One of the key improvements in automotive manufacturing efficiency over the past three decades may soon fall victim to America's current economic turmoil. Toyota made "just-in-time manufacturing" a common term and it has since been adopted by the entire industry.

Unfortunately, in order for just-in-time to work, assembly plants need a stable supply base that can reliably deliver the right parts at the right time, every time. If a company's suppliers are in danger of shutting down due to lack of funds, they cannot reliably function without an inventory bank of parts. The net-net is that if one or more automakers goes belly up in the coming months, numerous suppliers are likely to follow that company down the drain. Since most suppliers provide parts to multiple automakers, the effects will cascade. If Toyota, Honda, Ford and everyone else have to start stockpiling parts, this will raise costs at a time when they are desperately trying to cut expenses.

Even though suppliers have tried to diversify and line up as many customers as possible, price pressures from every automaker over the past decade have put most suppliers (especially smaller ones) into a tenuous position. The interconnected nature of the industry means that everyone feels the pain, and companies like Toyota are going back to the drawing board to analyze and modify every step in the production chain.

[Source: The Detroit News]


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