Toyota Moves To Stabilize Supply Chain

Edward Niedermeyer
by Edward Niedermeyer
toyota moves to stabilize supply chain

When Toyota told the world that it didn’t want to see any of its American competitors go bankrupt, they meant it. And not purely out of fear of an anti-import backlash either. Toyota’s North American operations rely on many of the same suppliers as Detroit, and if GM were to go bankrupt, many of those suppliers could go under. This is especially dangerous for Toyota with its “just-in-time” production techniques, which is why contingency planning is underway at Toyota City to keep ToMoCo’s supply chain independently solvent. But as Bloomberg reports, that very contingency planning could eliminate the efficiency gains of the Toyota system, once dubbed “The Machine That Changed The World.” The lean, “just-in-time” system was developed on the model of American supermarkets, with components arriving as they are needed for the production process, rather than being mass-produced and stored until needed. Emergency planning includes possibly building up component inventories, which strikes at the heart of the “just-in-time” system’s competitive advantage. Still, a supplier bankruptcy would wreak even more havoc, holding up production lines until more parts arrive. The Japanese automakers have recently learned firsthand of the cost of supply disruption, especially among specialized (tier two and three) component makers. Last July, piston-ring maker Riken’s shut-down due to earthquake damaged forced eight of Japan’s 12 carmakers to temporarily suspend or cut manufacturing, leading to a total output reduction of at least 120,000 vehicles.

Join the conversation
4 of 13 comments
  • TheRealAutoGuy TheRealAutoGuy on Dec 31, 2008

    Change the name "Toyota" to "GM" in the above article, and you have the pretty much the same story, provided GM has the cash. They've done so in the past, and will do so again in the future.

  • TheRealAutoGuy TheRealAutoGuy on Dec 31, 2008

    Come on, Bertel: Don't forget that Ignaki did millions, if not billions, of dollars of damage to GM by absconding to VW with, (literally!) an entire apartment's full of information. Bertel Schmitt : December 30th, 2008 at 12:05 pm I’ve followed just-in-time ever since it was introduced at VW by Lopez.

  • Fred54 Fred54 on Dec 31, 2008

    I'm confused,if car sales are at say 10 million next year the suppliers will supply enough parts for 10 million cars, what does it matter if they supply to gm ford honda toyota nissan or anyone else,parts for 10 million cars are parts for 10 million cars.maybe it's a stupid question i'm far from an expert.I think americans are still going to buy 10 million cars if these companies go out of business or not,just curious

  • PeteMoran PeteMoran on Dec 31, 2008

    @ fred54 It's not a stupid question. The parts suppliers like the auto manufacturers are likely geared for higher demand too, and are discovering a sub-13m unit year is in loss making territory for many of them. The suppliers that send parts in multiple directions of exact same specification will probably suffer less should any of their customers disappear, assuming the slack is taken up by their other customers. The highly specialized parts suppliers would be in a whole world of different trouble however. It's unlikely Honda need a tail-light or drive shaft components that Chrysler use (for example). That part line would have no work, have to be written down, and while requests for parts from Honda might increase, the supplier mightn't be able to switch to making more of the needed parts easily.