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Carmakers back from 50 years of ‘just in time’ production

Tokyo – Toyota Motor Corp

Hoarding some parts for up to four months. g

Six factories are being built to have their own batteries. And in shades of Henry Ford, Tesla Inc.

Try to block access to raw materials.

The underperforming automated supply chain, symbolized by the word “just in time”, is undergoing the biggest transformation in more than half a century, accelerated by problems faced by automakers during the outbreak. After sudden demand fluctuations, severe weather and accidents, they are reevaluating the fundamental assumption that they can always find the parts they need when they need them.

“Timely models are designed for supply chain efficiency and economies of scale,”

; said Ashwani Gupta, Chief Operating Officer of Nissan Motor Co., “the impact of an unprecedented crisis like Covid emphasized. To the vulnerability of our supply chain model “

Consider a Ford Motor Co., Ltd.

And the F-150, the latest version of the best-selling vehicle in the United States, is packed with technology, including a hybrid gas-electric drive system and a Tesla-style automatic software update.

With the vaccine starting to beat COVID-19, customers bought around 200,000 F-150s in the first quarter of this year, the best retail start-up in 13 years, but now in short supply. The truck plant is shut down or production is limited every April, and the slowdown is likely to continue until at least mid-May. The hit for pre-tax profits is as much as $ 2.5 billion.

The new Ford F-150 pickup cannot be sold due to a global shortage of semiconductor chips.


Jim West / Zuma Press

The basic idea of ​​being timely is the avoidance of waste. By having suppliers ship parts to the assembly line a few hours or days before they get into the vehicle, automakers won’t pay for anything they don’t use. They save warehouses and people to manage.

But as supply chains gain popularity around the world and automakers increasingly rely on one supplier, the system has grown fragile. Crises happen more often

A severe blizzard in Texas in mid-February shut down a refinery that feeds 85% of the U.S.-made resins.These resins go into components ranging from car bumpers to steering wheels. They are the most expensive staple in cars. But it is foam upholstery and dealers cannot sell cars without seats.

At the end of March, Toyota shut down production at several U.S. factories as a result of a scheduled shortfall seen by The Wall Street Journal, which has resulted in the production of some of its best-selling products, including sport utility vehicles. RAV4

Some suppliers are flying resin to the United States from Europe, said Sheldon Klein, a lawyer for Butzel Long, who is a supplier advisor. “That’s just an economic hash,” he said. Talk vigorously with your customers about paying some of their expenses. ”

Management said they didn’t want to replace it all in time because the savings were too big. Instead, they’re trying to undo it to some extent, focusing on the areas that are most vulnerable. They try to stockpile more important parts, especially if they’re lightweight and relatively inexpensive. But irreplaceable like semiconductors.

Ford chief executive Jim Farley said he was looking to maintain more inventory.

“Most other industries use safety stock for critical components such as chips,” he said at an event organized by Automotive News, “and many of these companies pay for chips years and years ahead of capacity requirements. ”

Three decades in the auto business have not prepared Mr. Farley for this year. “It was shocking to me how much I learned about the supply base,” he said.

The shift to electric vehicles is putting pressure on automakers to rethink half-century automotive history as these vehicles use heavy parts during their shortest supply, including lithium-ion batteries and Semiconductor

General Motors Co., Ltd.

And partner LG Chem Ltd.

It is building a $ 2.3 billion factory in Ohio and locating a second factory with the aim of producing enough batteries for hundreds of thousands of electric cars a year. Volkswagen has plans for six joint-venture battery plants, saying it will order an additional $ 14 billion of batteries by 2030.

The companies take the lead from Tesla’s playbook, influenced by Silicon Valley.Tesla built a $ 5 billion battery manufacturing facility called the Gigafactory in the Nevada desert in conjunction with Panasonic. Corp

Of course, securing a direct battery supply does not solve a problem in the entire supply chain.Even the most advanced EVs require plastics for floor mats, rubber for rubber and leather, or fabric for the seats.

Still, Tesla is trying to identify most of the strategic materials and supply them on their own, the jobs at the supplier are subject to traditional timely production. In September it signed an agreement to provide access to lithium from mines in North Carolina that is under development.

Tesla chief Elon Musk said last year he wanted to buy the nickel directly, too. “Tesla will give you a big contract for a long time if you mine the nickel efficiently and in an environmentally sensitive way,” he said.

Mr. Musk’s push for raw materials took the automobile industry back a century to when Henry Ford’s assembly line was a pioneer in manufacturing techniques.

Work continues at the factory. Renault’s Flins-sur-Seine in France last year.


Martin Bureau / Agence France-Presse / Getty Images

In the 1920s, Ford’s cutting edge was the vertical integration or control of everything needed to build the Rouge River plant in Dearborn, Michigan. But produce cars But it’s automotive steel, forged from Ford’s iron mines.

After Henry Ford died, the company sold the docks and forged steel. The automakers decided to leave the steel, rubber and cargo businesses to the companies that knew them best, more efficiently. Making a car has become a matter of buying the right parts and materials and putting them together more.

Toyota was a pioneer, going one day in 1950, Toyota executive Taiichi Ono visited a supermarket in America and marveled at how the shelves were reloaded while they were empty. As Jeffrey Liger recounts in his book “The Toyota Way,” shoppers are happy, even if the supermarket only has a small storage room. It is the opposite of the automobile industry where warehouses are full of sheet metal and rubber to ensure the assembly line doesn’t go off.

Supermarkets have few options because they can’t stockpile bananas for months. However, Mr Ono argues that their practice helps eliminate waste and cut costs. Toyotai pays only for what is needed to produce a car in just one day. That means they can do it with smaller factories and warehouses.

Hence, a system that was later known as was born in time. Each day, many trucks go to the Toyota plant and disperse enough to cover the day-to-day production value.

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It was easier for Toyota to pull off, given the amalgamation of loyal suppliers known as keiretsu that were initially concentrated around the factory, U.S. rivals were wary. But the system proved so effective that all automakers, from Detroit to Wolfsburg, adopt it. Ford fitted Ford’s production system to match the production system named after Toyota. Leading suppliers do too, for their own suppliers lowering the pyramid.

This idea spread by other industries. Inc.,

McDonald’s Corp

Franchises and big box stores like Target Corp

All take some form at the right time to keep inventory running low.

The Moment Sisters’ idea was to use a single supplier across multiple segments.These suppliers can specialize in delivering daily goods, reducing costs through volume, and serving a global network of factories at automakers. Leading action

Carlos Tavares, chief executive of Stellantis, Chrysler’s parent company, said the company expects to buy about 400,000 parts for 100 models in the Chrsyler, Ram, Fiat lineup.,

Peugeot and other brands, he said, that 95% of those parts are from a single source.

“That’s the norm in the automotive industry,” said Tavares.

At times, events like the 9/11 terrorist attacks will raise the system. But most of the industry shrugs and continues because of the exorbitant returns.

The current began to turn around as the global financial crisis At least 50 car suppliers went bankrupt, surprising the automakers. When suppliers like Visteon Corp

The maker of air conditioners, radios and other components has declared bankruptcy, raising fears that the Visteon-based car factory would fail to operate.

The varying shock rethinks at the time the company kicked off the 2011 earthquake in northern Japan hitting Toyota suppliers, including chipmaker Renesas Electronics. Corp

The Camry’s wheels move down a belt at Toyota’s manufacturing facility in Georgetown, Kane, in 2019.


Luke Sharrett / Bloomberg News

Spokeswoman Shino Yamada said that after the earthquake, automakers had pushed for suppliers to reveal who sold their components, which was by no means a success in the auto industry, where suppliers are often. It will protect their supply chain in the event that automakers use that to drive price cuts.Over time, Toyota has built a database that says it covers over 400,000 items and reaches 10 floors.

For some components, Toyota urges suppliers to hoard parts, which is quick to oppose. Inventory held by DENSO, Toyota’s largest supplier. Corp

It rose to about 50 days of supply in the year ending March 2020, up from 38 days in 2011, according to a financial filing.Denso declined to comment on inventory figures. But it said it had started collecting emergency parts, especially semiconductors.

Toyota’s efforts have helped this year’s semiconductor shortage weather better than many of its rivals, even if it wasn’t perfect.The same Renesas plant that was hit a decade ago by the earthquake was shut down. A month after a fire in a clean room in March Despite help from thousands of employees from Toyota, Nissan and others, the plant will not fully recover until around July.

For now, just as they have emulated over time, many automakers are trying to match up with Toyota’s network insights to spot hidden chokes.

“This is where procurement is so straightforward to fail,” said Bindiya Vakil, chief executive of software maker Resilinc, who helps manufacturers investigate supply chain shortages. Kneeling is not an expensive item. But these are the small things that we don’t deal closely with. ”

Write to Sean McLain at sean.mclain@wsj.com.

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