August 30, 2023- Toyota Motor (7203.T) has initiated the process of ramping up production at its Japan-based factories, following an unexpected and disruptive shutdown caused by a computer system failure. This unexpected glitch forced the closure of 14 assembly plants, dealing a blow to the core of Toyota’s renowned lean manufacturing system, which emphasizes efficiency and reduced inventory. The system, originally pioneered by the Japanese automaker, has since been adopted and integrated by various competitors across the industry.
The incident unfolded on Tuesday when the computer system responsible for processing orders for vehicle parts unexpectedly malfunctioned. The cascading effects of this disruption reverberated through the manufacturing process, necessitating the temporary closure of the 14 assembly plants. While Toyota swiftly clarified that the root cause was not a cyberattack, the company has maintained a degree of reticence about the precise nature of the system failure.
However, this is not the first instance where Toyota has faced such a predicament. In a parallel scenario, the very same 14 factories had to be temporarily shut down in February of the previous year. This eventuality occurred due to a virus infection originating from one of Toyota’s suppliers, Kojima Industries. The ramifications of that attack raised serious concerns regarding the cybersecurity vulnerabilities that lurk within Japan’s intricate supply chain—a vulnerability that continues to pose significant challenges for the industry at large.
Given Toyota’s promising and consistent production recovery throughout the current year, the repercussions of this recent outage are poised to potentially surpass the costs incurred by the shutdown experienced in 2022. Remarkably, Toyota’s domestic production managed to surge by an impressive 29% in the first half of the current year—a notable achievement that marked the first such escalation in a span of two years. The diverse spectrum of vehicles manufactured by Toyota in Japan encompasses everything from the affordable Yaris to the opulent Lexus brand, illustrating the automaker’s reach across various market segments.
Approximately one-third of Toyota’s global output emanates from its Japanese operations, with an average daily production tally of roughly 13,500 vehicles recorded during the first half of the year. To contextualize this in terms of revenue, Toyota’s global average vehicle sale price during the most recent quarter stood at approximately $26,384. Extrapolating from this figure, a full day of production at the 14 affected plants would theoretically translate to a staggering $356 million in potential revenue.
Though Toyota has refrained from divulging its strategies for recuperating the lost output, it is imperative to acknowledge the company’s rich history of innovative manufacturing practices. At the forefront of this legacy is Toyota’s trailblazing “kanban” system, which revolutionized modern auto assembly processes by relying on visual cues to orchestrate workflow and inventory management. Originating from an observation of an American supermarket chain’s inventory management practices, this system has since become a beacon of streamlined efficiency, adopted across a plethora of industries—including software development.
Nevertheless, despite the company’s resounding accomplishments within the automotive sector, a series of setbacks have served as stark reminders of the challenges that persist in the industry. In an unfortunate occurrence, Toyota disclosed in April that its affiliate, Daihatsu, had manipulated safety tests for a subset of small cars. Similarly, in May, the company accidentally exposed customer data pertaining to over 2 million Toyota owners due to a misconfiguration in a cloud-based tracking system.
As Toyota embarks on the process of resuming production, the industry’s gaze remains fixed on the company’s response to the system outage. Stakeholders and experts alike are keenly observing the automaker’s strategies for reasserting its leadership within the realm of lean manufacturing practices and innovative automotive approaches.