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The Future of Manufacturing at Toyota Takes Shape

Posted By Jeff Moad, April 20, 2015 at 5:11 PM, in Category: The Adaptive Organization

Toyota has announced plans to invest $1 billion to build a new manufacturing plant in Central Mexico and to shift production at several of its other North American plants, all part of the automotive giant’s plans to reengineer its global manufacturing system in order to reduce costs and increase flexibility.

Toyota said its new plant in the state of Guanajuato, Mexico, will begin production of the company’s Corolla model in 2019. The plant will have a capacity of 200,000 vehicles annually. It represents the company’s first new plant since 2011 when Toyota—after having been stung by overcapacity and high fixed costs following the Great Recession—halted  investments in new plants.

The Guanajuato plant, which will employ up to 2,000 workers and be Toyota’s largest investment in Mexico to date, will be the first plant built from the ground up to support what the company is calling its Toyota New Global Architecture (TNGA.)

Toyota officials have said TNGA will change how the company designs, engineers, and manufacturers cars and will emphasize significantly increased sharing of parts and subsystems among the company’s different models. By designing and producing cars in a modular fashion that enables greater sharing of parts, Toyota says TNGA will allow it to cut costs by more fully leveraging its global supply chain and by building smaller plants and production lines that can more easily manufacture multiple models with minimal retooling. Building more than one model on shared lines will also allow Toyota production to become more flexible in responding to shifts in global customer demand and preferences.

The public roll-out of TNGA casts Toyota in an unfamiliar role among the world’s major car and truck manufacturers: Follower. Competitor Volkswagen, in 2012, began producing cars based on what it calls its MQB platform which also emphasizes modular designs, significantly increased part-sharing among models, and the production of multiple models on common lines.

“It used to be one plant, one line, one model,” said  Volkswagen CEO Martin Winterkorn, at a recent news conference. “Now we can manufacture different brands and models with great flexibility on one production line.”

Ford is pursuing a similar strategy. In 2013, John Fleming, Executive Vice President, Global Manufacturing and Labor Affairs at Ford told a group of Manufacturing Leadership Council members touring the company’s Dearborn Truck Plant that, as part of its One Ford initiative, the company by 2016 will build 8.5 million cars based on nine core platforms, enabling scale, lower costs, and common production processes. As recently as 2007, Ford built cars based on 27 different platforms, Fleming said.

The shift by big car makers such as Toyota, Ford, and Volkswagen to modular designs, vastly increased part-sharing, and production lines that are  shared by multiple models and brands, while promising to cut costs and increase flexibility, will also undoubtedly increase pressure on these manufacturers to improve supply chain and quality management processes. Quality problems such as those that have affected Toyota and other manufacturers over the last couple years could lead to even larger and more expensive recalls if affected parts are shared across more models and brands. And other types of supply chain risk—such as those caused by supplier failure or natural disaster—could have similar wide-spread ripple effects if affected parts are more widely shared.

Besides building the new Guanajuato plant, Toyota said it will shuffle production among and increase investments in some of its 15  existing plants in North America. The company said that once production in Guanajuato begins in 2019, it will switch its current Cambridge Ontario North Plant from producing Corollas to building mid-sized, higher-value vehicles.

Toyota said its plan is to begin creating groupings of its plants that produce vehicles based on common platforms. The company’s Cambridge, Ontario, plants will join the company’s plants in Kentucky and Indiana producing higher-value, mid-sized vehicles; the new plant in Mexico will join Toyota’s plant in Mississippi in building Corollas; and Toyota plants in San Antonio, TX, and Baja California are focusing on building Tacoma and Tundra trucks.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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