynaud and his team more control over the assembly and presentation of data.

‘In doing this, we had a second objective,’ said Reynaud. ‘We wanted to have consistency in our closing process and automated inter-company operational reconciliation using Magnitude.

‘We also decided to satisfy management’s needs by producing monthly reports that are consistent with the annual report, and that take into account Japanese accounting standards as well as international financial reporting standards.

‘As well as helping us with our obligation to comply with so many different financial regulations, the system consolidation work has helped us understand the business better in terms of how to create value and growth.

‘We now close the accounts on day five and deliver all the required reports related to the financial data by day 10,’ he said. ‘In the meantime, we deliver a flash report by working day six.’

It has taken two years to implement standardised ERP and BPM platforms across the company, but Nissan is now using that technology as the basis for expansion. The systems support the company’s latest strategic initiative, Nissan Value Up, which demands top-level operating profit margins be fixed at 20 per cent within the next three years.

‘Now we are concentrating on expanding the business – it is one of our main

objectives over the next three years,’ said Reynaud.

‘We are creating new companies all over the world and each time we do we implement the standard ERP/BPM system. We are permanently extending the financial consolidation of the group, so developing our capabilities in the system.’

Nissan Value Up will run until 2007 with the aim of producing even more cars and growing profits.

‘The main proposals of this mid-term plan is to fix our objectives and decline them by region, function and product,’ said Reynaud.

‘According to these three categories, we are fixing the commitments we will need to fulfil from every part of the business.

‘At the end of this three-year mid-term plan we have to deliver on three categories of objectives: we have to deliver 4.2 million units; achieve the best top-level operating profit margin in our industry; and realise an average return on capital investment of 20 per cent over the three years.’