Production decrease According to its official press release, Toyota announced that it would reduce its production in November. The Japanese automotive giant continues decreasing its production since August 2021 and […]
According to its official press release, Toyota announced that it would reduce its production in November. The Japanese automotive giant continues decreasing its production since August 2021 and the number in November would be about 850K. In fact, the company had been originally planning to produce almost 1 million vehicles in the month, so it means that it would cut its production by 15%.
As a result, Toyota would stop its factories in Japan as well as all over the world. The Japanese company would reduce the production by 50K vehicles in Japan and 50 to 100K cars overseas. Even though the Japanese company made a difficult decision, it expects to keep producing 9 million vehicles in the year. Also, the company tries to cut off its fixed cost as much as possible. In addition, it thinks that the change of currency exchange rate would affect the final result positively.
Thus, Toyota does not change its forecast of consolidated financial results in the end of the year. Of course, the spokesman in the company mentions in the following. “We think that chip shortage will last longer than our former expectation, so we must prepare alternative plans to solve the problem.”
Our media has already reported that the Japanese company decreased its production in September. Of course, there are several reasons why Toyota, which is known for well planned production, should reduce its production.
As we see above, one reason is definitely chip shortage. After the pandemic, many people all over the world must work or learn from their home. As a result, demand of laptops and tables soared up more than our forecast. These electronics also needs semiconductors. In addition, once many countries are trying to restore their economy, demand of automotive also soars up.
However, supply of chips is not enough to meet their demand. Chip foundry companies need huge investments to increase their capacity, and it needs time as well. Therefore, it seems that the gap between supply and demand of chips will last longer.
Factories in East Asia
Furthermore, in the summer of 2021, there was a huge gap of vaccination rate from country to country. Especially, among South East Asian countries, vaccination rate was really low. As a result, the number of cases was increasing rapidly at that time and several factories were stopped due to governments’ restrictions. As a result, it made the situation more difficult to produce automotive or its components there.
An automotive needs more than 30K components to manufacture a final product. In this sense, even a component would affect production schedule in the end. Also, we can see other examples that natural disasters have a big impact on supply chain.
In theory, it is time for original equipment manufacturers (OEMs) to rethink their supply chain to make it more sustainable and more resilient. However, the process is much more difficult than our thoughts. This is because supply chain is really complicated and there are so many unpredictable factors including geopolitics.
When it comes to small medium enterprises (SMEs), they have less resources including money and human resources. As a result, they feel more difficulty to cope with unknown problems. However, if each employee in SMEs acts and thinks more proactively, the organization will be more resilient and adaptable. Therefore, if they make use of business intelligence media such as us, it could be one way to help them.