“1 million production cuts” What happens at the scene of the supply chain crisis?
October 27, 15:36
Japanese automakers such as Toyota, Honda and Nissan have been forced to cut production significantly.
The total scale is over 1 million units.
This is because of the global shortage of semiconductors and the delay in procurement of various parts.
What is happening in the supply chain = supply network?
When we interviewed the site in Southeast Asia, which is the base for supplying parts, a change was beginning to occur that would transform the production of the automobile industry.
(Keita Kage, Directorate General of Asia)
In the secret procurement department
The main factory of Mitsubishi Motors in Thailand, the largest concentration of the automobile industry in Southeast Asia.
In mid-October, employees from the procurement department were gathering in the conference room.
This is to discuss future supply prospects with the person in charge of the parts manufacturer called the supplier.
This time, I was allowed to cover the highly confidential department of parts procurement, and I was able to see how it was.
The screen shows the number of parts supplied and the number required for production on a daily basis.
We will compare the two numbers to check if production can be continued as planned, and if we find that there are not enough parts, we will start considering countermeasures such as procurement from other manufacturers.
On this day, there was new information that the production capacity of a parts manufacturer could decline due to the shortage of semiconductors and the limitation of power supply in China.
The officials decided to analyze whether the supply would be affected.
It is said that this meeting, which had never been held at the Thai factory, is now held every day.
It's a response to somehow maintain production in the midst of global turmoil in the supply chain.
Procurement employee
"We follow up daily and adjust procurement methods to meet production plans."
The impact of reduced production is also on consumers
Since this summer, major automakers have been forced to cut production significantly due to the shortage of semiconductors and the spread of the new coronavirus infection in Southeast Asia.
The production of the six major Japanese companies this year is expected to be more than 1 million units less than planned.
Mitsubishi Motors is expected to reduce production of 40,000 units worldwide, and production of some models was stopped at its main Thai plant in September.
The Thai factory has taken thorough measures against infection of employees and is now in full operation.
However, when I looked inside the factory, the situation was different.
Some parts do not fit on the shelves and are piled up on the outside.
Nowadays, there is a wave in the amount that can be procured for each part, so there is a difference between parts that can be procured smoothly and parts that cannot be procured, and some parts cannot fit on the shelves.
It can be seen that the turmoil in the supply chain has had such a great impact that it changed the common sense of automobile production.
Production has become unable to keep up with global demand for automobiles, and the impact is spreading to consumers.
In Japan, even if a new car is purchased, there is a long waiting time for delivery depending on the model, and in the United States, which is a car society, the price of used cars is rising due to the decrease in the stock of new cars.
Air transportation of parts and change of production area
Of course, automakers aren't just watching the situation.
According to a person familiar with a major manufacturer, there are times when the missing parts are transported by plane in a hurry, and when it is found that procurement from a factory in one country is not possible, the production machine is moved to a factory in another country to make parts. Sometimes it is said.
All of these measures are unthinkable in normal times, but even so, procurement cannot be maintained and large-scale production cuts are being forced.
Even now that the infection in Southeast Asia has improved compared to the past, procurement continues to be a tightrope walk.
Just-in-time → Just-in-case
So what about parts makers now?
Since June, many factories in Malaysia have been shut down due to the government's lockdown, which has become a major factor in hindering car production in the world.
We interviewed a factory of a major parts manufacturer that produces body parts and deals with Japanese manufacturers.
The lockdown shut down operations for three months from June, so the factory is now running six days a week for recovery production and is almost at full capacity.
With the lockdown unlocked, the factory seemed to be back at first glance.
But that was not the case.
CEO Michael Kuu told interviews that he had changed his raw material procurement policy.
Parts maker Michael Kuu CEO
"I decided to procure extra raw materials such as iron, which are necessary for production, not just the amount. Just in case (= just in case), changing the way of thinking of just-in-time so far. Switched to the policy of "
"Just-in-time" is a method of producing and procuring what you need, when you need it, and in the quantity you need.
It has been regarded as one of the sources of competitiveness of the Japanese automobile industry, as it pursues rationality that leads to cost reduction by reducing inventory to the limit.
On the other hand, it has been pointed out that there is a risk that the impact on production will likely increase once the supply of raw materials and parts begins to stagnate because it does not have inventory.
Every time the production was affected by the Great East Japan Earthquake and the flood in Thailand, the risk aspect of this production method was highlighted, but this was the first time I heard that the procurement policy was actually changed.
The CEO didn't reveal details about what parts and how much he had in stock, but Malaysia was definitely starting to change.
Will the manufacturing industry change?
Changes in parts manufacturers triggered by the spread of the new coronavirus infection.
Experts familiar with Southeast Asian supply chains point out that these moves could spread.
Professor Seiya Sukegawa of Kokushikan University
"Japanese companies have been pushing for just-in-time production methods to reduce costs, but not only corona but also natural disasters and economic security problems have become risks, and the prerequisites have collapsed. "Just-in-case" methods such as increasing inventory and diversifying production and procurement will be strengthened more than ever. "
What will happen if many manufacturers have more inventories?
Who will bear the increased costs?
The balance between supply and demand of raw materials may be further disrupted.
Questions come up one after another.
Even now that the infection situation in Southeast Asia has improved from one time, the risks surrounding the supply chain are increasing rather than decreasing due to semiconductor shortages, logistics disruptions, and restrictions on electricity supply in China.
This crisis has the potential to radically change the production and procurement of manufacturing industries.
The impact is spreading quietly.
Keita Kage
,
Directorate-General of Asia
Joined in
2005 In
charge of financial and financial coverage at the Ministry of Economic Affairs,
Directorate-General of Asia since last summer