American connector company

OM-1 Case Study assignmentSubmitted By:

Pratima Rao 37Rahul Sahu 38

Rajesh K. Pradhan 39 Gurkirat Singh Bedi 40

Rashmi Agarwal 41Rishi Agarwal 42

Overview of the Case

American Connector Company (ACC) and DJC Corporation (DJC) were both mid level competitors in the highly fragmented and highly competitive electrical connector industry. ACC and DJC each had distinct strategies and practices related to the operations and manufacturing within their respective corporations.

DJC, like most of the Japanese corporations relied mostly upon efficient manufacturing processes as the basis for their competitive strategy and as the means to achieve their annual profit goals.

ACC relied mostly upon their ability to offer customized connector solutions and high end products. DJC recently announced the construction of an US-based manufacturing facility located near ACC’s facility. Faced with the threat of a highly efficient competitor launching a nearby production facility, ACC must develop a plan of action to limit DJC’s intrusion into their established North American market. By answering the questions mentioned in the following slides we will try to explore the above mentioned issue.

Issues for discussionComparison of the manufacturing structures and strategies of DJC’s Kawasaki plant and ACC’s Sunnywale plant.

Kawasaki Planned from Initiation. A dedicated production unit

for each of the four types of connectors developed, thus in effect having 4 production areas.

Packaging was standard, and was different from the industry standard.

Maintained a finished goods inventory of 56 days.

Sunnywale Capacity and technology was

added as and when required. The whole production area

was used to develop all products.

In terms of packaging, the Sunnyvale plant was quite flexible.

Maintained a finished goods inventory of 38 days

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In Kawasaki, the production schedule was fixed and would not change under any circumstance or for any special order from customers. This gave them an upper edge, in terms of controlling costs. Whereas, in Sunnyvale, although policy stated that the production schedule for any given day was to be decided upon 30 days in advance, actually the schedule was changed quite frequently to meet customer demands. Thus , while the buzz word for the Kawasaki plant was cost cutting, for the Sunnyvale plant it was flexibility.

In terms of products, the Kawasaki plant stressed on continuous and reliable operations and low raw materials cost. This was because, in Japan, the cost of raw materials was twice as high as in the United States. So while the Kawasaki people studied and adapted designs from American companies, they did away with most of the extras that they felt did not add any value for their customers. Thus, despite high difference in raw material prices, Kawasaki cost per units were only slightly higher than Sunnyvale’s cost per unit connector.

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In terms of process, for Kawasaki, the idea was to concentrate on automation. Thus a lot of pre-automation work was performed, in order to perfect the efficiency of the automated process. This was different from Sunnyvale.

At Kawasaki, technology used was old and reliable upgraded in-house, as compared with Sunnyvale, where in the growth years heavy investment had been made into buying new technology as per requirements, which would lose its edge in a few years’ time.

Kawasaki identified moulding as a key area, and investments were accordingly made. Required experts were hired for the moulding technology group, the moulds received regular maintenance, besides basic daily maintenance. At Sunnyvale, this was merely bought from vendors as standards and requirements changed.

There was a dedicated “Technology development division “ at Kawasaki to co-ordinate between various divisions in product planning. In terms of hierarchy, the senior management took long term decisions, but staff was given freedom in day to day decisions. In Sunnyvale, each division was headed by a supervisor who reported to a director.

Impact of manufacturing strategy of each plant on its ability to achieve different competitive objectives, such as low cost, high reliability, flexibility and product innovation

DJC’s Kawasaki PlantThe chief golas of the kawasaki plant are:: The plant must achiever asset utilization of 100 % Yield on raw materials must reach 99 % Customer complaints should not exceed 1 per million units per output

Fulfillment of the above three goals would mean that kawasaki plant would be the lowest cost producers in Japan.

Also the following factors would allow it to maintain low costs & strategic advantage :-

Proximity to major Japanese electronics companies Proximity to major raw materials suppliers Availability of young, highly skilled workers

DJC Corporation, dedicated to process positioning and robust systems engineering, required that the Kawasaki facility be highly automated. The pre-automation process helped analyze process flows, worker movements, and raw material consumption. DJC also believed it better to utilize an older, more established process, rather than implementing newer unproven processes. Continuous improvement of existing processes was highly relied upon.

Flexibility-Kawasaki plant had complete control over its schedule and mix and refused to make changes for unplanned orders.

-They used to ensure a smooth flow of materials

-Hold less raw material inventory

 

Product Innovation

-In-house technology development

- Made all proprietary design modification in-house

-It used to simplify production and reduce cost by packaging its connectors only on tape and reels.

-Pre-automation

-The technology development department coordinated various functions to improve product characteristics. It removed any design feature that didn’t add value to the customer.

ACC’s Sunnyvale Plant

Low Cost

•The company ensures that they get the raw material for product and packaging at a lesser costs, and cheaper electricity costs, making the total cost lower.

Reliability

•The company has tried to ensure that the defects in products shouldn’t exceed 1 defect per million units, and it has met customer delivery requirements with quality and on time.

Flexibilit

y

•They decide on the production schedule 1 month prior to the actual date. This helps to accommodate rush orders and requests from more important customers. They have tried to expand capacity ahead of expected growth in demand.

Product Innovation

•. The plant production has increased from 3000 to 4500 products due to increase in number of individual product manufactured. It buys latest technologies for its production channels, and also produce custom models and supports innovation.

If DJC builds a new plant in US then the factors on which they should focus more are

They should drop that IN-HOUSE technology development strategy at least for the first few years till the time they acquire substantial market share in the US and have sales to achieve break even for that.

They have improve their flexibility as 15% of ACC’s production is from customization and the rest is from four types of products that means 85%, which if divided equally among them is 21.25% of production . Therefore one looking to compete with ACC in the US cannot ignore this sector.

As one knows how fast electronic industry is growing and everyday or every weekend one can see a new product in the market so to cater to fast changing environment they should also look for new technologies and improve them with time too, which they have been ignoring.

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If Sunnyvale plant doubles its production run length then it will be very difficult for them to schedule this much complex production considering they at present are making more than 4500 different connectors. Moreover, it WIP inventory will increase and finished goods inventory will increase, which will further aggravate the situation.

DJC is a very serious threat to ACC as by their current at Kawasaki is able to compete them in international arena when they are working on raw material which is double of the cost of raw material at which ACC is working.

Changes recommend in the operations of ACC’s Sunnyvale plant

They need to change their plant layout and have a separate cellular layout for the mass production of all four types of connectors which would be working 24*7 considering the demand and have a separate layout for customization.

They need to have a particular standard for packaging i.e. they are currently packaging at 10 piece plastic bag to 1500 pieces of loaded reel, which would decrease the worker needed to handle packaging.

They need to automate their process by which they can decrease their man power from 396.

Thank you