Just-in-Time ordering: reshaping the automotive industry’s recovery from the chip crisis 

How Just-in-Time ordering reshaped the automotive industry 

The automotive industry regularly utilizes Just-in-Time ordering, commonly sourcing and procuring parts only as needed. Manufacturers prefer Just-in-Time manufacturing because it reduces warehouse and storage costs, eliminating the need to hold parts before use. Furthermore, Just-in-Time manufacturing streamlines production, making it much preferred by those in the automotive sector.  

The ability to switch to Just-in-Time ordering also ensures that the automotive sector can combat the ebbs and flows of the industry more easily. Automotive manufacturing is often a cyclical business depending on the demand from customers. Just-in-Time ordering allows the automotive companies to stay on top of this, efficiently sourcing what is required, when required. 

The benefits of Just-in-Time ordering  

The benefits of Just-in-Time ordering means that the automotive industry – especially those in manufacturing – can order what they need when they need it. Toyota, as one of the pioneers of Just-in-Time ordering, led to its global adoption by most car manufacturers. This approach ensures that parts ordered at the last minute are already sold, significantly cutting down on wastage and over-ordering. However, it is crucial for automotive companies to partner with a reliable Time Critical logistics provider to consistently deliver Just-in-Time orders. Failure to fulfill Just-in-Time orders can collapse the entire system, negating all benefits.

This strategy has long served the automotive industry, not only reduced costs, but simplifying and organising its sourcing. On average, modern cars and vehicles contain about 40,000 components and parts, most of which manufacturers can produce quickly or make to order. For instance, each car uses approximately 1,400 semiconductor chips. Although these chips take longer to manufacture. Their widespread use in various aspects of automotive production, such as sensors, engine management, and battery controllers. Makes them perpetually in demand and essential for all vehicles.

Semiconductor chip demand & supply is cyclical, and therefore there can be shortages. The Covid-19 pandemic caused one such shortage, as many companies saw a decrease in demand, therefore production halted also. Thanks to Just-in-Time ordering, automotive companies were able to obtain what chips were available when the industry began to recover. The immediate demand was beneficial because it allowed for quick dispatch. Which helped the automotive sector recover from the chip crisis faster than other companies. Don’t overstate the importance of the company that provides Just-in-Time deliveries, especially during a shortage. The chip crisis meant that there were not enough semiconductors to go around, and the role played by the Time Critical logistics company. Because their existing relationships with companies across the supply chain can help a business that partners with them. 

Thanks to the success that automotive companies have had with Just-in-Time ordering. Many have opted to approach semiconductor companies directly, bypassing the middlemen, including some traditional suppliers. In this manner, they can ensure, through their relationships and the trustworthiness of their partnered Time Critical logistics company. That they will be able to collaborate with the chip companies to secure a reliable supply.

Implementing Just-in-Time ordering in your own business 

Challenges of Just-in-Time logistics 

Just-in-Time ordering is not without its challenges. For companies who rely on Just-in-Time ordering to keep their production, manufacturing and supply chain running smoothly, precision is paramount. Just-in-Time delivery, specifically in the automotive industry, relies on components being delivered at a certain time; usually the last possible moment. It can make more complex manufacturing processes much cleaner and smoother if done right, but done wrong and the whole system collapses. 

The chip crisis experienced after the pandemic is another example of when Just-in-Time logistics can present a challenge. The lull in demand experienced by the automotive industry meant they held off on ordering semiconductors. This in turn meant that many of the automotive companies fell to the bottom of the list. When it came to chip companies, who were experiencing a shortage. Their lack of reliable, consistent orders can make them wary of choosing the automotive industry over those who order more regularly and in a ‘uniformed’ way. The automotive industry is also cyclical, like the semiconductor industry. So there is a level of understanding between them that if orders have dropped, they will again pick up. 

Royale International is one of the companies that have an unrivalled reputation when it comes to Just-in-Time delivery. Their Time Critical service is second to none, and this is clear in the huge range of businesses they partner with. From small start-ups to Fortune 500 companies and globally known automotive manufacturers. With years of experience providing Just-in-Time logistics to the automotive industry, Royale is perfectly placed to help your business thrive and simplify your processes. Find out how you can benefit from their 25+ years’ experience and take control of your ordering with Royale International here: https://www.royaleinternational.com/services/time-critical-services/ 

There is no doubt that the automotive industry across the world has benefitted from Just-in-Time delivery. It has made supply chains more streamlined, smoothed manufacturing processes and simplified the industry as a whole. While Just-in-Time delivery carries risks and potential difficulties, understanding and setting it up properly, and having the right Time Critical logistic partner, can significantly benefit your business.