Toyota Slowing Down U.S. Plant Expansion?

Report: Toyota May Slow US Plant Builds: Financial News – Yahoo! Finance

WSJ article: REDUCED SPEED Toyota’s New U.S. Plan: Stop Building Factories

Toyota is concerned about overexpansion and overcapacity in the U.S., apparently.

In Japan, most of Toyota’s factories are clustered in a single place, Toyota City. In the U.S., over the past decade, Toyota has spread factories from Fremont, Calif., to Georgetown, Ky.

That clustering would certainly lead to supply chain efficiencies (and risks). For each new spread out site in the U.S., suppliers often have to build new locations (to be close to the new Toyota plant for just-in-time delivery). Of course, it wouldn’t be “lean” if we talked about each supplier having a huge central factory that could easily feed ALL Toyota plants, would it? Lean gives us tools for not having to rely on “economies of scale” to be profitable. As commentators have pointed out before, part of Toyota’s strategy of sharing the factory wealth is probably more politically-driven than supply-chain-driven.

“Toyota has just announced the new Mississippi plant, where production is set to start in 2010,” Imai told The Associated Press. “As for North American plants after that, nothing has been decided.”

The assembly plant on the outskirts of Tupelo, Miss., will be Toyota’s eighth North American vehicle-assembly plant and the fourth new one in the past five years.

I think a more interesting topic to discuss — why aren’t the North American Toyota plants as flexible as in Japan?

In Japan, some of Toyota’s plants are capable of building more than a half-dozen different vehicles. In North America, several of them build just one or two models, making them somewhat inflexible to adjust to sudden swings in demand.

Having less flexible demand worsens any overcapacity problem, as it’s harder to shift production around (or forces the building of a new plant for a new product instead of using an existing flexible line). Can anyone shed more light on this?

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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2 Comments on "Toyota Slowing Down U.S. Plant Expansion?"

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  1. Fletch says:

    From my outsider’s view, it appears that Toyota is moving towards more rational factories, although it is unequal to compare the Japanese factories to American factories because of the differences in the local demand.

    It is also slightly misleading to say that the American plants only make 1 or 2 vehicles because most make 3 (TMMC makes the Corolla, Matrix and Lexus RX350, TMMK makes the Camry, Avalon and Solara, TMMI makes the Tundra, Sequoia and Sienna, NUMMI makes the Tacoma, Corolla and Pontiac Vibe, TMMTX only the Tundra with the new Canadian plant only scheduled to make Rav4 and the new Mississippi plant the Highlander). That leaves the Land Cruiser and 4 Runner as the main Toyota label vehicles that are still to be produced outside of North America.

    Now, consider that the Tundra and Sequoia go down the same line at TMMI (the Sienna goes down a separate line) and that Toyota just built a whole brand new plant to make Tundras (TMMTX). The logical next steps from this go one of two ways. Either the Tundra absolutely explodes in sales and they need to produce enough trucks to fill both plants…OR…the Tundra does pretty much what it already does in sales, TMMTX handles any slight bumps in volumes (because it doesn’t have the Sequoia going down the same line) and you have a highly respected Toyota plant in TMMI with an established supplier base and a mostly idled production line just waiting to be filled with either or both of the other 2 Toyota badges.

    Again, this is just speculation, but I don’t think it’s too far out of line to see something like this happen.

  2. david_duckworth says:

    Fletch,

    I believe your observation is correct. Another factor appears to be that the Japan factories are still the low cost source and it is therefore cheaper to induce variation in the plants there than overseas. With plants clustered closer together, moving manpower between plants becomes much easier. Also, Toyota can reduce their Temporary Workers, and still leave their permanent employees in place. The value of the yen, helps drive the decision. Toyota imports about 50% of what it sells and makes the major portion of it’s profits in the United States.There factories here give the impression that they sell what they build here. They are also projecting a shortage of labor in Japan. You either automate and raise your fixed cost or you go where the labor is available. All Politically and Financially sound reasons for their strategy.

    Because the Toyota system is based upon deep techinical competence, which takes years to achieve, exporting that knowledge is not so easy. So it will take some time for all non-Japan plants to equal all the measurements of those in Japan.

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