Monday, July 10, 2017

Toyota's Manufacturing Option

Toyota recently spent $1.3 billion to overhaul its plant in Georgetown, Kentucky. The plant was originally designed to build the Camry and Avalon, which are both assembled on the same platform. However, a shift in consumer purchasing patterns has increased the sales of SUVs. The Georgetown plant could not manufacture these more profitable vehicles, an opportunity cost to the company. The plant remodel means that Toyota can produce 11 different models at the plant, allowing the company to switch production more quickly and cheaply in the future to meet consumer demand more efficiently. Toyota also plans to mix and match more components between its models, another increase in manufacturing optionality.