Toyota's Fight With Mother Nature
This past week has been devastating for the Japanese island of Kyushu. Since Thursday, people living there have gone from pillar to post: after a 6.5-magnitude earthquake hit the Kumamoto region on Thursday, killing 9 people and injuring many more; a 7.4-magnitude quake hit the same region on Saturday. The second quake killed 32 more and brought the injury toll into the thousands. Hundreds of thousands of people were left without power or running water; and aftershocks continued to shake the fragile region, causing massive mudslides throughout rural regions.
Naturally, the quakes have disrupted industry in the area, and the automotive sector is no exception. Among the more significant producers in the area, Toyota operates 3 production facilities in Kyushu. Their plant in Miyawaka, Fukuoka, is responsible for the production of many US-bound Lexus models, including the CT, HS, IS, ES, NX and RX models. The quake forced the suspension of production in all of Toyota’s Kyushu plants, including Miyawaka. However, they eventually had to shut down production in almost all their plants across Japan. The reason for these shutdowns is, ironically enough, a direct result of a revolutionary manufacturing technique pioneered by Toyota.
Shot in the Foot
Among the many factories damaged in the Kyushu quakes was the Aisin Seiki plant. Responsible for supplying parts to many different manufacturers, Toyota is one of their clients. As mentioned above, Toyota was forced to shut down most of their Japanese production after the earthquakes. This was due to supply shortages caused because Aisin Seiki had to shut down their production facilities as a result of earthquake damage. Why didn’t Toyota rely on Aisin’s inventory? The answer is simple: they didn’t have any, and Toyota is oddly enough to blame.
Back in the early 1990s, Toyota developed a method of manufacturing calledlean. Basically, what lean manufacturing does is systematically reduce the amount of waste in the manufacturing process, thereby reducing input costs and consumer prices. One of the aspects of lean is something called just in time inventory. It works pretty much exactly as it sounds—inventory arrives at the factory only when it is needed. As a result, no excess inventory is held in stock. This system works very well in most cases, but is extremely susceptible to natural disasters or other impediments in the supply chain.
So What Does This Mean For Us?
It seems somewhat ironic that Toyota’s groundbreaking innovation has come back to bite them after the Kyushu earthquakes, but they are not alone. In fact, lean has become extremely popular throughout the Japanese automotive sector. This means that, unfortunately, other manufacturers (such as Nissan) have had to shut down production facilities as well. It is not known how long they will be down for, but the longer they are, the longer that product deliveries will be delayed. A shortage in dealer supply could also raise prices, although if the delays are expected to be relatively short, most buyers may be inclined to wait it out. The market for replacement parts may also be affected.
Of course, any automotive plant shutdowns will have a serious impact on the Japanese economy, especially in Kyushu. An article from the Japan Times claims that Japan’s already-weak economy could be pushed to the brink of recession as a result of the quakes. Hopefully, this is not the case. In any event, however, it could take some time before we will truly know the scale of the economic damage caused by this quake. For petrolheads like you and I, we can only hope that it isn’t too serious, and that our beloved Japanese automakers will be back on their feet soon.