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.