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

How Just-in-Time ordering reshaped the automotive industry 

Just-in-Time ordering is an approach regularly utilised by the automotive industry. It is common practice to source and procure automotive parts as and when they are needed. Just-in-Time manufacturing is preferred as it mitigates warehouse and storage costs, and parts are not needing to be held for a time 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 was one of the first automotive companies to pioneer the idea of Just-in-Time ordering, and it has been adopted globally by the majority of car manufacturers. It means that the parts that are being ordered at the last minute have already been sold, significantly reducing any wastage or over-ordering. It is key to note, however, that automotive companies need to be partnered with a trustworthy Time Critical logistics provider who can be trusted to deliver consistent Just-in-Time orders without fail. If Just-in-Time orders are not fulfilled, the whole system breaks down, with the benefits being lost. 

This strategy has long served the automotive industry, not only reduced costs, but simplifying and organising its sourcing. The majority of modern cars and vehicles generally contain 40,000 components and parts on average, most of which can be made quickly; in other words made to order. Semiconductor chips are one such component (roughly 1,400 per car), and while these can take longer to make, they are used in so many elements of automotive manufacturing that there is always the need for them. They are used in sensors, engine management, battery controllers and more, and are crucial to 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, however, automotive companies were able to obtain what chips were available when the industry began to recover. The fact that they wanted them right away was of benefit, as they could be dispatched quickly, helping the automotive sector recover from the chip crisis quicker than other companies were able to. The role of the company providing Just-in-Time deliveries cannot be overstated, 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 thanks to their existing relationships with companies across the supply chain can help a business that partners with them. 

Thanks to the success automotive companies have had with Just-in-Time ordering, many have opted to go to the semiconductor companies directly, bypassing the middlemen, some of whom are traditional suppliers. In this way they are able to ensure, through their relationships and the trustworthiness of their partnered Time Critical logistics company, that they will be able to work with the chip companies to ensure that they have a supply they can rely on.  

Implementing Just-in-Time ordering in your own business 

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, however, automotive companies were able to obtain what chips were available when the industry began to recover. The fact that they wanted them right away was of benefit, as they could be dispatched quickly, helping the automotive sector recover from the chip crisis quicker than other companies were able to. The role of the company providing Just-in-Time deliveries cannot be overstated, 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 thanks to their existing relationships with companies across the supply chain can help a business that partners with them. 

Thanks to the success automotive companies have had with Just-in-Time ordering, many have opted to go to the semiconductor companies directly, bypassing the middlemen, some of whom are traditional suppliers. In this way they are able to ensure, through their relationships and the trustworthiness of their partnered Time Critical logistics company, that they will be able to work with the chip companies to ensure that they have a supply they can rely on.  

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 there are risks and potential difficulties with Just-in-Time delivery, once it is understood and set up, and with the right Time Critical logistic partner on your side, it can make a huge difference to your business.