Question

World-renowned Toyota Motor Company has a worldwide presence, with Toyota’s investment in North America alone exceeding $12 billion in 10 manufacturing plants. Toyota is at the forefront of lean firms and a showcase of JIT. Executives from all over the world make the journey to Toyota to see how JIT works.

But early one Saturday morning in February, a fire roared through the huge Aisin Seiki plant in Kariya, Japan. The fire incinerated the main source of crucial brake valves that Toyota buys from Aisin and uses in most of its cars. Aisin has long been a supplier of the critical brake-fluid-proportioning valves (P-valves), supplying 99% of Toyota’s requirement for the valve. About 80% of Aisin’s total output goes to Toyota. As the smoke cleared, the extent of the disaster was clear—most of the 506 special machines used to manufacture the P-valves were useless. A few might be repaired in 2 weeks, but most would need to be replaced—and the lead time was 6 weeks. Both Aisin and Toyota had been operating at full capacity.

Consistent with JIT practices, Toyota maintained only a 4-hour supply of the valve. And there were few of the valves in the closely knit network that constituted Toyota’s supply chain. Depending on a single source and holding little inventory is a risk, but it also keeps Toyota lean and its costs low. The Toyota plants in Japan build 14,000 cars a day. Without that valve, production would come to a rapid halt. Moreover, Toyota production managers were dismayed to find they needed 200 variations of the P-valve.

Consistent with the keiretsu networks that are typical of Japan’s manufacturing sector, Toyota holds 23% of Aisin’s stock, and Aisin’s president is Kanshiro Toyoda of the Toyoda family that founded the automaker, Kosuke Ikebuchi, a Toyota senior managing director, was tracked down at 8 A.M. at a golf course clubhouse and given the bad news.

Discussion Questions

1. If you are Mr. Ikebuchi, what do you do?
2. What does this experience tell you (and Aisin and Toyota) about just-in-time?
3. If you had been in charge of DaimlerChrysler’s JIT supplies the morning of September 11, 2001,

what actions would you have taken?

Answer 1

Answer 1 :

If I was Mr. Ikebuchi.I would have promptly selected to get the industrial facility fixed on super need premise. In addition to repair, I will invest into other companies that have similar offerings and can customize Toyota standard products in a very short lead time.

Answer 2 :

This experience suggests that the company should have diversified its risks by adding addition vendors who can provide same quality product. In the above case, Toyota has this situation only because of the dependency on Single vendor. Has Toyota used multiple vendors or had developed few other vendors to produce the same product; the damaged would have been minimized. This is a clear example that the Just in time concept is not flawed but it was implemented poorly leading to crucial problem.

Answer 3 :

If I had been Daimler Chrysler in charge, I would have immediately assessed similar situations in my organization. In case we have a crucial dependency on a single vendor, I would immediately initiate the development of 2 or 3 more vendors who can provide me with the required capacity so that I can run my plant optimally even if one of my partner plant is non operational.

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