Chip Shortage continues

Several media including BBC ( reported that Toyota Corporation will reduce its production by 40% in September. This is because the global chip shortage affects not only its competitors including Volkswagen and General Motors but Toyota. Toyota experienced the short supply of its parts a decade ago due to the earthquake and tsunami in Fukushima. After the disaster, the Japanese automotive manufacturer improved its business continuity plan.

Thus, even though many automotive companies experienced the chip shortage in 2021, Toyota had enough stocks compared to them. However, the pandemic had much more influence on the industry than Toyota’s plan. As a result, Toyota will produce 540K vehicles in September, though its original plan was 900K. This result means that even Toyota’s famous “Kaizen” cannot overcome the chip shortage. Therefore, it means how serious the chip shortage is at the same time.

What is Kaizen?

“Kaizen” is a philosophy that helps to ensure maximum quality, the elimination of waste, and improvements in efficiency. It is applicable for not only equipment but also work procedures. “Kaizen” improvements standardize every work and maximize productivity at every worksite. Standardized work involves following procedures consistently so that employees can identify the problems promptly and properly.

Within the Toyota Production System, Kaizen humanizes the workplace, empowering individual members to identify areas for improvement and suggest practical solutions. The focused activity surrounding this solution is often referred to as a kaizen blitz, while it is the responsibility of each member to adopt the improved standardized procedure and eliminate waste from within the local environment.

Must see external environment

Various factors affect supply chain. For example, climate change is one of big factors. To get matters worse, we cannot control most of these factors. For instance, if we assume that climate change caused winter storms in the US, winter storms caused power shortage in Texas. Furthermore, power shortage in Texas’ plants led to chip shortage and chip shortage affected automotive makers.

In addition, as the pandemic changes our ways of living, the demand of some products soars up. They include smartphones, tablets, laptops and gaming consoles. From automotive manufacturers’ perspective, how do they control other industries? Of course, it is almost impossible. What’s more, how do they prevent or forecast winter storms and the pandemic? It is nearly impossible, too.

In this sense, what we should do is to try to see things outside ourselves. Even though we do not control our external environment, it is useful for us to think of it. This is because outside box thinking can reduce our unconscious bias and help us plan our scenarios. Of course, our scenarios are not always true, but they help us prepare our future like Toyota does. Toyota experiences the chip shortage in September since it prepared for it. If the Japanese automotive giant did not prepare, it would have experienced the chip shortage in the first half of 2021.

Large companies can invest in more money in Research & Development than small and medium companies (SMEs) do. Therefore, it would be better for SMEs to make use of us to understand external environment.