In our last class we learned firsthand how a company successfully forecasts demand and maintains the proper inventory to ensure that costs are minimized. Toyota, the long time high volume automobile retailer was faced last year with two major setbacks that completely disrupted its just-in-time (JIT) supply chain. The Japanese worldwide industry leader felt the blows from both the earthquake and tsunami on its native soil and also the floods in Thailand later in the year. Toyota utilizes the JIT inventory method and from this it benefits largely in the bottomline of itsbalance sheet and income statment because of the advantage of more cash on hand. When the supply chain is disrupted, however, the results are astonishing. Just as you would imagine from the results of our in class activity, when demand is neither known or constant opportunity costs rise and could quickly set a company behind. Toyota has been praised for its prized forecasting abilities but when these natural disasters set them back for months they were not able to recover in time.
Toyota looks to quickly forget about the problems that it faced last year, the year brought them the aforementioned supply issues in addition to many recalls and an overall slump in automobile sales. The article notes that the manyfacturer is now building 400,000 less cars that in 2007. If you think about how this trickles down that is the output equivalent of one plant per year. Toyota looks to rebound and take back the market share it lost to American rivals but it will be an uphill battle with the likes of Ford and GM recovering strong from their recession woes.
What do you think about Toyota’s mishap? Could it have been avoided or handled differently? Should Toyota and others do away with just-in-time inventory?
The above post was derived from this article: