HBP# TB0648

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William E. Youngdahl
Kannan Ramaswamy

Toyota’s Disrupted Global Supply Chain:

COVID-19 and the Global Chip Shortage
Especially in Southeast Asia, the spread of COVID and lockdowns are impacting our local suppliers.1
Toyota’s Purchasing Group Chief Officer, Kazunari Kumakura

It was 2021, and the world was deep into the crisis of the COVID-19 (Corona Virus Disease) pandemic which
had triggered a variety of challenges for organizations worldwide. Earlier in the year, a very large proportion of
new cases emerged in Asia where the delta variant of the virus was wreaking havoc. Against this backdrop, even
Toyota’s supply chain, long admired as an industry benchmark for efficiency and effectiveness, was unable to supply
critical parts to replenish inventory in its plants. Southeast Asia, where Toyota sourced many auto components,
was particularly hard hit. Consumer demand patterns started to shift across the globe. When the virus first hit,
consumer demand dropped precipitously, and even the leading car rental companies were scaling down their
vehicle portfolios and sold off a sizable proportion of their cars. However, as the Western world was showing
signs of a recovery due to the vaccination effort in the latter half of 2021, consumers rushed to buy new cars. As
demand for automobiles surged, a critical shortage of microchips forced Toyota and other automakers to shut down
some of their assembly lines. In Germany, Opel, Ford, BMW, and Mercedes Benz had all announced that they
were idling some of their plants as a result of the chip shortage. Opel said that it found itself “in an exceptional
situation due to the continuing pandemic and the worldwide shortage of semiconductors.”2 Across the Atlantic,
GM announced that it was idling production at eight North American plants “driven by the continued parts
shortages caused by semiconductor supply constraints from international markets experiencing COVID-19-related
restrictions.”3 Toyota announced that it would shut down 40% of its global production saying that the decision
“for the production adjustment include[s] a decline in operations at several local suppliers due to the prolonged
spread of COVID-19 in Southeast Asia and the impact of tighter semiconductor supplies.”4 Interestingly, Toyota
was the last of the major global automakers to cut production during the challenging COVID-19 era. It had
withstood many disruptions in the past and had shown a higher level of supply chain resilience in recent years.
COVID-19 was the type of challenge that left even the best performers overwhelmed.

Toyota made several changes to increase supply chain resilience after recovering from the Fukushima
earthquake and tsunami in 2011. The magnitude 9.1 earthquake had disrupted supplier operations that were
vital to Toyota’s plants, and the company was faced with a serious supply chain challenge that had to be addressed
quickly. As part of the series of changes that Toyota undertook in responding to the disruption, it increased
inventory buffer stocks for critical parts and also increased their supply chain visibility to all tiers of suppliers.
Although these changes helped them during 2020, the shortages of microchips forced the company to reduce
production. The auto industry had never experienced a multi-year parts shortage. This was different from prior
natural disasters and plant fires. In those cases, Toyota and its suppliers could rebuild their plants. Components
needed to replenish assembly lines could be sourced from other geographies. The chip shortage was affecting all
automakers. Assembly lines were shut down as engineers scrambled for technical workarounds.

Would the company need to change its Toyota Production System (TPS) and supply chain practices in
a post-COVID-19 world? How long would Toyota have to wait before it received enough chips to resume full
production? What could the company do to prepare for this kind of crippling perfect storm, or was the pandemic

Copyright © 2021 Thunderbird School of Global Management, a unit of the Arizona State University Enterprise. This case was
written by Professors William E. Youngdahl and Kannan Ramaswamy for the sole purpose of providing material for class discussion.
It is not intended to illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of
the material in this case is prohibited unless permission is obtained from the copyright holder.

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 a black swan event that didn’t mandate major changes once it was in Toyota’s rearview mirror? These questions
were surely on the minds of Toyota executives as 2021 was coming to a close.

Toyota Production System

Toyota defined its Toyota Production System as a production system based on the philosophy of achieving
the complete elimination of waste in pursuit of the most efficient methods. Waste included excess inventory,
extraneous processing steps, defective products, wasted motion, performing unnecessary process steps, waiting,
and transportation. TPS, Toyota’s version of lean manufacturing, relied on two foundational approaches: jidoka
and just-in-time (JIT).5

Jidoka is defined as automation with a human touch. Its origin can be traced to Sakichi Toyoda, inventor
and founder of Toyota. Prior to founding the auto company, Toyoda developed Japan’s first self-powered loom in
1896. He subsequently added a device that automatically stopped the loom when a thread breakage was detected.
This minimized any defects and allowed for quick problem detection and resolution.6 Jidoka was expanded at
Toyota to include machine jidoka and human jidoka. Machine jidoka relies on automated mechanisms for stopping
production when defects, or conditions that could lead to defects, are detected. Human jidoka empowers line
workers to stop the production line if they notice any defects.

JIT involves making only what is needed, when it is needed, and in the amount needed. JIT relies on pull
production control in which production is “pulled” by orders received from its dealers (see Exhibit 1). Toyota
translated demand for different models (production plan) into a heijunka sequence plan. Roughly translated,
heijunka is the Japanese word for smoothing or leveling. By creating a heijunka sequence plan, Toyota was able
to smooth out, or balance, assembly line workstations such that they all took roughly the same amount of time,
or cycle time, to complete their sets of tasks.7

The company’s assembly lines produced a mix of auto models with different specifications. The sequence
plan was laid out in a very visual manner in a heijunka box (see Exhibit 2) that stored production kanban cards
for different components under a specific time slot. Kanban cards included the product number and description,
production quantity, and a picture with annotation for the physical location of the workstation.8 Heijunka helped
to maximize efficiency while reducing complexity that could lead to excess work-in-process inventory.

JIT, the use of kanbans, and heijunka worked together to limit the buildup of excess inventory feeding
each assembly supply point. Limits were placed on inventory waiting at supply points. Production control
systematically reduced these inventory limits as inefficiencies were eliminated through a process of continuous
improvement. Exceeding inventory limits signaled a need to address new inefficiencies.9 To make TPS work in its
assembly plants, Toyota needed suppliers that could supply the required quantities of subassemblies and parts at
precisely the right time and in the right locations. Toyota’s relentless pursuit of waste reduction, efficiency gains,
and stability extended to its suppliers.

Toyota’s Lean Supply Chain

The Toyota Production System required precise coordination throughout all of the links in its global supply
chain. Toyota achieved this by rigorously vetting new suppliers and building deep relationships over time. Like
other automakers, Toyota, an original equipment manufacturer (OEM), had several tiers of suppliers. Tier 1
suppliers were responsible for major systems such as seats and dashboards. Tier 2 suppliers supply components to
the Tier 1 suppliers. Tier 3 suppliers supply individual parts and materials to Tier 1 and Tier 2 suppliers. Many
of the suppliers had other automobile companies as customers, each with their own set of expectations. In some
instances, Toyota spun off supplier companies that were formerly vertically integrated parts of the company.
Examples included Nippon Denso, an air conditioner manufacturer, and Aisin Seiki, a parts and components
manufacturer.10 Given their heritage, these suppliers started with deep understanding of the Toyota Production
System.

To improve coordination and deepen supplier relationships, Toyota believed Tier 1 suppliers should be as
close to the factory as possible, even on-site with Toyota when feasible. Toyota’s Tier 1 suppliers delivered various

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 parts and systems just-in-time as needed by a Toyota assembly plant. Proximity provided several benefits to
both Toyota and its suppliers. Many Tier 1 suppliers were responsible for detailed component design. Suppliers’
engineers worked closely with Toyota’s counterparts to ensure that design expectations were met. Similarly, Toyota
production specialists worked with supplier counterparts to continuously improve their production processes
to reduce waste and improve efficiency. Joe Lewis, business development manager at Blue Springs Metal and
Georgetown Metal Processing, a Toyota supplier, shared his company’s experience in working with Toyota:11
Over the years, we’ve developed a strong relationship with the Toyota stamping departments. During
our first major model change at [Toyota Motor Manufacturing, Mississippi], Toyota—as well as our
teams—needed to develop fully transparent ways of exchanging information across companies. We
[worked closely] together and with seamless support. Many of these practices we still hold today,
and they continue to provide greater creative input, increased trust, and enhanced stakeholder
relationships.

Tier 2 suppliers supplied parts and components to their customers who were Toyota’s Tier 1 suppliers.
Given the relative commoditization of parts and components supplied by Tier 2 suppliers and their Tier 3
suppliers, less emphasis was placed on forming deep engineering relationships. However, each link in the supply
chain required coordination with suppliers to receive the right quantity of the right parts and components to
the right location at the right time. This required relationships formed primarily by working together to improve
processes. Toyota had little to no visibility into Tier 2 and Tier 3 suppliers. Tier 1 suppliers were responsible for
these lower-tier suppliers.

Increasing Supply Chain Resiliency: The Fukushima Tsunami

On March 11, 2011, a magnitude 9.1 earthquake occurred off the northeast coast of Honshu in the Japan Trench.
The earthquake generated a tsunami that arrived at Japan’s coast within 30 minutes. The flooding disabled three
nuclear reactors, destroyed more than 123,000 houses, and forced many of Toyota’s suppliers to cease operations.12
Over 300 Toyota suppliers reported damaged facilities. Since Toyota plants typically held only several hours’
worth of inventory for many parts, they relied on frequent inventory replenishment from their suppliers.13 Many
Toyota plants quickly ran out of components needed for assembly. A single missing component could shut down
production of at least one car model.

After 2011, Toyota ensured that multiple suppliers would supply each component. In rare cases, a
supplier was a sole source given a patent or unique set of capabilities. In these cases, Toyota pushed suppliers to
add an additional facility at a different location. The company also concluded that long lead times for certain
components made it difficult to cope with devastating shocks such as natural disasters. This was particularly true
for semiconductor suppliers. Under normal conditions, these suppliers were able to maintain the capacity needed
to supply Toyota or one of its Tier 1 suppliers with semiconductors while also maintaining some safety buffer of
inventory. Facing devastating flood waters and closing of supplier plants, safety buffers were quickly depleted.
Toyota responded by developing a business continuity plan that required semiconductor suppliers to maintain
a safety buffer of anywhere from two to six months’ worth of chips, depending on the order to delivery lead
time. The company also worked with its Tier 1 suppliers to create a database that included detailed information
on suppliers down the entire supplier ladder. Information included what components the supplier makes, plant
locations, and suppliers of the component parts. This was the first time Toyota had a complete picture of all levels
of suppliers in its global supply chains. And, finally, the company committed to establishing regional supply
chains with all required suppliers. This would provide opportunities for shifting to another region’s suppliers to
avoid complete shutdowns.14

After the Fukushima disaster, it took Toyota four months to get production inside Japan back to normal
levels and an additional two months to restore production levels at assembly plants outside of Japan. Toyota
needed no convincing to implement the previously described solutions to increase its abilities to both resist
disruptions and recover operational capability after a disruption occurred.15 At the time, the company did not
factor a potential global pandemic into their supply chain resiliency, however.

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 COVID-19
Coronavirus disease 2019 (COVID-19) was caused by a new coronavirus first identified in Wuhan, China, in
December 2019. Although most people infected with COVID-19 had mild symptoms, COVID-19 also caused
severe illness and even death. Some groups, including older adults and people who had certain underlying medical
conditions, were at increased risk of severe illness. By December 4, 2021, 265.42 million cases had been reported
across the globe with 5.25 million deaths.16

Full or partial lockdowns required to address the public health crisis, combined with rapid drops in consumer
demand and production, led to a global recession. It was also the first economic recession since 1870 to be
triggered solely by a pandemic.17 Rising infection rates and death counts, combined with economic upheavals
and social isolation, created tremendous tension between the call for science-based precautions (e.g., lockdowns,
testing, contact tracing, social distancing, and mask wearing) and the need to restart economies and reconnect on
a human level. In May 2020, the United Nations raised alarm bells over a looming global mental health crisis.
Psychological distress in populations is widespread. Many people are distressed due to the immediate
health impacts of the virus and the consequences of physical isolation. Many are afraid of infection,
dying, and losing family members. Individuals have been physically distanced from loved ones and
peers. Millions of people are facing economic turmoil, having lost or being at risk of losing their
income and livelihoods. Frequent misinformation and rumours about the virus and deep uncertainty
about the future are common sources of distress. A long-term upsurge in the number and severity of
mental health problems is likely.18

The release of several vaccines and the subsequent vaccination of millions of people during the fourth
quarter of 2020 provided some well-needed reasons to be optimistic that return to some new normal would be
possible. Despite this progress, COVID-19 breakouts continued throughout 2021 with new, more virulent virus
variants, causing significant concern.

Toyota’s Initial Responses to Coronavirus

Toyota’s initial response at the end of January 2020 was to offer condolences to those who had been affected
by coronavirus. The company also made a donation to support the purchase of medical supplies and personal
protective equipment, or PPE.
I offer my condolences to all those who lost their lives, as well as my sympathy to those who have been
affected by the outbreak of Coronavirus. At the same time, I would like to express my sincere respect
to the healthcare professionals and government officials who are on the front lines day and night.
Toyota has a number of team members that work and live in China. I may not be able to understand
the true feelings of the local people, but from our desire to help, Toyota has decided to donate 10
million CHY through the Red Cross Society of China to assist in the purchase costs of medical supplies
such as masks, glasses, protective clothing, etc.
We, Toyota, will continue to monitor the situation and be mindful of the feelings of those in the
midst of this outbreak, and focus on safety and security as the highest priority.
Akio Toyoda, President, Toyota Motor Corporation19

Although Toyota was initially responding to the COVID-19 disaster in China where the virus first surfaced,
it soon became clear that virus was rapidly spreading globally. In March 2020, 118,000 cases were reported in
114 countries.20 By April, demand for automobiles had declined significantly as many dealerships closed and
potential customers were at home sheltering in place hoping to avoid the virus. As consumer demand declined,
Toyota reacted by reducing production in several of its assembly plants in Japan (see Exhibit 3). In subsequent
months, Toyota reduced the number of operating days for specific assembly lines in its plants. The peak hit in
June 2020 with 28 assembly lines affected across its assembly plants around the world. A total of 145 operating
days were removed from Toyota’s global production in April. By August 2020, only three assembly lines were
affected with just six operating days removed from production. After months of sheltering in place, demand for
automobiles was increasing.

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 Toyota executives were pleased to start getting back to some version of normal. By the end of 2020,
Toyota total sales in number of autos was 10.5% lower than 2019 (see Exhibit 3). Despite this decline, Toyota’s
decline in sales was less than the 16% average decline for all automakers (see Exhibit 5). The work that Toyota
completed after the 2011 natural disaster to make its global supply chains more resilient was paying dividends.
While other automakers were running out of critical components, Toyota was able to replenish stock for several
months from the inventory buffers established to help recover from natural disasters. During the fourth quarter
of the 2020 calendar year, global sales were up 6.8% year-on-year. This increase in sales, combined with the
rollout of coronavirus vaccines, provided reason to be optimistic that Toyota was recovering quickly from a very
challenging year.

Global Chip Shortage and the Delta Variant

Every automobile had dozens of microchips that controlled everything from window motors to navigation
systems. A microchip (or chip) is a set of electronic circuits on a small flat piece of silicon. Chips came in many
forms and served different purposes. Logic chips typically processed information to complete some task, whereas
memory chips stored information. Microcontrollers were essentially a complete computer on a chip. Before the
pandemic, automakers’ annual demand for microchips numbered in the hundreds of billions. In contrast to peer
industries that used long-term (~12 months or more) purchase agreements for procuring chips, the automakers
used a much shorter time horizon for their purchases. Auto industry contracts with semiconductor suppliers were
typically binding for no more than three months, and often even just a few weeks.21 When production declined
in 2020, Toyota and other automakers cancelled orders for semiconductors to prevent excess inventories. At
the same time, demand for more complex semiconductors boomed in other industries that were responding to
the new work-from-home phenomenon. Demand for electronic devices such as computers, printers, displays,
networking equipment, and video-conferencing equipment for work and entertainment surged. As demand for
autos picked up in late 2020 and 2021, automakers had to compete for the attention of chip manufacturers
who had already shifted their focus elsewhere. By that time, other industries offering longer-term contracts had
largely exhausted global chip-making capacity.

A freak snowstorm triggered power outages in Texas, causing Samsung Electronics, Infineon Technologies,
and NXP Semiconductors to close their Austin, Texas, area chip-making factories in February 2020.22 It took the
companies over a month to get their factories back to full capacity. Just as these chipmakers were recovering, in
March 2021, a Renesas Electronics factory in Japan was shut down after a major fire. The factory, which supplied
30% of worldwide auto production, did not resume full operations until June 2021.

Toyota was better prepared to deal with this shortage given their just-in-case buffer inventory of microchips,
but the company did not consider such a prolonged shortage caused by increased demand from other industries,
power outages, and fires. And nobody predicted that the coronavirus would continue to wreak havoc throughout
2021. It was a perfect storm of colliding circumstances.

The delta variant of coronavirus was first detected in India in December 2020. Medical researchers discovered
that people infected with the delta variant had 1,000 times more viral load than those infected with the original
strain. It was also much more aggressive in its ability to replicate and spread.23 The knock-on effects of COVID-19,
combined with the global chip shortage, had already had a dramatic negative impact on automakers. CNBC
reported that the chip shortage alone would cost the automakers US$ 210 billion in 2021 alone.24

Addressing the Global Chip Shortage

Most automobiles were fitted with cheap but reliable microchips that were designed over a decade ago. Intel made
its own chips but some companies such as Qualcomm outsourced chip production to foundries that served as
contract manufacturers. Building new microchip fabrication facilities involved capital expenditures that ran over
US$1 billon. Expanding production of microchips for automobiles essentially translated into investing in old
technologies to produce low-margin commodity chips, a prospect that was quite unattractive to many players.
To help overcome this hurdle, several countries offered significant subsidies for constructing new semiconductor
fabrication facilities, but even with companies breaking ground on new facilities, the chip shortage was projected
to extend well into 2023 or 2024.25

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 Toyota had enough buffer inventory, along with what they could still get from suppliers, to last through
December 2020. While Toyota appeared to be focused on fine-tuning and recalibrating its vaunted TPS approach,
its solutions were largely aimed at managing known unknowns. Some of its competitors had taken a different
fork in the road to recovery.

Toyota’s Competitors: A Different Response to the Global Chip Shortage

Toyota’s competitors had decided to re-evaluate their product lines to assess areas where engineering might be
able to address the known unknowns associated with parts availability. Tesla and GM identified controllers as
a potential solution for dramatically reducing the number of microchips used in their automobiles. Essentially
computers on a chip, controllers could perform the functions of many basic commodity-level microchips found
in automobiles. Having the relative luxury of buffer inventories of chips, Toyota found itself in catch-up mode
without any publicly shared, technology-based solution.

Tesla was founded in 2003 by a group of engineers who wanted to prove that people didn’t need to
compromise to drive electric automobiles. Despite the global chip shortage, Tesla delivered 241,300 cars worldwide
in the first quarter of 2021, a record for the company.26 By late 2021, Tesla’s market cap was over $1 trillion, yet
the company still prided itself on its ability to act with the agility of a startup. During an earnings call in July
2021, Elon Musk, Tesla’s CEO, stated, “We were able to substitute alternative chips, and then write the firmware
in a matter of weeks. It’s not just a matter of swapping out a chip; you also have to rewrite the software.”27 The
company was working on designing, developing, and validating 19 new variants of controllers that could reduce
the number of chips in their automobiles. They had also identified suppliers who could commit to supplying
the new controllers. During that same earnings call, Musk also acknowledged that for the rest of 2021, Tesla’s
growth rate would depend on the slowest part in their supply chain. Musk confessed that the microchips that
control seats and airbags were in short supply. Despite Tesla’s technical prowess, it seemed that even they could
not engineer their way out of all chip shortages.

In November 2021, General Motors announced that they were working with seven chip suppliers on three
new families of microcontrollers. They estimated that using controllers instead of more traditional semiconductors
would reduce the number of unique chips by 95% on future vehicles. Unlike Tesla, GM did not plan to use its
own engineers to design, develop, and validate chips.28

Some automakers eliminated certain features that depended on microchips. GM started building some of
its full-sized pickup trucks without software that managed fuel consumption. Tesla began removing adjustable
lumbar support from the passenger seats of some models. Given the limited number of microchips, automakers
made tough choices about product design and product line priorities. GM shifted some microchips from less
popular to more popular models. Another approach was to build the vehicles without certain chips and park them
in large lots for eventual completion when chips became available. This approach was referred to as a build-shy
strategy. By the end of March 2020, Ford had 20,000 vehicles parked and waiting for chips.29

The global chip shortage was expected to cost the global auto industry over seven million units of production
in 2021.30 Toyota survived the shortage better than its peers, except for Tesla, by carrying a large buffer inventory
of microchips. Tesla’s engineering solutions, combined with relatively fewer cars produced (241,300 vs. Toyota’s
2,148,000 in Q1 2021), helped them weather the storm better than others. GM and likely other automakers
were just beginning to investigate engineering-based solutions by the end of 2021. But shortages continued, as
did coronavirus.

Ongoing Supply Chain Disruptions

The global automakers seemed resigned to a continuing shortage of chips and the unpredictable effects of
COVID-19 that was far from contained. Not only was the delta variant of the virus still wreaking havoc in
some countries, there were new variants that were also cropping up and some, such as the omicron variant,
were showing resistance to existing vaccines. It appeared that this was no black swan event of the regular kind.
Toyota continued to face supply chain disruptions beyond the semiconductor shortage. The shortage in chips
had grown to encompass other critical materials as some of the automakers had reported. Ford Europe’s Chair

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 of the management board, Gunnar Hermann, said, “It’s not only semiconductors,” adding that lithium, plastics,
and steel were all in relatively short supply. “You find shortages or constraints all over the place.”31

Toyota learned from its recovery from the devastating earthquake and tsunami in 2011. The company
challenged its long-standing belief in relentless inventory reduction by carrying a large buffer stock of microchips
and other critical components that could be difficult to source after a natural disaster. Toyota also worked to
ensure that multiple, geographically distributed suppliers would be available for each of their components. After
working with their Tier 1 suppliers to create a database, they had complete visibility of all levels of suppliers
in their global supply chains. Despite these changes to create more supply chain resiliency, the company never
anticipated a multi-year shortage of key components. Would Toyota need to change its production and supply
chain practices in a post-COVID-19 world, or was the pandemic a black swan event that didn’t mandate major
changes once it was in Toyota’s rearview mirror?

Endnotes
1
Toyota Cuts Shows COVID Ravaging Even Best Supply Planners. SupplyChainBrain RSS. https://www.supplychainbrain.
com/articles/33623-toyota-cuts-shows-COVID-ravaging-even-best-supply-planners.
2
Ash, S. Chip shortage spurs new wave of car plant closures in Germany. https://techxplore.com/news/2021-09-chip-
shortage-spurs-car-closures.html.
3
BBC. 2021. GM to idle eight North American amid chip shortage. https://www.bbc.com/news/business-58416930.
4
Boudette, Neal. 2021. Toyota to cut production 40% in October because of the chip shortage. https://www.nytimes.
com/2021/09/10/business/toyota-production-chip-shortage.html.
5
Toyota Production System: Vision & Philosophy: Company. Toyota Motor Corporation Official Global Website. https://
global.toyota/en/company/vision-and-philosophy/production-system/.
6
Jidoka—Manufacturing High-Quality Products: Toyota Myanmar—Together Tomorrow Toyota. Toyota Motor Corporation.
http://www.toyota-myanmar.com/about-toyota/vision-philosophy/toyota-production-system/jidoka.
7
Heijunka—Toyota Production System Guide. Toyota UK Magazine, 31 May 2013. https://mag.toyota.co.uk/heijunka-
toyota-production-system/.
8
TPS Pillar Seven: Production Smoothing (Heijunka). Bader Martin, 19 July 2020. https://badermartin.com/tps-pillar-
seven-production-smoothing-heijunka/.
9
Schonberger, R. J. 2001. Let’s Fix It! Overcoming the Crisis in Manufacturing. New York: Free Press. pp. 70–71.
10
Lioudis, Nick. Who Are Toyota’s Main Suppliers? Investopedia, Investopedia, 2 Dec. 2021, https://www.investopedia.
com/ask/answers/060115/who-are-toyotas-tyo-main-suppliers.asp.
11
Toyota Drives Change with Supplier Diversity Program. Toyota, 13 Aug. 2021. https://pressroom.toyota.com/toyota-
drives-change-with-supplier-diversity-program/.
12
On This Day: 2011 Tohoku Earthquake and Tsunami. National Centers for Environmental Information (NCEI), 12
Nov. 2021. https://www.ncei.noaa.gov/news/day-2011-japan-earthquake-and-tsunami.
13
Schreffler, Roger. Quake Changes Little in Toyota’s Supply-Chain Strategy. WardsAuto, 16 May 2012, https://www.
wardsauto.com/industry/quake-changes-little-toyota-s-supply-chain-strategy.
14
Kubota, Yoko. Japan Earthquakes Rattle Toyota’s Vulnerable Supply Chain. The Wall Street Journal, Dow Jones &
Company, 19 Apr. 2016. https://www.wsj.com/articles/japan-earthquakes-rattle-toyotas-supply-chain-1460986805.
15
Steven A. Melnyk and David J. Closs. Understanding Supply Chain Resilience Supply Chain 24/7. http://www.
supplychain247.com/article/understanding_supply_chain_resilience/.
16
Coronavirus Pandemic (COVID-19)—The Data—Statistics and Research. Our World in Data. https://ourworldindata.
org/coronavirus-data. Accessed on November 29, 2021.
17
Global Economic Prospects, World Bank Group, June 2020.
18
Policy Brief: COVID-19 and the Need for Action on Mental Health, United Nations, 20 May 2020.
19
Toyota Provides Aid for Measures against Coronavirus: Corporate: Global Newsroom. Toyota Motor Corporation Official
Global Website. https://global.toyota/en/newsroom/corporate/31463023.html.
20
Who Director-General’s Opening Remarks at the Media Briefing on COVID-19—11 March 2020. World Health
Organization, World Health Organization. https://www.who.int/director-general/speeches/detail/who-director-general-s-
opening-remarks-at-the-media-briefing-on-COVID-19—11-march-2020.
21
Burkacky, Ondrej et al. Coping with the Auto-Semiconductor Shortage: Strategies for Success. McKinsey & Company, Oct.
2021. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/coping-with-the-auto-semiconductor-
shortage-strategies-for-success.
22
Samsung, Infineon, NXP Close Texas Plants. Sourcengine. https://www.sourcengine.com/blog/samsung-infineon-nxp-
halt-production-texas-winter-storm-2021-02-18.
23
Anthes, Emily. The Delta Variant: What Scientists Know. The New York Times, 22 June 2021. https://www.nytimes.
com/2021/06/22/health/delta-variant-COVID.html.
24
Wayland, Mike. 2021. Chip shortage expected to cost auto industry $210 billion in revenue in 2021. https://www.cnbc.
com/2021/09/23/chip-shortage-expected-to-cost-auto-industry-210-billion-in-2021.

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 25
Shead, S. 2021. Major automakers fear the global chip shortage could persist for some time. https://www.cnbc.
com/2021/09/06/vw-ford-daimler-fear-chip-shortage-could-persist-for-some-time.html.
26
Tesla Delivers a Record Number of Cars as Other Manufacturers Struggle amid Chip Shortage. USA Today, Gannett
Satellite Information Network, 5 Oct. 2021. https://www.usatoday.com/story/money/cars/2021/10/05/tesla-delivers-record-
number-of-cars-despite-chip-shortage/119016356/.
27
Hawkins, Andrew J. Tesla Rewrote Its Own Software to Survive the Chip Shortage. The Verge, 26 July 2021. https://www.
theverge.com/2021/7/26/22595060/tesla-chip-shortage-software-rewriting-ev-processor.
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Lienert, Paul. GM Aims to Tackle Chip Shortage with New Designs Made in North America. Thomson Reuters, 18
Nov. 2021. https://www.reuters.com/business/autos-transportation/gm-aims-tackle-chip-shortage-with-new-designs-made-
north-america-2021-11-18/.
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How the Chip Shortage Is Forcing Auto Makers to Adapt | WSJ. YouTube, 16 Sept. 2021. https://www.youtube.com/
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Feuer, Will. Chip Shortage Expected to Cost Global Auto Industry $210B in 2021. New York Post, 23 Sept. 2021. https://
nypost.com/2021/09/23/chip-shortage-expected-to-cost-auto-industry-210-billion/.
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Shead, S. 2021. Major automakers fear the global chip shortage could persist for some time. https://www.cnbc.
com/2021/09/06/vw-ford-daimler-fear-chip-shortage-could-persist-for-some-time.html.

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 Exhibit 1. Illustration of the Toyota Production System

Source: Adapted by authors from “Toyota Production System—Maximising Production Efficiency.” Toyota Motor Europe, https://
www.toyota-europe.com/world-of-toyota/this-is-toyota/toyota-production-system.

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 Exhibit 2. Heijunka Box

Source: Adapted by authors from “Heijunka Box.” Wikipedia, Wikimedia Foundation, https://
en.wikipedia.org/wiki/Heijunka_box.

Exhibit 3. Reduced Operating Days in April 2020

Plants and Production Lines Reduction in Operating Days
Takaoka Plant, #1 production line 3 operating days from Apr. 3 to 7
Tsutsumi Plant, #1 and #2 production lines 3 operating days from Apr. 3 to 7
Tahara Plant, #1 production line 6 operating days from Apr. 3 to 10
Tahara Plant, #3 production line 8 operating days from Apr. 3 to 14
Toyota Motor Kyushu (TMK), #1 production line 9 operating days from Apr. 3 to 15
Hino, Hamura Plant, #1 production line 2 operating days from Apr. 3 to 6
Source: “Regarding Japan Domestic Production (as of March 23): Corporate: Global Newsroom.”
Toyota Motor Corporation Official Global Website, https://global.toyota/en/newsroom/
corporate/32075122.html.

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 Exhibit 4. Number of Toyota Autos Sold

Source: Adapted by authors from “Toyota’s Global Sales and Production Up Year-on-Year in February for Sixth Consecutive Month:
Sales, Production, and Export Results: Profile: Company.” Toyota Motor Corporation Official Global Website, https://global.

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 Exhibit 5. 2020 Changes in Auto Sales
(Industry Average vs. Toyota)

Source: Adapted by authors from data found in Toyota’s 2020 Annual

Report and “2020 (Full Year) International: Worldwide Car Sales.”
Car Sales Statistics, 19 Jan. 2021, https://www.best-selling-cars.com/
international/2020-full-year-international-worldwide-car-sales/.

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