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On American Connector Company
Issue discussed in the case:
US based electrical interconnector supplier company, American Connector Co. Worried because of probability of DJC co, japan based interconnector supplier, going to start its production facility in US. This situation lead ACC officials to think on manufacturing strategy of the ACC s Sunnyvale plant in comparison with DJC s last established plant at Kawasaki, Japan. Because Sunnyvale plant already facing problem of rising costs of the product and deteriorating product quality, ACC officials worry about this.
The U.S. connector industry was grown very rapidly from 1970s to 1990s. Around 1200interconnect product suppliers were available worldwide. There was very high new entrant barrier, required high level of Economic of scale and economic of Scope , tight competition among revelry firms , Low switching cost, more bargaining power to buyer and supplier. The connector industry included 3 type of interconnect products: Connector, Cable assemblies and back panels. In 1991, The worldwide sales of this interconnect product totaled around $16 bn. Dominant company in the industry was AMP Inc., with 16% market share with sales of $2.6 bn approx. While DJC Corporation and ACC were second Tier Company in the connector industry and their sales were around $ 500 mn -$800 mn..DJC and ACC produce all kind of interconnector products, but in Sunnyvale (ACC) and Kawasaki (DJC), plants, they manufacture only connector. These connectors were basically 4 types: Component, Board to board connector, Wire to connectors and wire to wire connector.
DJC is more likely to pose a threat to other manufacturers than face direct threats itself. # Goal is 100% utilization of plant and equipment. # Production schedules are very inflexible. # Products are delivered frequently. # Continuous 24-hr a day production reduces variable costs and eliminates startup and shutdown expenses. WEAKNESS # Standardization and limited variety restrict the company¶s ability to meet customized needs.DJC Corp. OPPORTUNITY DJC¶s opportunities include seizing market share from American connector manufacturers such as ACC through introduction of its low-cost. usually daily but sometimes hourly. STRENGTH # Products are standardized. American Connector . improved copies of US-made connectors # Steps and features that do not add value are eliminated. If DJC can successfully implement in the US the manufacturing and production strategies that have brought it so much success in Japan. Indeed. # Success of low-cost approach is highly dependent on full utilization of capacity to reduce costs. low-cost connectors might not be optimal strategy if customers place a higher value on other product characteristics. was DJC¶s low-cost strategy to prove more effective than ACC¶s mass customization approach. then the company can position itself as a major player in the US connector market and successfully challenge the dominance of American manufacturers. # Processing lead times and work-in-process inventories average two days. # Production of standardized. yet effective manufacturing strategy in the US market. the future prospects of many American connector producers would definitely be at risk. # Relatively high finished goods inventory adds to costs. # Use of tin-plated pins and new type of resin maintains quality while reducing costs. # DJC¶s production capacity could lag demand THREAT As the latest competitor in the US connector industry.
STRENGTH # ACC¶s Sunnyvale plant produces a large variety (4. # A relatively high percentage (46%) of the company¶s workforce is employed in indirect labor activities. # Batch processing and automated assembly facilitate production of large quantity of products (600 million units per year). # Just-in-time (JIT) delivery results in minimal raw materials inventory. invest in new plant and equipment to meet the highly customized needs of the specialty market. They also exceed customers¶ expectations. # Although 15% of the company¶s products are geared toward meeting the specialized needs of customers. if low-cost rivals were to make a concerted push to enter the specialized connector market. ACC continues to employ post-production inspections rather than statistical process control. # High level of work-in-process inventory promotes flexibility but increases finance costs. # Products are customized and state-of-theart. it faces the very real risk that it will be undercut by lowcost rivals such as Japan¶s DJC Corp.000 per million units). THREAT The threats faced by American Connector Co. Unless the company completely changes its manufacturing process from a mass customization approach to a product-focused strategy. # Processing lead times and work-in-process inventories are held down through efficient production scheduling. # Customization and high variety place tremendous pressure on company¶s forecasting and production schedules. are substantial.500) of connectors. WEAKNESS # Although defects are rising (approx. 26. ACC could feel that segment of its customer base threatened as well. or. OPPORTUNITY # Adopt a product-focused strategy for standardizing production of the 85% of connectors that do not require customization. # Decrease the percentage of employees dedicated to indirect labor by redesigning and improving product development and manufacturing activities . # Mass customization approach focuses on product innovation rather than cost reduction. # Decide whether it wishes to continue meeting the needs of both standard and specialty customers or concentrate on only one type of customer # Depending on which strategy it adopts. Moreover. the remaining 85% are prone to price undercutting by rivals such as DJC. rely on continuous improvement of existing plant and equipment to produce reliable. the company has not made any significant plant investments since 1986. low-cost standardized connectors. # Despite its commitment to technology and product quality. This allows the company to provide just about any kind of connector that a customer could want.
# This line will run exclusively for standardized product so we can increase batch time for production and reduce waste because of rapidly change in batch process. Run plant for 24 x7 for 50 weeks. company using same line and rapidly changeover for products. 3. 2. Separate process line for standardized and customized product: 1. Because existing manufacturing strategy has many limitations and weaknesses. which has order share around 15 % in total orders. 2. which need to hold work in process inventory often. So now PCD should expand its working area i. coordinating and managing activities of the product planning section. # In existing manufacturing strategy. Assembly line 2: # Line 2 will work for customized products. Increase capacity utilization and increase production per employee. I propose that company should implement new manufacturing strategy whether DJC will enter in US market or not.Strategic decision based on Industry & SWOT analysis: On the bases of Industry and SWOT analysis.e. Assembly line 1: # Line 1 will work only for standardized products. Proposed manufacturing changes. If company improves on those issues then ACC can generate more profit with higher efficiency of plant and proper utilization of the assets. 1. complication to maintain schedule will be reduce for Production Control Department. process engineering and improvement in product. More competent Production Control Department Now because of separate process line. which has order share around 85% in total orders. Now because of separate lines this situation is removed. So it will give upper hand to ACC over DJC if it will enter in future in US market. 3. the material section. Separate process line for standardized and customized product. it will reduce startup & shut down cost. This line will run exclusively for customized product where we can use our skilled labor for rapidly changeover for different batches. Quality control division: .
Responsibility of marketing division: Marketing division should convince customer for standardized products. 6. Change in inventory management: Inventory management can undergo a sea change. And that s a must for ACC irrespective of any threat from DJC is there or not. carries finished goods inventory for about 58 days while it carries very low levels of work in progress and finished goods inventory. The Kawasaki plant for instance. Statistical Process Control: Implementation of statistical process control in the inspection process and materials release planning systems would significantly improve the operational efficiency of the plant. when the customers place orders. Plant layout: Movement of men and materials need could be streamlined with the usage of Kanban cards or boards. the lead-times that they can promise would be higher. Hence. measures to isolate areas which manufacture one type of connector from the other enables easy materials management and monitoring. Marketing policy should be like less price offer for standardized product compare to customized order. 5. The Sunnyvale plant on the other hand carries a lot of raw material and work-in-progress inventory.In new strategy QC department should do quality control at post production time instead of at the finished goods time. Summary . 4. If they believe in carrying large finished goods inventory to cater to customer demands very fast or if they produce just in time. 7. This allows them to meet demands of the customers dynamically by adopting the just-in-time philosophy while having a buffer to guard against. While the entire assembly line need not be reconfigured. So even defect will be identified. it will incur lesser cost for WIP goods. the amount of money tied up as work in progress (which neither ensures fast response nor enables greater working capital) would be much less.
opportunities and threats. Second. That such a system could work has yet to be proven. In reality. This would likely require a radical restructuring effort as well as massive layoffs of personnel. . the challenges facing ACC are daunting. then it will essentially be foregoing 85% of its core business. ACC must decide whether it wishes to service the standardized connector market. In sum. it will have to make the changes noted above and become much more like its low-cost rivals. the mass customization market. or both. if ACC opts to focus exclusively on meeting the customized needs of its customers. it will essentially have to bifurcate operations to meet the unique process engineering demands imposed by each type of manufacturing process. if ACC chooses to continue catering to both segments of the market. First. weaknesses. There is no guarantee that it can do this. Finally. customized and standardized. and it will require a concerted effort on the part of the company¶s management to establish clear priorities and select the best path forward in view of the company¶s strengths.In essence. if ACC decides to channel all its efforts to meeting the needs of the standardized connector market. such a step might be too draconian to put into practice.
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