Chip crisis forces automakers to rethink just-in-time ordering

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A century after automakers showed the world the value of assembly-line manufacturing, a shortage of semiconductors is teaching the industry a painful new lesson in what it takes to build a car.

For most of its history, the industry has relied on a distinct approach to buying car parts, procuring components from suppliers right at the moment they’re needed. It’s referred to as just-in-time manufacturing and is designed to streamline production and eliminate the costs of keeping warehouses stocked with parts waiting to be used.

A computer sits plugged into a Cupra Formentor automobile on a production line near Barcelona, Spain, on Sept. 29, 2020.

But the shortcomings of that system were made starkly clear this year as the automakers confronted a dearth of the chips they need to build advanced functions into their vehicles, and found themselves near the bottom of chipmakers’ customer lists because of their just-in-time approach. That shortage is threatening to cut $110 billion in sales from the industry, and forcing auto manufacturers to overhaul the way they get the electronic components that have become critical to contemporary car design.

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