Monday, December 29, 2008

lean healthcare

The Toyota Production System (TPS) earned the sobriquet 'JIT' in the 1960s. It created a very narrow view of TPS and created an image that it was suitable only for discrete and repetetive manufacturing industries. It created an image that implemeting TPS meant 'zero inventories'. Actually zero inventories are only possible when the production shop is shut down for good.

The word 'lean' has replaced JIT to describe TPS. The word first surfaced in an article by Krafcik in the Sloan Management Review in the Fall 1988 issue. Womack's book 'The machine that changed the world gave the word 'lean' worldwide acceptance. Both Krafcik and Womack talked about TPS. The only difference was that they talked in terms of generic principles. This caused a
huge change in the nature of TPS implementations. Service organisations started implementing their own version of TPS.

Check this article of lean implementation at a small hospital.

It gives a very good message. TPS / Lean / JIT is not merely about inventory reduction. They are a set of principles. It is about making work more simple and reliable. Kanban, TPM, etc are merely tools. Lets hope more organisation abandon the jargons and fall in love with the simplicity of TPS.

Thursday, December 18, 2008

End of an era?

The GM and Chrysler bailout funding drama just does not seem to end. Both sides have their points. But that the Christmas vacations may never end in these two companies is definitely a possible situation. Read this article:
It is a common academic statement that rarely have companies survived by cutting costs. Yet, it seems sad that such huge multi billion dollar enterprises have to stoop to a level of monitoring all purchases of over $10,000. Everything in the press is about how these and other auto companies are acting to reduce costs. Nothing is about new strategies on how to earn more money. If saving costs is a prime requirement, pensions - they are said to be as much as $1500 per car for GM, could be first reworked. Better deals with hospitals could be worked out, lower insurance premiums negotiated. A 10% savings here would be a lot higher than the savings from saving a few sheets of paper or electricity.

That sales will fall is an accepted fact. Earning more money means increasing margins. It also could mean doing something else with the spare capacity / resources. Auto companies could think of a business where they refurbish old cars. People still would need to move and cheaper used cars (that are refurbished by the original company) could be a good business.

The companies need to do something positive and not merely cut costs. I am sure there would be a way. If nothing is possible maybe they could prepare for a grand end that has a minimal impact. All said, with the current spree of cost cutting and waiting for the 'bridge' loan seems to be a stop gap measures. The sales are going to continue to fall and a new loan would again be required in due time. All the Best Gm and Chrysler.

Wednesday, December 3, 2008

Effect of terror attacks

Check this link -
If we go by this article, the terror attacks in Mumbai are by themselves not going to have a major impact on the investments in India. While Indians may cheer it as great news and a measure of confidence on the so called "Great Indian Dream", I believe it is a lack of foresight.

The continuous acts of terrorism in India clearly demonstrate the lack of security and political will in India. Add to this the token and glamour based opposition from the people (candle light vigils, human chains) clearly show that the situation is not about to change very soon. In fact it would get worse. Especially for American and Israel based companies in India. Given the solid planning demonstrated in the current strike, it would not be difficult for the terrorists to strike selective targets. Targeting the factories that are in rural areas would even be easier.

There could be a few reasons for the international manufacturing companies not changing their plans
1. They already have invested substantial capital and pulling back now would be a major loss
2. They see India as an extremely cheap manufacturing destination. Given the current economic downturn, the companies might feel that the India cost advantage might make survival possible.
3. They plan to staff the Indian Operations with very few expatriates and so the death / damage would be of locals only.
4. Suitable insurance policies to take care of all possible financial losses.

I believe all the points are myopic.
1. As companies are reducing production, with new capacity in India coming up they would have to stop something. Either way capital loss is certain. The continued cost of keeping non operating plants in Europe / USA (pensions and other overheads) might work out to be substantial.
2. Given the lack of infrastructure the real costs of producing in India might be higher. The added security and insurance costs would also add up.
3 & 4. The disruption of supply from the India plant would be a huge loss. Especially in a recession based market. Competitors would take away the market share in the time in which the supply resumes. Getting it back would be very difficult and costly. No insurance policy or alternate manpower planning can reduce this loss.

My message - India is a huge risk proposition.