Comment by pradn | Hacker News Reader

Comment by pradn | Hacker News Reader

Toyota was one of the leaders in just-in-time manufacturing, yet they're doing just fine with the chip shortage. They stockpile parts, and try to understand how they work in depth.

> After the [Fukushima] catastrophe severed Toyota’s supply chains on March 11, 2011, the world’s biggest automaker realised the lead-time for semiconductors was way too long to cope with devastating shocks such as natural disasters.

> That’s why Toyota came up with a business continuity plan (BCP) that required suppliers to stockpile anywhere from two to six months’ worth of chips for the Japanese carmaker, depending on the time it takes from order to delivery, four sources said.

> The sources said Toyota has another advantage over some rivals when it comes to chips thanks to its long-standing policy of ensuring it understands all the technology used in its cars, rather than relying on suppliers to provide “black boxes”.

https://www.reuters.com/article/us-japan-fukushima-anniversa...

This is really ironic given the fact that Toyota was really at the cutting edge of 90s JIT manufacturing and this was one of worries that was raised in the. Their response, "we have multiple sources for parts." [0] But over time those multiple partners migrated to the same geographical locations, and then an earthquake hit.

[0] I'm totally paraphrasing here as I remember reading it in some magazine years ago.

They famously maintained production after that earthquake. It's a common case study of how to adapt to supply chain shocks by being good at running a supply chain in the first place. All the things they needed for resilience -- plentiful data, high trust relationships with suppliers, flexible and skillful workforce -- were things they had built up to support their JIT manufacturing capability.

It certainly is ironic, but it is also an interesting case study for the many, many idiots who keep applying LEAN manufacturing as a dogma.

Look! See! Toyota isn't dogmatic about everything being Just In Time. They are only doing it because it is the best option at the time and it works. If it isn't the best option (or doesn't work) then they stockpile like a clever person.

There are a few people who really need their noses rubbed in to this little example.

These are the same idiots who applied Jack Welch's BS to non-manufacturing operations.

You mean rank and yank? I heard that one was a disaster for Enron and Microsoft.

For those curious that’s another name for stack ranking fire to bottom x% promote the top y%

Forcing suppliers to hold 3-6 months inventory is also a clever trick to make one look "lean".

Dell was amazing at this 10-15 years ago. They had less than 24 hours of production volume of harddisks (and other components) on their own shelves, but forced their suppliers to have them ready. Which resulted in the suppliers building warehouses close to Dell manufacturing locations, essentially offloading some of the inventory costs upstream in the supply chain. They could do that because suppliers were competing for Dell order volume. And Dell to their customers never specified the brand of the components just generic specs like 7200 rpm, 100 GB.

It's not so ironic, you can do both. What differentiates what Toyota is doing today from what Toyota did before TPS is, without understanding where the bottlenecks were in their manufacturing operations, the stockpile sizes were uncontrolled and thus only represented waste. Here, lean manufacturing principles still apply, albeit with an intent to pay a certain amount of cost to maintain a stockpile of a certain size, for BCP purposes.

Yes. No buffer is bad, and too much buffering is also bad. It's about understanding all the parameters that determine the optimal buffer size given the goals, and maintaining that optimal size.

^ today in Dyson Sphere Program tips !

At least they had it planned, and very well planned. And they still understand what JIT really meant. The actual idea and concept is now only known to Apple and Toyota. For various sort of reason ( Mostly Politics ). Others are only applying what they think they know to Supply Chains.

Most on HN would likely have little exposure to supply chain, take a look at another example coming from Toyota that anybody should have at least heard of it in Software development.

Remember Kanban board?

Holy mother of God that great idea quickly turn into a shit show.

This may be a dumb question, but is it still "Just In Time" if the parts are just stockpiled on shelves owned by someone else?

I had the same question, I'm not versed on manufacturing processes but "Just in time" would seem to imply inventory is nearly 0 and as parts come in, they are used for assembly and go right back out the door.

Perhaps they realized the limits of JIT and have looked at storying inventory based on the impact to assembly continuity?

Worked in automotive, not at Toyota.

> storying inventory based on the impact to assembly continuity?

It's always been about that.

JIT can be looked at as, "right part in the right quantity at the right time." That can mean "milk runs" where assemblies are delivered to the final assembly plant twice a day. An AM delivery where the last assembly is bolted to a car as the PM delivery arrives. Or it means "kanban orders" where 1 week supply of parts is delivered on a Monday and a refresh the next Monday. Or it means you buy in bulk and get 3 months supply at once.

JIT and everything around "Lean manufacturing" and the "Toyota Production System (TPS)" are ideals to strive for. Not everything in Toyota operates according to the ideals. There are certain fundamental things (e.g., stability in material, personnel, machinery, and methods) that need to be in place before starting to reduce inventory.

When suppliers have trouble with providing defect free parts, the orders start to increase in quantity and decrease in frequency. These can be subject to 100% incoming inspection if the supplier's quality comes into question enough.

Sure. That's technically not inventory for tax purposes.

That has always been the core innovation of JIT. Offloading inventory costs onto suppliers makes your books look a lot better. Toyota did make a bunch of other improvements to streamline their manufacturing processes, but the just in time part is really just bullying suppliers into taking on some of your cost and risk.

Partially - suppliers can offset that by increasing their cost to do business; but also most contracts in that world are multi-year deals with ranges of minima / maxima for quantity, time etc.

It also means you can customise your product closer to the delivery time. The vast majority of parts are the same between dozens of final variations of the cars. Having low final product inventory, but plenty of parts stockpiled, means if demand shifts between your final variations you can respond to that quickly while also still being resilient to sudden increases in total demand.

I think the article is implying that they moved away from a "pure" JIT model, to somewhat of a hybrid model. Their in-depth knowledge of their suppliers is orthogonal to their stockpiling, but it still helps them plan better.

Having the supplier store them still uses the same distribution network as if they were shipped directly. If Toyota stored them, they'd need to develop an equally robust network from their warehouses to their factories. It's more expensive to maintain your own distribution network and warehouses than to just pay the supplier to store stuff

That's ... brilliant. I genuinely had never thought of that

To be more specific, it is cheaper to maintain warehouses for the products your company produces and more expensive for products your suppliers are producing.

1 chip warehouse per supplier vs 1 chip warehouse for each customer.

Toyota is an expert in storing cars, it is not an expert in storing thousands of different car parts.

From Toyota perspective yes -- they can maintain appropriate kanban stocks in their individual factories and still pull as needed. Sounds like the suppliers might be "strongarmed" by Toyota purchasing power.

Except if Toyota's business is worth the cost of keeping 2-6 months of product in the warehouse, it isn't really like an "unneeded resource" that the JIT approach would want to avoid. They are being paid (in a sense) to hold those parts, so it is not wasted.

Thanks for all the responses, makes a lot of sense. It seems like the answer is “Yes, from Toyota’s perspective” in that Toyota gets to focus solely on the manufacturing process, and let the others figure out the chaotic bits to get the required parts in the right place at the right time, because that’s a different skill set that certain other corporations are far more adept or have specific resources like rolling stock.

To use an analogy: a surgeon operating on a patient, holds a hand out and says “scalpel” and a scalpel instantly placed in hand. Does it matter that their are trays and trays of parts and other people in the room if we are just evaluating the surgeon’s efficiency?

Toyota also part owns Denso. They're closer to their supply chain than many of their competitors.

No wonder Denso parts are so good.

I don't know if we should give Toyota any praise over their supply chain management. Consider the situation with their electric vehicles.

The plug-in hybrid "rav4 prime" has a 2 year wait list. They sold 3200 last year because they don't have any battery capacity. https://insideevs.com/news/466641/us-toyota-rav4-prime-sales...

This is a bit of digression on this thread, but it's stuff like this that makes it seem like traditional car companies are still out to lunch vs Tesla. They're just too slow to adapt and give up what has worked for decades.

Isn’t it their first plug-in hybrid? Seems like they could be testing the waters and ended up with way more demand than they anticipated. I guess we will see in a year or two if they can ramp up.

No, they've had Prius plug-in hybrids for awhile now (but as far as I can tell, the demand for those haven't been nearly as high as the Rav4 Prime).

They’ve had the Prius since 2012, I thought?

https://en.m.wikipedia.org/wiki/Toyota_Prius_Plug-in_Hybrid

128 thousand total cars globally

It seems unreasonable to criticize Toyota on the basis that one model of a car has an extremely long waitlist.

Toyota’s blunders with electric vehicles has nothing to do with its supply chain and everything to do with its strategic decisions. The Rav4 Prime has a long wait list because they chose to make a small quantity of them.

They partly choose to make so few of them because they’re still trying to make hydrogen happen.

If all the manufacturers did what Toyota did that would have exacerbated the chip shortage.

Not if the other car companies realized that the lead time being so long meant that cancelling their orders was a horrible idea.

The stockpiled chips would have been made before the shortage, so that doesn’t follow.

That's backwards. It would had prevented the shortage.

The shortage is happening because manufacturers cancelled their chip orders from their suppliers because of reduced sales forecasts due to COVID.

When the manufacturers cancelled their orders from their suppliers, the supplies cancelled the orders from the foundries, which cancelled their slots and gave them to consumer electronics which had increased demand.

When sales of new cars rose, manufacturers called their suppliers for more parts, which called the foundries to increase production only to find out their previous slots had been sold.

Well also the climate induced power outages in Texas knocked out three (4?) foundries in the Austin area from suppliers that tended to supply embedded customers. Foundries really really hate to be interrupted and getting them back up seems to be taking longer than anticipated.

I think I know what you're getting at: If all of the manufacturers suddenly requested private inventories to be set up, the chip manufacturer would be dedicating all of its production to filling up warehouses rather than shipping.

It seems like Toyota was farsighted in this.

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