I've followed JDS Uniphase for many years, ever since their downturn during the 2001 telecom meltdown demolished a previous employer. Last week they had a quarterly earnings call where CEO Tom Waechter discussed their lean initiatives.
A little over 12 months ago we began productivity improvement
program in the form of lean initiatives across the company. They are
designed to reduce the overall complexity of JDSU to move the company
from a fixed to variable cost manufacturing model. As a result of these
actions, more than 20% of presently occupied real estate will be
vacated. JDSU started these measures in advance of a downturn, which I
believe puts us at an advantage compared to our peers.
Great! Maybe they won't get into the excess inventory situation, one shared by an entire industry confronting overbuilt fiber optic capacity, which caused the mayhem seven years ago. So what does Mr. Waechter say next?
I will now
cover a few of the major milestones recently achieved as part of these
initiatives. An agreement with Sanmina, which transfers our Shenzhen
manufacturing facility to Sanmina to the manufacture of JDSU’s optical
communications transport and transmission product line. The
Communications Test and Measurement has signed an agreement with
contract manufacturer Benchmark. This will enable the largest JDSU
business to move primarily to a variable manufacturing cost model and
improve overall scalability. And finally, agreements are already in
place with Fabrinet for a production of select laser products.
Two, maybe three, manufacturing operations will be outsourced, to create a "variable manufacturing cost model and improve overall scalability." As if that can't be accomplished with basic good manufacturing, especially real lean manufacturing?
Sorry Tom, you've just signed away a potential core competitive competency. And proven that your lean initiatives are really just LAME.
AC says
Hi Kevin,
It’s been a few months since your trip east. I’m wondering how the working standing up is going?
It’d be nice to follow up on that.
thx
ac