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Crises make automakers rethink lean parts supplies

By Dee-Ann Durbin and Tom Krisher

Associated Press

Published: Friday, April 20 2012 9:59 p.m. MDT

A worker installs an inner dash silencer in a Camry. For the first time in 20 years, automakers are rethinking how to bring parts to the assembly line.

Associated Press

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DETROIT — For the first time in more than 20 years, U.S. automakers are questioning a pillar of manufacturing: The practice of bringing parts to assembly lines right before they're used.

So called just-in-time deliveries have helped automakers save billions and run their factories more efficiently. But the approach also relies on an almost perfect supply chain. And twice in the last year, the system's weak links have been exposed.

An earthquake last March knocked out many Japanese parts makers, resulting in factory shutdowns and model shortages around the world. And last month, an explosion at a German chemical plant cut off supplies of a resin essential in car fuel lines. Without those parts, assembly lines could slow or grind to a halt within weeks, causing shortages of cars on dealer lots later this year.

The threat of a new shortage comes as U.S. auto sales are just becoming healthy again. Carmakers are scrambling to find alternatives to the resin.

Supply problems are unavoidable, but car manufacturers are starting to rethink the just-in-time system, which is more global than ever and relies on increasingly specialized parts from fewer suppliers.

The system, developed by Toyota in the 1970s and brought to the U.S. in the 1980s, discourages big stockpiles of parts in favor of deliveries shortly before they're needed. It saves companies the cost of storing the parts or carrying them on their books. A typical large supplier now has only a few weeks' worth of parts, says Steven Wybo, a managing director and automotive expert at Conway Mackenzie, a consulting firm.

"It's pretty fragile," Wybo says of the system. "The only way to protect supply is to build up inventory. Until that happens, we're going to continue to see problems like this."

Many of a car's 3,000 parts have become so specialized that they're made only by a few factories worldwide. That leaves the industry vulnerable to problems that may knock out a single parts factory.

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