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Strategies & Market Trends : Tang's school of business management for serious investors

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To: Arthur Tang who wrote (40)	10/13/2006 6:29:57 AM
From: Arthur Tang	of 57

Most annual reports did not show quality control aspect of the business. So no one knew Sony lithium batteries were a disaster for many OEM manufacturers. Quality control is very simply put, as percentage of returns from you product sales. 0% returns means your products cost too much to sell. 1-2% returns means your quality control is efficient and does not cost the company too much rejections or rework expenses. More than 2% returns means you customer relations will be suffering. Your business plan has to tighten your quality control by traceability of defects. Sony lithium batteries suffered a technology which is marginally controlled of their metal particle mixing uniformity in the lithium compounds. Either reduction of metal particle quantity or size of the metal particles must be more uniform. Lithium compound will uniformly disperse the metal particles if size and weight is correct for the viscosity of the compound. Metal particles must suspend uniformly in the compound. You have to mix the particles in solution before you use it. the heavier particles will fall to the bottom, so you will not use that portion of the compound. So some percentage of the batteries caught fire, according to IBM, Raleigh, NC., because the metal particles shorted out the battery internally. However, operating temperature might change the viscosity of the lithium compound shifting the suspension of the metal particle positions. Lot by lot, quality test has to be large enough sampling until quality is established. This is a typical nightmare for top management, when quality control suffered. Some day SEC might want to have product returns listed in the revenue column in profit and loss statements.

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