Another Innovation Setback from the Financial Crisis

It looks like Toyota may be making changes to its just in time inventory system as a result of the credit crunch.

They are worried that bankruptcies and liquidations of suppliers may leave them with no parts to make cars with.

The Japanese company may work with more partsmakers and increase inventories to mitigate the effects of a collapse among its U.S. suppliers, at least half of whom also work for Detroit automakers, Goss said. U.S. vehicle sales at a 26-year low have forced GM and Chrysler to seek government aid and left as many as a third of North American component-makers at risk of bankruptcy, according to consulting company Grant Thornton LLP.

(emphasis mine)

Basically, they are going to put up some warehouses and get a few weeks to a few months of parts to handle potential disruptions. This amounts to an abandonment of just-in-time, at least in the short term.

On the bright side, the increase in inventory will provide a small boost to the economy.