LEAN in Economy: a new dimension to JIT for economies in recession

Today, I was going through the concept of Lean Production, as has been pioneered by Toyota through its legendary Toyota Production System, famously known as the TPS. Of its two key concepts, is Just In Time (JIT). Quoting from Toyota worldwide website, JIT is: Making only "what is needed, when it is needed, and in the amount needed!"
But my intention here is not to inform you about either of these. You can google it and will find numerous article and research reports on them. I came across one very deeply inspiring illustration, based on JIT which I share here with you.

Source: The Elsmar Cove Site

To describe it, when the inventory level in the production system is high (which is opposite of what is followed in JIT), the problems of not only the production but the firm as a whole is submerged in it. This leads to only the surfaced problems coming in the eyesight. As an extension of what has been shown here, some problems may actually build one upon the other and create a sea-bed of problems, much like an iceberg (This idea was conveyed to me by my esteemed Operations Management Professor)
To use this model in the current economic downturn that has uncovered the problems (or opportunites in disguise), I propose the following illustration:

(Copyright Image) Click to enlarge

When the Sensex was making its dream-run, no one was bothered about any of the trifle matters that are being taken up. But the same guys have started nitpicking at each and every action of the companies. Even the launch of "People's Car" Tata Nano was not without its skeptics, who wondered if Tata will be able to sell as many as it wished.

Now, coming to the hidden ineffeciencies of the market:

• Business Ineffeciency
• Pareto Ineffeciency
• Production Ineffeciency
• Agency Problem
• Monopoly

Will write in the next post about how an economic recession (as low level of inventory) exposes these ineffeciencies.

Wishlist 2009

I am privileged to experience blogging in the break between two lectures at IIM Indore . I was thinking of writing on this topic since December last, but was at a loss to start with the apt wish that should grace the first priority.

But, reading the Letter from Apple CEO Steve Jobs to all at Apple (nasdaq: AAPL), in which he has hinted that his health-related issues are more complex than he originally thought; has triggered the flush of wishes. So, here is my Wishlist 2009:

1. May Steve Jobs return healthy after the medical leave of absence. This would put an end to the flurry of rumours about his health. Steven Paul Jobs, the charismatic founder of companies like Apple and Pixar, has such a fan following that a mere mention of his ill health triggered a drop of 6.4% today.
(Pic Courtesy: Forbes)
Jobs has disclosed that a hormonal imbalance has led to his loss of weight throughout 2008. He also skipped the keynote address at MacWorld conference, held on January 6, 2009.


2. May the Satyam Scandal not hurt the IT reputation that India has gained in the last two decades.
After the skeletons of financial bungling and corporate misadventure tumbled out of Satyam's closet; there are doubts being raised about the IT services industry in India. The fact that Satyam was awarded Golden Peacock award from the World Council for Corporate Governance for excellence in corporate governance, raises serious questions about the mismatch between the reality and perception on Indian IT industry. R.Raju, the now jailed erstwhile CEO of Satyam has stated in his confession that the margin on which Satyam opearted was a low as 3%. This is way below the margins quoted by its peers.
It is also being seen as the Enron of India by several people. The World Council for Corporate Governance has compared Satyam to Enron and the chief economic adviser to a $2bn family-run conglomerate, J K Organisation has said "The idea of corporate governance has not sunk in (India) as much as it should". As per the latest reports, Satyam was stripped of the award on 7th January.


But, with companies like Infosys, Wipro and TCS, lead by iconic leaders like NR Narayanmurthy and Azim Premzi, the core of Indian IT industry is still the same. Maybe there was an odd fish in the pond, but that does not mean that all fishes and the pond in particular is tainted.

3. May the Mumbai Terrorist Blasts not affect the economic leadership of Mumbai, the city of dreams.

The Mumbai terrorist attack on 26/11 was targeted at the destroying the image of the city of dreams as the driver of Indian economy. But, Mumbai has withstood many such attempts in the past, and will surely emerge this time stronger.
According to Dr. David Lanegran of Macalester College: in 1999, Mumbai accounted for 20% of India's total employment in industry and 11% of India's employment in total. It handled 30% of India's exports and imports and is the subcontinent's largest port. After surge in globalization and rapid economic development in India, the contribution of Mumbai has risen and is probably the reason of the 26/11 attacks.