Toyota Motor, the world’s largest automaker, faced a major disruption in its production in Japan on Tuesday, August 29, 2023, due to a system failure that affected the processing of orders for vehicle parts. The company had to halt operations at all of its 14 assembly plants in Japan, which account for about a third of its global output. The system outage was not caused by a cyberattack, according to Toyota.
The impact of the one-day loss of production
The production halt could be potentially more costly for Toyota than the previous shutdown in February 2022, when one of its suppliers was hit by a virus attack that carried a threatening message. Toyota’s domestic output was up 29% in the first half of this year, the first such increase in two years, as the company recovered from the effects of the COVID-19 pandemic and the global chip shortage.
Toyota makes a full range of vehicles in Japan, from the budget Yaris to its most expensive models, including luxury Lexus brand cars. Its average global vehicle sale price in the most recent quarter was equivalent to $26,384, based on its financial reporting. Using that as a proxy would mean a full-day of production at the 14 plants would be equivalent to $356 million in revenue. Toyota has not said how or whether it will look to recoup the lost output.
The cause and resolution of the system failure
Toyota said the system failure occurred around 8:30 a.m. local time on Tuesday and was resolved by 9:30 p.m. The company did not provide details on what went wrong, but said it was not a cyberattack. The system failure affected a computer system that processes orders for vehicle parts from suppliers and sends them to assembly plants. This system is at the core of Toyota’s lean manufacturing, a way of reducing inventory and maximizing production efficiency that the Japanese automaker pioneered and its rivals have widely adopted.
The system failure prevented Toyota from receiving parts orders from its assembly plants and sending them to its suppliers. This disrupted the flow of parts and materials to the production lines, forcing Toyota to suspend operations at all of its 14 domestic factories. The company said it gradually resumed production at its factories on Wednesday, August 30, 2023, after confirming that the system was functioning normally.
The implications for Toyota’s competitiveness and reputation
The system failure exposed a vulnerability in Toyota’s production and supplier management system, which relies on a smooth and timely flow of information and parts between different parties. The system is designed to minimize inventory and waste, but also requires high levels of coordination and reliability. Any breakdown or delay in the system can have significant consequences for Toyota’s production and sales.
The system failure also raised questions about Toyota’s cybersecurity and resilience, especially after the virus attack on one of its suppliers last year. Toyota said it has been strengthening its security measures and contingency plans to prevent and cope with such incidents, but did not elaborate on what steps it has taken or plans to take.
The system failure could also affect Toyota’s competitiveness and reputation in the global market, where it faces fierce competition from other automakers, especially electric vehicle makers such as Tesla and Chinese brands. Toyota has been investing heavily in developing new technologies and products, such as hybrid and hydrogen vehicles, autonomous driving systems, and mobility services. However, any disruption or delay in its production could hamper its ability to deliver these products to customers and meet their expectations.