Professional Documents
Culture Documents
CONNECTOR COMPANY
Sanjay Jharkharia
Case Objectives
To have an understanding of different production
strategies followed by companies producing same
products
To understand the threats from the competitors and
how to defend.
Sanjay Jharkharia
Case Questions
How serious is the threat of DJC to ACC
How big are the cost differences between the DJCs
Kawasaki and ACCs Sunnyvale plants
What accounts for these differences? How much of
the difference is inherent in the way they compete?
How much is due to efficiency of operations?
What should ACC Management at Sunnyvale do?
Sanjay Jharkharia
Sanjay Jharkharia
Sanjay Jharkharia
Sanjay Jharkharia
B. American Connectors
Position
Competitive
Sanjay Jharkharia
D. ACC vs DJC
Sanjay Jharkharia
Sanjay Jharkharia
10
Sanjay Jharkharia
11
RM Product
DJC/Kawasaki($) Index
DJC/US($) ACC ($)
12.13
0.6
7.28
9.39
RM Packaging
2.76
0.6
1.66
2.10
Labour(Total)
3.77
1.1
4.15
10.30
Electricity
1.40
0.8
1.12
0.80
Depreciation
1.80
1.0
1.80
5.10
Other
4.24
1.0
4.24
6.10
Total
26.10
20.25
33.79
12
DJC/Kawasaki($) ACC/Sunnyvale($)
1986
1986
41.74
32.91
DJC/Kawasaki($) ACC/Sunnyvale($)
1991
1991
26.10
33.79
Sanjay Jharkharia
13
Threat Perception
How serious is the threat?
DJC could be a serious threat. Not only are the
costs significantly lower, but they have
demonstrated successfully how to reduce them
over time.
We will consider three possible sources of the cost
differences
1) Utilization cost differences
2) Differences inherent in each companys strategy
3) Differences in operating effectiveness
Sanjay Jharkharia
14
Sanjay Jharkharia
15
American Connector
$ 5.1/ thousand
DJC
$1.8/thousand
Current output
$420 million
$700 million
$2.14 million
$1.26 million
Capacity (rated)
600 million
800 million
85%
100%
$510 million
$ 800 million
$4.20/thousand
$1.58/thousand
DJCs strategy
ACCs strategy
Low cost
Innovation, flexibility
and customer service
Some cost differences bound to come from here
ACCs customers could be willing to pay more
for its products. After all, connectors represent
only 2% of product cost, but are essential to
product performance.
Sanjay Jharkharia
17
ACCs operation
strategy
1. Capacity: Plant
maintains excess
capacity
DJCs operation
strategy
Sanjay Jharkharia
18
ACCs operation
strategy
2. Facilities:
Functional layouts
(five functional
areas with WIP
storage space)
Sanjay Jharkharia
DJCs operation
strategy
Facilities: 4 cells,
with 4-6 production
lines each. Each cell
is dedicated to
running one basic
connector type.
Plating and shipping
are functionally
specialized, and
centrally located
19
ACCs operation
strategy
3. Product Technology:
DJCs operation
strategy
3. Product Technology:
20
ACCs operation
strategy
4. Process Technology:
relies on state of the art
equipment
and
processes. Initially, for
customized
products,
yields are lower and they
are less efficient due to
smaller lots
DJCs operation
strategy
4. Process Technology: old
reliable
processes
preferred to new ones.
New processes are preautomated. It has an inhouse
technology
development
group,
molding expertise and
maintenance operations
skills. Reliable processes
result in low defects,
high
utilization,
low
process failures, & high
Sanjay Jharkhariaraw material yield.
21
ACCs operation
strategy
5. Work force:
employs 396 workers, 54%
are direct labour and 46%
are indirect labour
DJCs operation
strategy
5. Work force: employs 94
workers, 68% are direct
labour and 32% are
indirect
labour.
Management s goal is
to
decrease
labour
further over time.
Sanjay Jharkharia
22
ACCs operation
strategy
6.
DJCs operation
strategy
6.
Production planning: Plant
operates 3 shifts/day, 5
days/wk,
50
wks/yr.
Relatively long lead times
(10 days for std. products,
2-3 wks for special orders),
short production runs (1.5
to 2 days), finished goods
inventory (38 days). These
are typical of a plant with a
high number of SKUs
(4500),
&
flexible
production schedule that
accommodates
customer
requests
Sanjay Jharkharia
Production
planning:
operates 24 hrs/day,
7days/wk, and 330
days/yr. Changes for
special orders etc. are
not
permitted.
Relatively short lead
time, long production
runs, large finished
goods inventory (58
days)
23
Quality: it is
defined as
conformance to
specifications. (low
defect rates, fewer
than 1 defect per
million), targeted
raw material yield
of 99%
24
ACCs
operation
strategy
DJCs
operation
strategy
8. Organization: is a
marketing
and
engineering driven
company.
Manufacturing
plays a secondary
role
8. Organization:
manufacturing
plays a key role in
determining
the
strategy of the
company.
Sanjay Jharkharia
25
$0.21
mold design
$0.48
less expensive resin
$3.50
tin plating
$0.18
reduced runs of housi $059
2000 piece reel
$1.05
waste reduction
---------------------------------------------------------------------------$1.92
Total
$4.09
Total
Sanjay Jharkharia
26
Sanjay Jharkharia
27
Fixed Costs
For this we refer to Exhibit 6 in the case
Kawasaki effective utilization = 75.4%
Sunnyvale effective utilization = 30.2%
Sunnyvale operates 6000 hrs versus 8400 available
hrs. So it is not operating its plant 28.6% of time.
Looking at Exhibit 6 again, for asset utilization, in the
case of Sunnyvale
Sanjay Jharkharia
28
Competitive Advantage
DJCs competitive advantage comes from low-cost highquality standardized products, adapted to customers
requirements
ACC s competitive advantage comes through leading
edge technical solutions, customized design and flexible
delivery capabilities
Sanjay Jharkharia
29
DJC
ACC
30
Sanjay Jharkharia
31
Sanjay Jharkharia
32
Sanjay Jharkharia
33
Mold Design
Less expensive resins
Reduced mass of housing
Waste reduction
Tin plating
Packaging in 2000 piece reel
Sanjay Jharkharia
34
35
Sanjay Jharkharia
36
Sanjay Jharkharia
37
Measure 3 Change in
Organizational structure
Cut down the long chain of management possible by
better control with change in the operating process
Clear vertical hierarchy in the plant management
Sanjay Jharkharia
38
More on Manufacturing /
Operations Strategy of ACC
Sell its own operational strength by aggressively selling
customized products
Dont let DJC plant run near to the theoretical capacity
Sanjay Jharkharia
39
Recap
Investigate How to Assess The Competitive Threat of
a Foreign Competitor Setting Up Operations Here
cost differences
strategy differences
Sanjay Jharkharia
40