OUT OF TIME

COVID FLIPPED THE AUTO INDUSTRY’S ‘JUST IN TIME’ APPROACH TO CAR MANUFACTURING ON ITS HEAD

- ABRAHAM JEWETT

Toyota is stockpiling parts. Yes, you read that correctly. The auto manufacturer famous for its “just in time,” approach to car assembly has shifted gears, with COVID-19 disrupting supply chains around the world and leaving manufacturers in limbo.

The global health crisis has exposed what can happen to a supply chain when an unexpected disaster hits and inspired new lines of thinking when it comes to having parts at the ready.

JUST IN TIME

Toyota adopted the just-in-time (JIT) approach back in 1970 as a way to minimize the amount of inventory the company needed to have on hand, which would in turn increase efficiency.

For JIT to work, however, all systems need to be functioning properly. Broken-down machines, unreliable suppliers, low-quality workers, and a litany of other issues can turn the system on its head, but it has generally been a success and, ultimately, widely adopted.

“The just-in-time model is designed for supply-chain efficiencies and economies of scale,” Ashwani Gupta, Nissan Motor Co.’s chief operating officer, told The Wall Street Journal. “The repercussions of an unprecedented crisis like COVID highlight the fragility of our supply chain model.”

The main benefit of JIT is that a manufacturer won’t have to pay storage costs and isn’t left footing the bill, so to speak, if an order gets canceled early in the purchase process.

Toyota didn’t factor in, however, what could happen if a bigger issue than a broken machine or having an unreliable supplier occurred. What about if the entire world shuts down?

It hasn’t been good.