Toyota: When Just-in-Time Meets Just-in-Case

Only What Is Needed, When It Is Needed

A car is built from more than 30,000 parts, and many of them come from partner companies’ plants. Getting every one of those parts to the right place at the right moment is one of the biggest puzzles in manufacturing. Toyota’s answer is the Toyota Production System, a way of making things that aims to eliminate waste so vehicles can be delivered quickly, at low cost, and with high quality.

The system rests on two ideas. The first, jidoka, traces back to Sakichi Toyoda, founder of the Toyota Group, who in 1896 developed a device that automatically stopped a loom when a thread broke. In Toyota’s factories, a machine stops—or a worker pulls a cord to stop the line—when something goes wrong, so defective products are not passed along. The second idea, just-in-time, came from Kiichiro Toyoda, founder of Toyota Motor Corporation: make only what is needed, when it is needed, and in the amount needed, at the pace vehicles are being sold. As Kiichiro put it, “A complete car cannot be built if even one part is missing.”

Taiichi Ohno, who rose to executive vice president, built the basic framework for just-in-time. Instead of pushing parts forward, each step in the process goes back to the step before it and takes only the parts it has used, and cards called kanban tell suppliers to send the required quantity right when it is needed. Toyota worked out the system through trial and error in the late 1940s and early 1950s, began rolling it out to all of its plants in 1960, and began introducing it to its suppliers in the late 1960s. Because only a minimum of parts sits on hand, little money is tied up in extra stock—but every process depends on the next delivery arriving on time.

March 11, 2011

That dependence was tested on March 11, 2011, when a magnitude 9.0 earthquake and tsunami struck northeastern Japan and damaged many of the companies that supplied Toyota. That month, Toyota’s car production in Japan fell 62.7% from a year earlier, to 129,491 vehicles—the lowest since Toyota began keeping production records in 1976. Its global production fell 29.9%. In April, Toyota restarted its Japanese plants at only half capacity because it was still trying to secure about 150 types of parts, and it had already lost production of about 260,000 cars. President Akio Toyoda publicly apologized to customers for long delivery delays and said all models might not return to normal production until November or December. In North America, where production was also cut, Toyota promised not to lay off any of its 25,000 workers and planned to use the downtime for training.

The disaster exposed a hidden weakness: Toyota did not have a full picture of the companies that supplied its suppliers. Jeffrey Liker, author of a book about Toyota’s methods, told Fortune that managers did not know these lower-tier suppliers’ names, phone numbers, or addresses. In the first hectic weeks, they pieced the information together in a crisis room, tracking details on sticky notes. Toyota estimated that more than 1,200 of the parts and materials it bought might be affected, and it drew up a list of 500 priority items whose supply needed to be secured in the future. Some came from Renesas Electronics, a Japanese chipmaker whose plant was knocked out for three months. Toyota’s production outside Japan took six months to return to normal.

Building a Safety Net

Toyota did not abandon just-in-time, but it added protection. It built a database called RESCUE (Reinforce Supply Chain Under Emergency) that maps its suppliers and their suppliers. Masayoshi Shirayanagi, then Toyota’s chief of supply chain and procurement, said the system cut the time needed to find the source of a problem from two weeks to 12 hours. Toyota also uses parallel sourcing—buying the same part from more than one supplier—so it can shift orders if one supplier falters.

The biggest change involved computer chips, which have long lead times—the wait between placing an order and receiving it. Under Toyota’s business continuity plan, suppliers had to hold a two- to six-month supply of chips for Toyota. Holding extra stock costs money, so, according to Reuters, Toyota pays for the arrangement by giving back a portion of the yearly cost cuts it normally demands from its suppliers. A Toyota spokesman summed up the approach: “The BCP for us was a classic lean solution.”

The Chip Shortage Test

The safety net faced its test in 2021, when automakers around the world ran short of semiconductors. Early that year, a cold snap in Texas shut down chip factories, a drought in Taiwan threatened chip supplies, and in March a fire halted a Renesas plant in Japan. General Motors cut production by 278,000 vehicles through May, and Ford cut its global production 50% in the second quarter. Toyota, by contrast, kept production largely on target until May, and its North American plants ran at 90% of capacity through June. Fortune reported that in the second quarter of 2021, Toyota was the No. 1 automaker by sales in North America—the first time since 1998 that GM had not held the top spot.

The cushion had limits. In August 2021, Toyota said it would cut its September global production by 40% from its plan, about 360,000 fewer vehicles, across 14 factories. The chip shortage had been made worse by COVID-19 outbreaks in Asia that disrupted parts suppliers, and Toyota had already halted three plants in Thailand in July. Reuters described Toyota as the last major automaker to cut output because of the chip shortage.

Where Toyota Stands

Other automakers took notice. In 2021, Ford said it would build direct relationships with chipmakers, and GM said it might do the same. Toyota, meanwhile, kept growing. In 2025, the Toyota group, including its subsidiaries Daihatsu and Hino, sold a record 11.3 million vehicles, up 4.6%, and remained the world’s top-selling automaker for the sixth year in a row; its production rose 5.7% to 11.2 million vehicles. In February 2026, Toyota announced that Kenta Kon, its chief financial officer, would take over as president and CEO on April 1, 2026. More than a decade after the earthquake, Toyota’s experience suggests that a company can stay lean while keeping a cushion for the parts it cannot do without—though no cushion covers every shock.