Reference no: EM132974301

As early as January, Ford and General Motors warned of shortages. Since then, they have halted assembly lines where they have failed to secure chipsets to power their cars' onboard computers; GM cut production by 278,000 units through May, and Ford had to reduce global production 50% in the second quarter. European automakers buckled too. Volkswagen, Daimler, BMW, and Renault each slashed their manufacturing totals. Thousands of workers were idled or furloughed, while would-be car buyers suddenly faced weeks-long waiting lists. All told, consultancy AlixPartners says the chip shortage will cost automakers globally about 4% of total sales this year-some $110 billion in forgone revenue.

But not all carmakers have suffered equally. While rival OEMs (or original equipment manufacturers, as automakers are known) stumbled, Toyota kept production largely on target until May. The company has said factory closures owing to chip shortages would cause a shortfall of 20,000 vehicles in Japan-less than 1% of Japanese production in fiscal 2021. Toyota's North American production, meanwhile, hummed along at 90% of capacity for the year through June. That prolonged productivity propelled the company to a rare victory: In the second quarter, it was the No. 1 automaker by sales in North America, marking the first time since 1998 that GM hasn't held the top spot.

Unlike many of its rivals, Toyota essentially stockpiles chips. That's a deviation from JIT, which dictates that supplies reach the production line only when then are needed....Toyota requires suppliers to maintain up to a six month buffer supply of chips.

Problem 1: How Toyota's approach leveraged the Factory Physics Framework to keep making cars when other competitors experienced production issues. How did Toyota configure its buffers strategically? What happened to the buffer profiles of competitors who experienced shortages?