But there is a bright side: necessity is breeding invention, especially in the chip-starved auto sector. Companies like Ford are trying to find opportunities in developing a built-to-order business model, one that might be more resilient to external crunches.
Toyota, likewise, is re-evaluating the merits of its “just in time” business, which tries to maximize efficiency by having all parts delivered only when they are needed and not a moment sooner.
“Toyota is the best-known company for the just-in-time model,” said Soo-Haeng Cho, professor of operations management and strategy at Carnegie Mellon University. “Just-in-time is more doable when [companies] have local suppliers.”
Toyota traditionally relied heavily on local Japanese suppliers, but as supply shifted to Chinese firms, the company became “more exposed to these kinds of disruptions,” Cho added.