Published on February 27, 2014
AMERICAN CONNECTOR COMPANY CASE STUDY XIMB students’ presentation
A Brief Comparison 2 ACC Quality and Customization Design and Performance 52% to 43% decrease in gross margin from 19841991 DJC Highly efficient manufacturing Attention to customer needs No customization Never alters production schedule
Comparison of Manufacturing Strategies 3 ACC: Sunnyvale plant Production Type : Majority Batch Process, rest Job Process Average Production Rate : 420 million units (600 million units maximum) Competitive Strategy : Flexibility and customization Production Areas: 5 Separate Areas - Terminal Stamping and Fabrication, Terminal Plating, Plastic Housing Molding, Assembly and Testing, Packaging Production Planning:Operates 120 hours/week on a 3 shift per day, 5 day per week schedule, 50 weeks of the year. Lead Time:Relatively long lead times, short production runs (averaging 1.5 to 2 days), and small finished goods inventory (38 days). Capacity Utilization : only from 50-85% Outsourced design of equipment. Emphasized cutting edge equipment.
Continued … 4 DJC: Kawasaki plant Production type : Completely Continuous Flow Average production rate : 700 million units (800 million units maximum) Competitive Strategy : Low cost production, standardization and superior design Production Areas : 4 Production Cells with Terminal Stamping, Housing Moulding, Assembly, Packaging Production Planning : Operates 168 hours/week on a 24 hour per day, 330 days a year Lead Time : short lead-times, large finished good inventory Capacity Utilization : 100% utilization All technology in house. Emphasis on older technology. Equipment bought from vendors changed to suit needs.
Impact of manufacturing strategy on competitive objectives 5 ACC: Sunnyvale plant Low Cost DJC: Kawasaki plant Highly automated process High WIP inventory, so number of employees increased 3shifts/day,5days/week, capacity utilized is 70% approx. Product innovation Wide range of products Superior design Less investment on technology No quality control Low Cost Less inventory Reduced workforce No start-up & shut-down cost Standardized products Location advantage Connectors packaged in tape & reels Product innovation Copied from US designs Innovative ways to produce developed, preautomation, in-house technology
Impact of manufacturing strategy on competitive objectives (contd.) 6 ACC: Sunnyvale Reliability Latest production equipment used High defective rates on new products, but no defective product is sent to customer Flexibility Flexible Customized products Production schedule changes often DJC: Kawasaki Reliability Old reliable process used in quality control Molds checked regularly Flexibility Not much flexible High finished product inventory Production schedule is more or less fixed
Changes required in DJC for U.S. plant 7 Emphasize on Marketing/Sales Invest in new technology Increase customization and number of product variants Should be more flexible Production scheduling should be improved
Threat for ACC if DJC opens a new plant 8 Cost of raw material – $12.13/1000 units for DJC $ 9.39/1000 units for ACC (But due to cost advantage of US, DJC’s material cost will come down to $ 7/1000 units approximately.) Cost of labor – $10.3/1000 units for ACC $3.77/1000 units for DJC (But this will increase to $6 due to more labor requirement) DJC’s highly efficient style of production may attract buyers who need standard products
Continued … 9 Policies of DJC Impact on ACC Cost savings will be high (Cost per 1000 units will be 20.241) Higher margins for DJC. Thus profits of DJC will be higher compared to ACC. (Cost per 1000 units will be 33.79) Frequent deliveries will make the customers satisfied with DJC ACC will lose its customers. Lower rate of defects at DJC will improve its image and also cut down on costs Adverse effect on ACC. Process at DJC fully automated. Thus DJC will offer products at a faster rate than ACC. DJC always updated with the advancement in molding technologies. ACC had not bought new equipment in the past two years. Thus they will be producing at a slower rate than DJC.
Recommendations to ACC 10 Suggested Change Current Scenario Improve tech development. Presently its 12.8% for Kawasaki ,6.8% for Sunnyvale Improve employee productivity At Present: 7.45 m for Kawasaki, 1.06 for Sunnyvale Improve utilization by focusing mainly on increasing plant operating time At Present: (330 days/year-Kawasaki, 3 shifts/day,5 day/wk,50 wks/yr for ACC. Decrease raw material inventory size 5 days for Kawasaki, 10.8 days for Sunnyvale. - Bring in a degree of standardization for orders Focus on reducing depreciation and other costs - Study cost cutting policies of KW and implement the same Total of 6.04 for KW while total of 11.20 for Sunnyvale.
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