When the chips are down, do not hold too many of them

October 8, 2008

Micron Technology reported a $344m loss for the fourth quater, in large part due to a $205m write-down of memory chip inventory.  They report that DRAM chips fell 5% in price from the third quarter and NAND chips fell 15% over the same period.  Those price-decline rates translate to about 19% and 48% on an annual basis.  Holding even an extra week of inventory in such a climate is very expensive!

Wall Street Journal, October 1, 2008 – Micron Post $344 Million Loss

Quality, Incentives and Healthcare

October 5, 2008

The opportunities for improved quality in healthcare are enormous.  Now, there is more incentive for the industry to take quality seriously – Medicare will stop paying for 10 conditions that it deems to be “reasonably preventable”.  For example, Medicare will no longer pay for the treatment of patients who received incompatible blood transfusions. No doubt, some of the techniques that have been used to improve quality on the factory floor will also be useful in the hospital – reporting defects so that attention can be focused on them, changing labels on sensitive medications so that additional care is given to them, asking all attending a surgery to count sponges and instruments to confirm that no unwanted objects have been left in the patient, etc. And, additional quality improvement techniques may be developed that are tailored just for healthcare.

New York Times, Sep 30, 2008: http://www.nytimes.com/2008/10/01/us/01mistakes.htm

Honda’s Flexible Plants Provide Edge

October 5, 2008

This has been a tough year for most auto makes :  so far this year sales are down 24% at Chrysler, 18% at GM, 15% at Ford and 7.8% at Toyota.  But U.S. sales at Honda are up 1.7%.  There are two reasons for Honda’s success. (1) Honda’s product mix depends less on SUVs and pickups than the others (i.e., fuel efficient models make up a larger portion of their portfolio). (2) Honda has some of the most flexible plants in the U.S. To illustrate that flexibility, Honda is able to switch from producing  Civics to CR-Vs with only 5 minutes of downtime!  Honda has achieved this flexibility through many different decisions.  For example, the Civic and CR-Vs were designed to be manufacturered in the same sequence of steps, so the same step (such as a door installation) can occur at the same location on the assembly line.  Honda did have to invest $400m several years ago to improve its flexibility.  That looks like a good investment in the current climate.  

Wall Street Journal, Sep 23, 2008 – Honda’s Flexible Plants Provide Edge