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OM in the News: Toyota Remakes Its Biggest Plant

October 10, 2019

Toyota’s largest plant in the world sits on 1,300 acres in rural Kentucky. With floor space equal to 170 football fields, the Georgetown factory houses more than 2,000 industrial robots, 6 cafeterias, and 2 paint shops. Its newest order of business has been to add the gas-electric hybrid version of the popular RAV-4 SUV to one of the plant’s three assembly lines, writes Businessweek (Oct. 7, 2019).

Georgetown is fighting to hold on to its status as Toyota’s biggest plant as demand for its sedans has plummeted and the 3-decade-old factory deals with high fixed costs, falling productivity, and the rise of a network of sibling plants in North America churning out more popular crossovers, SUVs, and trucks. When the factory opened, it was designed to assemble hundreds of thousands of mass-market vehicles, such as the midsize Camry. For 27 years that was Toyota’s bestselling car in America.

An AGV rolls down the Camry assembly line.

The Georgetown plant’s output peaked at 514,590 vehicles in 2007, just before the Great Recession. Americans’ appetite for sedans didn’t keep pace with a recovery in auto demand over the past decade. In 2018, Georgetown’s production totaled 430,224 cars, a sign of rapidly changing auto tastes. That meant investing $238 million more in Kentucky to add the RAV4 hybrid, bringing Toyota’s total investment in the plant to $7 billion.

Georgetown’s ebbing fortunes have increased pressure to cut costs and boost efficiency: it is now less expensive to build a Camry in Japan and ship it to Kentucky than to manufacture one locally. Kentucky is installing advanced flaw-detecting cameras, self-driving supply carts, and systems for sequencing component delivery so fewer parts need to be stored on the factory floor. That will require fewer workers doing manual tasks and will boost efficiency in line with newer factories. Toyota also is reconfiguring equipment to match its most flexible factories in Japan, which make a half-dozen different models on the same assembly line. So one of the big things that is changing is the plant layout.

Classroom discussion  questions:

  1. Why is plant capacity a vital issue here?
  2.  What changes have negatively impacted the plant’s success?
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