Toyota Was Better Prepared for the Chip Shortage. That Didn't Make It Immune.
Wendover Productions makes a compelling argument: Toyota understood something the rest of the automobile industry had forgotten. Just-in-time manufacturing does not mean eliminating every reserve. It means knowing which reserves are wasteful and which ones keep an entire factory alive.
But the episode makes a much bigger claim than its evidence can comfortably support. It presents Toyota as the major manufacturer that escaped the semiconductor crisis, then attributes that achievement to a two-to-six-month chip reserve. Toyota's own subsequent production announcements tell a less triumphant story.
The distinction matters. Being better prepared for a crisis is not the same as being protected from it. And a company that loses less production than its competitors has not necessarily demonstrated that its management philosophy works exactly as advertised.
The six-month reserve was not sitting in Toyota's warehouse
The most revealing detail is what actually happened to the inventory. Reuters reported in March 2021 that Toyota required its suppliers to maintain between two and six months of chip inventory, with the physical stock held by component suppliers such as Denso, chipmakers including Renesas and TSMC, and chip traders. Toyota also compensated suppliers by returning part of the annual cost reductions it otherwise demanded from them. Reuters reporting.
That arrangement matters. Toyota did not simply abandon lean manufacturing and fill its own warehouses. It built a system in which suppliers maintained dedicated reserves, while Toyota helped pay for the arrangement. The distinction is central to understanding how its supply chain actually worked.
Toyota's advantage was real. "Unfazed" was too strong.
There is an important qualification: Wendover was not inventing Toyota's early success. By August 2021, Fortune reported that Toyota had kept production largely on target through May. Chip-related factory closures were expected to cost it just 20,000 vehicles in Japan, less than 1% of Japanese production for fiscal 2021, while North American factories operated at approximately 90% capacity through June. Ford and GM suffered much larger production disruptions.
Fortune
But Toyota was not literally untouched. On January 8, 2021, Reuters reported that Toyota had already throttled back production of its Tundra pickup at its San Antonio plant because of semiconductor shortages. No other Toyota vehicles in the United States were affected, so this was a limited setback, not a collapse. Nevertheless, the distinction between less affected and unaffected matters.
Reuters
The subsequent record is less flattering. On September 10, 2021, Toyota announced that production adjustments would affect approximately 70,000 vehicles in September and 330,000 in October, compared with its August plan. It also reduced its annual production forecast from 9.3 million to 9 million vehicles. Toyota attributed the disruption to both Southeast Asian supplier shutdowns and tighter semiconductor supplies. Its executive responsible for purchasing said COVID-19 was then having the overwhelming impact, so these cuts cannot fairly be presented as proof that its chip reserves failed. They do, however, expose the limits of calling the company immune to supply disruption.
Toyota Motor Corporation Official Global Website
Euronews
By June 2022, Toyota was acknowledging that its precautions had not solved the problem. Purchasing Group Chief Officer Kazunari Kumakura said the company had asked suppliers to maintain three to six months of inventory following the 2011 earthquake, but continuing shortages and strong demand made maintaining production difficult.
トヨタイムズ
Toyota's February 2022 financial presentation also reduced its production forecast by 500,000 vehicles, from 9 million to 8.5 million, citing COVID-related disruptions and semiconductor shortages. This was a forecast revision, not a claim that all 500,000 lost vehicles were caused by chips.
トヨタ自動車株式会社 公式企業サイト
The International Monetary Fund reached a useful broader conclusion in its 2022 supply-chain research: Japanese and Korean automakers were generally less vulnerable than their European and North American counterparts, partly because of their supply-chain practices and inventory reserves. But the IMF's conclusion was that higher inventories helped Japanese manufacturers delay, rather than completely avoid, production cuts. Toyota's advantage was real, but it was neither permanent nor uniquely attributable to one inventory policy.
International Monetary Fund
The missing machinery behind Toyota's success
The strongest evidence against the video's simplified explanation comes from Toyota's own CFO.
At its February 10, 2021 earnings briefing, Kenta Kon explained that Toyota's response involved several measures:
- A RESCUE system designed to identify vulnerable suppliers across multiple tiers.
- Monthly and medium-term production plans shared with suppliers.
- Production forecasts extending approximately three years.
- Regular communication with semiconductor manufacturers and suppliers beyond Tier 1.
- Four to six months of inventory for parts where necessary.
Kon explicitly credited reliable production forecasts and supplier relationships with helping Toyota manage the shortage. The inventory reserve was one component of a much larger operating system.
The Motley Fool
The missing details are substantial.
Toyota's RESCUE system maps thousands of supplier relationships and component dependencies. According to Fortune, it reduced the time required to identify the source of a supply problem from two weeks to approximately 12 hours.
Toyota also practiced parallel sourcing, maintaining alternative suppliers for certain components so that production could continue when one supplier encountered difficulties.
Fortune
There was another advantage that the video barely addresses: technical knowledge.
Toyota had developed and manufactured its own microcontrollers and other semiconductor components for approximately three decades. It transferred its chip-making plant to Denso in 2019, but retained a deep understanding of the technology and its manufacturing requirements. This gave Toyota a different relationship with its semiconductor supply chain from manufacturers that depended more heavily on outside suppliers to understand those components.
MarketScreener
These are not minor operational details. They help explain why Toyota could identify risks, negotiate supplies, anticipate problems and maintain production when competitors struggled.
The video turns this into a story about inventory management. The actual achievement was much broader.
The video accuses competitors without demonstrating the accusation
Wendover says manufacturers copied Toyota's inventory reductions while ignoring production leveling, cross-functional teams, employee involvement and the practice of stopping production to correct problems.
It then reaches its strongest moral conclusion:
"A ruthless pursuit of short-term profit at the expense of long-term gain is the cause."
That is a serious accusation against an entire industry.
But where is the comparison?
The episode names no specific manufacturers whose management deliberately sacrificed supply resilience for short-term profits. It presents no comparative inventory figures, supplier contracts, management decisions or evidence showing that executives knowingly rejected necessary safeguards.
There is a difference between demonstrating that Toyota maintained better reserves and proving that competitors deliberately neglected resilience to satisfy shareholders.
The IMF's research identifies a considerably more complicated picture. The semiconductor crisis involved pandemic shutdowns, geopolitical tensions, shifting consumer demand, natural disasters, production constraints and automakers losing their place in semiconductor suppliers' production queues after canceling orders.
These are identifiable mechanisms, not simply evidence of executive greed.
International Monetary Fund
A 2023 research paper in Production and Operations Management, written by six supply-chain scholars, makes another important distinction: just-in-time manufacturing must be adapted to individual supply-chain segments. It requires upstream visibility, suitable buffers and strong supplier relationships.
That is a much more useful explanation than treating inventory reduction as either universally good or inherently dangerous.
Sage Journals
Wendover's general argument that just-in-time is a philosophy rather than a rigid inventory formula is sound. Its failure is that it does not provide enough comparative evidence to establish that most manufacturers misunderstood or deliberately abandoned the principles that made Toyota successful.
Alaska's missing rental cars are not proof of Toyota's argument
The Alaska example makes the episode memorable, but its final conclusion goes too far.
Wendover argues that if automakers had maintained critical-component reserves, implemented production leveling and understood their supply vulnerabilities, Alaska would have had its rental cars.
The underlying shortage was real. But local reporting reveals another important part of the story.
On May 17, 2021, Alaska Public Media reported that Cheapwheels Rent-A-Car in Anchorage had sold half its fleet during the pandemic. Its co-owner, Nathan Speer, was left with just 38 vehicles and struggled to find replacements. Enterprise separately confirmed that the global computer-chip shortage was affecting vehicle availability across the rental industry.
Alaska Public Media
The shortage therefore involved two separate decisions: rental companies had liquidated their fleets to survive the collapse in travel, and they subsequently struggled to purchase replacement vehicles.
The first problem was not caused by Toyota's manufacturing system. Better semiconductor availability could have helped with the second, but the episode does not establish how many additional vehicles would have been available to rental operators, or whether those vehicles would have arrived in Alaska before the summer season.
The distinction matters because the narrator presents a plausible counterfactual as though it were an established conclusion.
Toyota's experience demonstrates how better supply-chain planning can reduce exposure to shortages. It does not establish that one manufacturer's inventory policy would have prevented a specific tourism crisis thousands of miles away.
The verdict: Toyota's success was a system, not a stockpile
Wendover gets the central principle right: efficient manufacturing does not require eliminating every reserve, and strategic inventory can protect businesses against disruptions.
But Toyota's achievement was considerably more sophisticated than the video suggests.
Its advantage combined supplier-held inventory, negotiated financial arrangements, multi-tier supplier visibility, alternative sourcing, long-term production forecasts and decades of semiconductor expertise.
Those capabilities helped Toyota outperform competitors. They also required investment, coordination and years of preparation. The company subsequently experienced production cuts despite its reserves.
The video's mistake is not praising Toyota. Toyota deserves the credit.
The mistake is reducing a complicated supply-chain architecture to an inventory lesson, then blaming the rest of the industry for failing to follow it. The claim that short-term profit seeking caused the crisis is not demonstrated, and the assertion that Alaska would have had its rental cars is not established.
Toyota did not prove that just-in-time manufacturing makes shortages disappear. It demonstrated that a manufacturer can build resilience into a lean production system by understanding, financing and protecting the entire supply chain.
That is a much more valuable lesson than simply telling companies to keep more chips in storage.
References
1. Why There are Now So Many Shortages (It's Not COVID) — Wendover Productions, June 1, 2021. Original episode and the claims examined in this critique.
2. Chip shortage forces Ford, Toyota, Nissan, FCA to cut vehicle production — Reuters, January 8, 2021. Documents Toyota's Tundra production reduction before the video was published.
3. Toyota Motor Corporation Q3 2021 Earnings Call Transcript — The Motley Fool, February 10, 2021. Records CFO Kenta Kon's explanation of inventory reserves, supplier communications and production forecasts. This is a third-party transcript.
4. How Toyota thrives when the chips are down — Reuters, March 9, 2021, republished by MarketScreener. Details supplier-held inventory, Toyota's compensation arrangements and its semiconductor expertise.
5. How Toyota kept making cars when the chips were down — Fortune, August 2, 2021. Provides production comparisons and details Toyota's RESCUE database, parallel sourcing and supplier-management system.
6. Changes to Production Plans for September and October 2021 — Toyota Motor Corporation, September 10, 2021. Official production adjustments and the company's explanation of Southeast Asian supplier disruptions and semiconductor constraints.
7. The Key Shareholder Questions for Toyota — Toyota Times, June 22, 2022. Records Toyota's acknowledgment that three-to-six-month supplier inventory reserves did not eliminate production difficulties.
8. FY2022 Third Quarter Financial Results — Toyota Motor Corporation, February 9, 2022. Documents the reduction in Toyota's production forecast and the combined effects of semiconductor shortages and COVID-19.
9. Supply Bottlenecks: Where, Why, How Much, and What Next? — International Monetary Fund, February 17, 2022. Provides broader evidence on automotive supply-chain vulnerability and explains why inventory reserves delayed rather than prevented production cuts. This is an IMF working paper, not an official IMF policy position.
10. Just-in-time for supply chains in turbulent times — Production and Operations Management, July 1, 2023. Explains why successful just-in-time systems require strategic buffers, supplier visibility and carefully managed relationships.
11. A rental car shortage is forcing some travelers to reconsider their trips to Alaska — Alaska Public Media, May 17, 2021. Documents actual fleet liquidations, local rental shortages and the impact on Alaskan tourism.