Automobile

How Toyota is managing an unprecedented global supply chain crises

There’s a giant whiteboard on the wall in a Michigan office building where the problems of the world are listed and tracked in minute detail.

The colorful papers hanging there — tracking earthquakes and tsunamis, fires and floods, coronavirus hot spots and even wars — aren’t just the world’s problems, though.

They’re Bob Young’s problems, today and every day.

Young, the group vice president of purchasing supplier development for Toyota Motor North America, and his team in the town of Saline are charged with keeping the region’s assembly and components plants running as much as possible. And for more than two years now, through COVID-19, a string of natural disasters, civil strife, labor shortages and now a war between Russia and Ukraine, Young’s job has been challenging.

“Normally, our world is some level of controlled chaos, but the last few years, it’s been a little more chaotic than what we’re used to,” Young said last month with what seemed to be an exhausted chuckle.

His whiteboard on March 21 was tracking at least 70 threats to the production and delivery of Toyota and Lexus vehicles to U.S. dealerships.

Illustrating how these events are affecting its manufacturing, Toyota Motor Corp. last month announced global April production would be cut by 150,000 vehicles, to 750,000, and output will be down 10 percent in May and 5 percent in June from estimates made at the beginning of the year. The next day, after Japan was rattled by a 7.4-magnitude earthquake, the company said it would halt production for three days starting on 18 lines at 11 factories there and lose 20,000 units of production.

Young’s “laundry list of issues” wasn’t surprising — semiconductors, labor availability, disruptions in global and regional logistics, natural and human-made disasters — but it seems to keep expanding in the face of conventional wisdom that the threat of major disruptions from the pandemic is fading.

So what gives?

“I think in general, because of all of the challenges that we’ve had — whether it’s cyberattacks or natural disasters or you name it — the supply chain is still relatively fragile. And I would say many suppliers aren’t in a full condition when it comes to work-in-process inventories or finished goods,” Young said. “So the first slight hiccup, it’s very close to causing us problems.”

Toyota, which operates one of the industry’s most complex global supply and logistics chains, has been running with the leanest inventories in the U.S. for most of the last year, with only fellow Japanese brand Subaru running with fewer days’ supply at dealerships. Longtime executive Bob Carter, head of sales for Toyota Motor North America, joked recently that, until last year, he “had no idea our system could even measure days’ supply in tenths” of a day.

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