What COVID-19 might do to just-in-time auto manufacturing

The global supply chain crisis has exposed some of the weak points in the just-in-time manufacturing model, according to a pair of industry experts.

Yet, the disruptions will likely lead automakers to adjust — as opposed to replace — the method at the root of essentially all modern vehicle production.

“I don’t think you’re going to see a fundamental change with respect to how the industry operates and particularly around delivery and build time,” said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, which represents the Detroit Three in Canada.

Instead, automakers will “return to a pre-pandemic model” while taking several steps to bring production of key components closer to home, Kingston added during a webinar hosted by Automotive News Canada Tuesday.

“You’ll see a little bit more … nearshoring on some of those critical inputs into vehicles just to make sure there’s a bit more resiliency should we have a situation like this again.”

The crisis knocked Canadian auto production down to 1.4 million vehicles in 2020, from an average of about 2.2 million through the 2010s, Kingston said. Its lingering effects have put the industry on track for an even weaker 2021 performance, with 1.2 million vehicles expected to be built this year.

Amit Sakhuja, senior industry adviser for manufacturing with Salesforce, said the auto sector has navigated the supply issues as best it could by prioritizing high-margin vehicles to get through the production challenges.

As with Kingston, he does not see the lean manufacturing model pioneered by Toyota decades ago as under threat.

“I think just-in-time is there for a reason and it’s done the industry great,” Sakhuja said, pointing to the model’s focus on waste reduction that allows automakers to invest in new equipment or processes as opposed to added inventory. Keeping higher inventories would also work against sustainability goals taking on increasing importance for companies, he added.

Yet Sakhuja said the supply crisis, and particularly the chip shortage caused by the concentration of production in Taiwan, leaves the door open for a shift away from supply chains spanning the globe.

“We have to drive some kind of a dependency out of that, so local sourcing within North America I think ought to be an approach which can make just-in-time more feasible in the future.”

Sakhuja also sees digital tools that offer a clearer view into all stages of a company’s supply chain and allow for smarter demand and sales forecasting as key takeaways from the disruption. 

Eleanore Beatty

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