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Toyota’s July Production Shortfall Due to Parts Shortages

Facing the challenges of semiconductor shortages and parts supply disruptions, Toyota lowered its July production forecast in Japan by 50,000 vehicles.

Toyota is expecting part shortages to be stabilized later in the year and will run additional shifts to meet the projected annual vehicle production volume of 9.7 million.

Read previous OM in the News posts about effects of the semiconductor shortage on the automotive industry, including some creative solutions

Video Spotlight:  

This post is based on the Car Buzz article, Toyota Won’t Be Celebrating This Independence Day, by Gerhard Horn, June 25, 2022; the PBS article, Chip shortage drives up vehicle prices, cuts sales, July 1, 2022, by Tom Krisher; and the YouTube video in the Spotlight. Image source: Vlad Deep/Alamy Stock Photo

Discussion Questions:

1.  What role does forecasting play in Toyota’s production planning?

Guidance: Forecasting allows Toyota to project its annual vehicle demand to be 9.7 million which informs Toyota’s capacity planning.

The disruptions brought on by part shortages are factored into its monthly demand forecast for aggregate planning.  This shorter-term demand forecast is key for Toyota’s decision to lower its July production by 50,000 vehicles to achieve a balance of demand and capacity in aggregate planning.

2. What kind of capacity strategy does Toyota use to counter the supply shortages and disruptions?

Guidance: Toyota uses a chase capacity strategy where its output rate is adjusted to a lower level in July to match reduced demand due to semiconductor shortages and part supply disruption.

Toyota will increase its workforce level to increase production to meet annual output, when the part shortage issue is resolved.

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