C&B Notes

Just-In-Time Shortages & Opportunity Costs

For the first time since 1931, General Motors has been dethroned as the largest U.S. auto manufacturer.  During 2021, Toyota sold 2.3m cars in the U.S. (up 10%) while GM sold 2.2m (down 13%).  The main reason for this sizeable shift in market share has been the global semiconductor shortage which has significantly impacted auto manufacturing.  However, this problem of semiconductor shortages was accentuated in the auto industry because of the popularity and wide adoption of Just-In-Time inventory.  Just-In-Time management can improve the next quarter’s reported earnings, but GAAP accounting does not measure the opportunity cost when it fails and sales are lost.  Toyota has been the standout performer in the industry as it worked to improve the resiliency of its supply chain following the disruption of Fukushima in 2011.



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