Toyota Plants Shift Gears from Highlander to Prius

Toyota announces the new Mississippi plant, originally slated for Highlander production, will now be used for Prius production. Highlanders will move to Indiana which will displace Tundra production. Consequently, Tundra production will be temporarily suspended in all plants except for Texas.

A couple of questions come to mind:

1) How enviable is Toyota's current capacity position? They regularly run plants at +100% capacity. When things go south in the market, they can move production seemingly at will?

2) Perhaps I'm naive, but how flexible are the Big Three in this respect? It seems to me that a close marriage between marketing, product development, and production is absolutely necessary. Could any of the domestic automakers pull something like this off?

To me, this seems like a daunting task, but Toyota discusses this as if it is routine.




At July 14, 2008 at 1:45 PM , Blogger Alex said...

I agree, the flexibility lean gives an organization is so important in a changing business environment. I had worked at a medical device startup company and having a lean manufacturing organization allowed us to quickly incorporate the many improvements marketing wanted and engineering developed with little inventory obsolescence.

In this case, I wonder how Honda was able to see sales increase last month. Was it because they are even more flexible than Toyota or were they just already making more of the cars the customer now want (fuel efficient cars).

At July 17, 2008 at 1:19 PM , Anonymous Anonymous said...

One of Toyota's strong points is their strategic planning system...strategy deployment.

Their system is designed to be flexible. A good strategy planning process forces you to consider various risk factors for the range of things that could come up (gas prices, loosing/gaining a competitor, earthquake, etc), along with the probability that each risk factor could occur.

My guess is that the "gas price" risk factor has been on their radar for decades, as evidenced in the Prius story in the original Toyota Way book.

I'm guessing there's a pretty careful analysis on what the probability is that gas prices could spike resulting in a sudden change in the market. So that means (through the deployment piece) it would have been in front of everyone who was planning a new plant, and there would be an associated strategy for what they could do if that happened. That flexibility is literally designed into the concrete they poured when the plant was built.

Contrast GM. I heard Rick Wagoner say in an interview recently (last couple months) "how could we have predicted gas prices could rise this quickly". Hmm...I guess Risky doesn't get out much. All these people trying to blow up pipelines. The US refining capacity running near 100%. China getting westernized into wasting much more gas. The dollar being weaker... on and on...

Well if you didn't pay attention to those things, then I suppose you could be suprised about gas prices. But as the CEO of one of the worlds largest companies, I begin to question the performance of someone who could possibly say "how could we have predicted..." when there is more than enough data to predict that the risk of this was pretty high. All he needed to do is read the news 10 minutes a day.

And even if they did predict this, since they have no clear strategy deployment process, it is unlikely that the guy designing the concrete forms in a new factory would know or be able to design flexibility into the plant. In fact, since he is probably behind schedule and probably getting squeezed in prime GM form for cost, well they're just going to do the minimum required to move the project forward.

The result is 10 years later they implement this shallow, devastating countermeasure to close the factory because that's all they can do. There's no plan B because they didn't think about one ahead of time.

As usual it comes down to poor planning. Poor planning comes from poor leadership. And the skilled workers get caught holding the bag...again.


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