Wondering what is just-in-time manufacturing and why car plants live by it? It is a system where parts reach the line only when needed, cutting waste and stock. Toyota developed it after World War II.
This explainer sits within the wider topic of automotive business, where carmakers, suppliers and costs meet.
| Item | Value |
|---|---|
| Where the idea was developed | Toyota’s production system, after World War II |
| Estimated worldwide auto production losses, year ending September 2021 | $210 billion |
| Priority parts Toyota flagged after the 2011 earthquake | 500 parts |
| Chip stockpile Toyota required from suppliers | Two to six months’ worth |
The figures come from a 2023 academic paper on just-in-time and an analysis of how to redesign just-in-time supply chains. Figures can change, so check the source before you rely on them.
How just-in-time works on a car line
Just-in-time (JIT) means a plant builds vehicles as orders arrive and keeps only the parts it needs close to the line. Toyota’s own description, quoted in a 2023 paper in Production and Operations Management, aims at the complete elimination of waste, inconsistencies and unreasonable requirements on the production line. It names those three problems muda, mura and muri in Japanese.
In practice, that description turns into a short chain of steps:
- When a vehicle order arrives, production instructions go to the start of the line as soon as possible.
- The assembly line holds the required number of every necessary part, so any ordered vehicle can be built.
- When the line uses parts, it replaces the same number from the parts-producing process before it.
The result is a pull system: each stage makes only what the next stage has used. Nothing is built far ahead of demand, which is why stock shrinks.
Where the idea came from
The 2023 paper describes JIT as a management philosophy first developed within Toyota as part of its production system. It says the philosophy emerged after World War II, when Japan needed to rebuild and strengthen its industrial base. A Bloomberg opinion column from February 2021 places Toyota’s invention of the method in the 1960s and 70s.
Early on, Toyota’s factories and those of its suppliers sat near each other, according to a supply-chain analysis. That closeness cut transit time and excess stock and made collaboration easier.
The paper says scholars viewed JIT as a radical new approach when it was proposed in the 1970s. By the 1980s and 1990s it had gained worldwide prominence. Companies such as Honda, Boeing and Volvo Group have credited part of their success to it, the authors write.
What just-in-time saves automakers
The savings are mostly about money tied up in stock. One study cited by Bloomberg found that American companies adopting JIT cut inventory sharply and also saw lower costs elsewhere:
- A 70% inventory reduction.
- Lower labor costs.
- Smaller space requirements.
Toyota kept pushing. In 2017, a trial at a subsidiary’s plant in Iwate, Japan, cut suppliers’ inventory space for some parts by 90%, according to the same column.
The 2023 paper adds that the approach has delivered significant reductions in operating costs, improved quality and increased customer satisfaction. Cheaper operations are one piece of the money picture. Readers who want the rest can follow a separate guide on how do automakers make a profit across sales, financing and other sources.
Why did the chip shortage test just-in-time?
The 2023 paper notes that the business press singled out JIT for the semiconductor chip shortages in the auto industry. It cites estimated worldwide auto production losses of $210 billion for the year ending in September 2021. For the shortage itself, see the explainer on why did the car chip shortage happen.
In February 2021, the Bloomberg column said global auto production could fall by up to 3 million cars, or 3% to 5% of the total. It blamed a miscalculation of demand and deep, systemic issues in the supply chain, not only lean stock levels.
Toyota looked different at that point. Its chief financial officer said the company had secured one to four months of stocks as necessary for various components, the same column reports.
How Toyota adapted without dropping the system
Toyota did not abandon JIT. After the 2011 earthquake in Japan’s Fukushima Prefecture, it identified 500 priority parts, including chips with very long lead times. It then required suppliers to stockpile two to six months’ worth of semiconductor chips, depending on lead time, according to the supply-chain analysis.
That analysis says Toyota had no shutdown or slowdown in the spring of 2021, while rivals including Volkswagen, General Motors, Ford, Honda and Stellantis suffered. Buffers are finite, though. Toyota had to suspend production in some plants a year later because the chip shortage dragged on.
The two reports give different stock lengths, so treat any single figure as a snapshot that varies by part and date. Bloomberg adds that Toyota built a database covering around 6,800 parts and talks with thousands of suppliers about production plans.
The same analysis sets out a four-step way to redesign a JIT network:
- Map your supply chain, including lower-tier suppliers.
- Identify the segments that can run on a JIT basis.
- Create buffers where those segments meet.
- Consider the nature of each supplier relationship.
Buffers do not have to be piles of parts. They can be spare or flexible capacity, or shared warehouses and transport. Volkswagen, the analysis says, is building battery factories worldwide rather than stockpiling batteries, so supply stays timely.
What just-in-time does not mean
The 2023 paper sets out five common misconceptions about JIT, and the debate over them continues. Some scholars argue JIT is not resilient, while others say it can keep delivering superior performance during disruptions. Its authors argue companies can improve supply chain performance if JIT segments are chosen fittingly.
A June 2021 opinion piece by an operations consultant makes a related point: JIT is a goal, not an inventory strategy. It says Toyota first described the goal as the “three-day car”, meaning three days between the customer’s decision to buy and receiving the vehicle.
Three takeaways follow from these sources:
- JIT is about shortening the order-to-delivery lead time, not simply minimizing stock.
- It should be judged across the supply chain, not just the plant.
- Lean supply helps under normal conditions but is not enough on its own in a storm, as Bloomberg put it in February 2021.
Frequently asked questions
Is just-in-time the same as having no inventory?
Show answer
No. A June 2021 opinion piece argues JIT is a goal of cutting the time from order to delivery, not a rule to minimize stock. Toyota itself held stockpiles of chips, as reported in 2021.
Who developed just-in-time manufacturing?
Show answer
Toyota developed it as part of its production system after World War II, according to a 2023 academic paper. Bloomberg’s February 2021 column dates the invention to the 1960s and 70s.
Did just-in-time cause the car chip shortage?
Show answer
The business press blamed it, according to the 2023 paper, but the authors treat that as a debate. Bloomberg’s February 2021 column pointed to a miscalculation of demand and deep, systemic supply chain issues.
Should carmakers move away from just-in-time?
Show answer
The sources lean toward adapting it rather than dropping it. The 2023 paper says the academic community is divided, and a supply-chain analysis recommends linking JIT segments with buffers such as spare capacity or extra inventory.
