AMERICAN CONNECTOR

COMPANY (A)

SECTION – A , Group - 5

Akash Kumar – 18PGP013 Jyothsna T – 18PGP129 Ayush Kumar – 18PGP256 Mathilde - 19SEP004
Deveshwar Laddha – 18PGP048 Rahul Roshan – 18PGP143 Ujjval Jain – 18PGP264
BACKGROUND :
• American Connector Company (ACC) was a major producer of electrical connectors
in the U.S.

• The management at ACC was concerned about the entry of a new competitor, DJC
Corporation of Japan in the U.S. market

• DJC was a dominant supplier of electrical connectors in Japan and had constructed
one of the most efficient plants for connector production in the world

• DJC was contemplating to build a plant in the U.S. to cater to the U.S. market

• DJC had the potential to capture considerable market share in the U.S. because of
superior operational and manufacturing efficiency
Overview of electrical connector industry :
• Electrical connectors are devices used for attaching wires to other wires, wires to
outlets, components or chips to PC boards or PC boards to other boards

• Connectors found wide applications in military and aerospace electronics,

telecommunications equipment, industrial electronics, automobiles and consumer
appliances

• The decade of 1970s witnessed rapid growth of US connector industry but demand
slowed in late 80s leading to underutilized plant capacity and greater price
competition

• Customers leveraged the huge competition in the US connector industry in the 1990s
to demand lower prices, improved quality and faster delivery

• In 1991, worldwide sales of connector products amounted to $16 billion and the
dominant company was AMP Inc. with 16% market share and $2.6 billion in sales

• Second tier companies that included DJC and ACC had sales between $500 million and
$800 million while third tier companies had sales in the $250 - $500 million range
DJC Corporation :
COMPETITIVE STRATEGY :
• Maintaining close links with major distributors and customers

• Design strategy that focused on simplicity and manufacturability over innovation

• Manufacturing excellence leading to low cost position

KAWASAKI PLANT :

• Plant layout – Organized into four large cells for four general types of connectors

• Product Technology – Limited product variations to minimise cost and complexity of short production runs

Pre automation of production process

• Process Technology Continuous improvement of existing proven processes
Reliability of moulding process
Emphasis on in house technology development
Inter functional coordination
• Sourcing – Maintaining close relationships with few key suppliers

• Quality control – Improvement in key areas and reduction of plant waste

• Production and inventory control – Minimization of changeover time and work in process inventory
American Connector Company (ACC):
• Competitive strategy was characterized by emphasis on both quality and customization

• Custom orders made 15% of total production volume

• Staff worked closely with large customers to develop unique solutions

SUNNYVALE PLANT :

• Plant was divided into 5 production areas

• Aggregate production schedule was specified by Production Control Department

• Production schedule was flexible to accommodate rush orders and orders from important customers

• Production schedule became more complex with increase in no. of SKUs

• Rate of defective products was relatively high with 26,000 per million units of production

• Production yield on newly designed products was 55% but gradually improved to 98% after at least a year of
production
Q-1. How serious is the threat of DJC to
American Connector Company?

• Lower cost of raw materials and packaging cost (Reduction of

40% in cost of raw material).
• The cost of customization led to increase in defects by
American Connector Company. (26000 PPM)
• Work in process inventory cost and raw material inventory cost
• Low level of employee utilization (75.4% of Kawasaki VS. 30.2%
of Sunnyvale)
• DJC applied cost saving approaches like use of tin instead of
gold, waste reduction, less SKU etc.
Q-1. How serious is the threat of DJC to
American Connector Company?

American Connector Company-> Sales and Marketing, High

SKU, High customization and ability to absorb
demand fluctuation, Less finished product inventory,
Chase strategy, Responsive supply chain.

VS
DJC-> Operations, low SKU, standardized products with
less fluctuations, level strategy, effective supply chain.
Q2. How big are the cost differences between DJC’s plant and American
Connector’s Sunnyvale plant ? Consider both DJC’s performance in
Kawasaki and it’s potential in the United States.

DJC/Kawasaki 1991 ACC/Sunnyvale 1991 DJC/Sunnyvale 1991

Raw Material, Product 12.13 9.39 = 12.13*0.60 = 7.278

Raw Material, Packaging 2.76 2.10 = 2.76*0.60= 1.656
Labor, Direct 3.02 NA = 3.02*1.1= 3.322
Labor, Indirect 0.75 NA = 0.75*1.1= 0.825
Total Labor 3.77 10.3 = (3.322+0.825) = 4.147
Electricity 1.4 0.8 =1.4*0.8= 1.12
Depreciation 1.8 5.1 =1.8*1=1.8
Other 4.24 6.1 = 4.21*1= 4.24

Total 26.10 33.79 = 20.241

(Data taken from Exhibit 7 & 8)

Q2. How big are the cost differences between DJC’s plant and American
Connector’s Sunnyvale plant ? Consider both DJC’s performance in
Kawasaki and it’s potential in the United States.

Raw Materials

Product Packaging

• Cost of Raw Materials is higher • Cost of Raw Materials is

in Japan as compared to US higher in Japan as compared
• DJC cost will go down when to US
setting up plant in US • Standard packaging used by
DJC
Q2. How big are the cost differences between DJC’s plant and American
Connector’s Sunnyvale plant ? Consider both DJC’s performance in
Kawasaki and it’s potential in the United States.

Labor Electricity
• Per unit electricity cost is high
• Labor cost in Japan less than
in Japan
that of US
• DJC’s cost will reduce for US
• Labor cost is a major chunk
plant as compared to
of the overall cost
Kawasaki plant
Q3. What accounts for these differences? How much of the differences is
inherent in the way each of the two companies compete? How much is
due strictly to differences in the efficiency of the operations?
Difference in the 11 Decision Criteria lead to cost differences -
CRITERIA
DJC ACC
(Structural)
Minimize WIP inventory(2 days), but since Finished goods inventory was less (38
Capacity production was never stopped, thus days)and high WIP inventory. High
finished goods inventory (56 days) was high inventory capacity
Four Large Cells (exception of Plating) with
Facilities 2-6 assembly lines. Processing stages were 5 Production areas on type of work
close to each other
Pre-Automation used. Use of old and Mostly Automated system except for low
Process
reliable process. Molds were maintained volume products which was manual
Technology
regularly. Packaging cost was less assembly
Close relationship with suppliers which were
Large distance from suppliers. But, Raw
Sourcing few. Technical support to supplier in case of
material cost was low (60%)
poor quality. Closer sources.
 CRITERIA DJC ACC
Capital/Resour
Focus on cost efficiency Focus on customization
ce Allocation
More customization means more
Human Less Manpower(1/4th) needed. Mostly young
requirement of labor. Separate Quality
Resource people with high skill & aptitude
control Team
Set production plan(MRP) and Just-in time Production was changed to respond to
Work Planning
deliveries, no emergency order taken. Shorter customer demand. Longer production
& Control
production runs (1.5 days) runs (one week)
QC Division worked with Technology
Quality QC Team worked separately. 26,000 per
Development Decision. Very high, Not more
Management million output
than 1 per million units of output
QC Division pursued 5 objectives: Improve QC
Measurement Statistical Process control by QC
standards, process system, precision of molds,
& Rewards department
product design and reduce wastage
Product High customization as per demand.
Limited SKU, not using new technology
Development Technology leaders
Organization Top down approach, influenced by
High level of Autonomy. Bottom up approach
& control marketing teams
Q3. What accounts for these differences? How much of the differences is
inherent in the way each of the two companies compete? How much is
due strictly to differences in the efficiency of the operations?
Inherent Difference between Companies -
DJC focused more on increasing efficiency ACC was focused to provide customer
and reducing cost keeping the quality in satisfaction by making customized products
mind. VS and thus had high number of SKUs (4500
compared to DJC’s 460).
Their decisions were generally taken by
operations people Marketing people could influence the
production schedule easily

Major focus is on Cost, Quality

Major focus is on Flexibility and Speed

Operational Efficiency between Companies -

• DJC was more efficient and productive than ACC because of the factors mentioned above.
• Employee utilization of DJC was 75.4% vs 30.2% of ACC
• Shorter production runs and high SKUs in ACC decreased yields
• Higher flexibility to adjust according to demands decreased operational efficiency of ACC
Q4. What should American Connector’s management at the Sunnyvale plant do?

The Sunnyvale plant needs a series of improvements in order to bring Positioning (Quality &
Customization) and Execution of ACC on the same line, so that it can become competitive to face
DJC’s Kawasaki plant. Major recommendations for the Sunnyvale plant are:

Increase the
Reduce
Address the effective Reduce the More Infusion of
wastages Focus on in
quality utilization of high number autonomy to Technology
(Lean house R&D
control issues Plant & of SKUs Operations Development
Approach)
Manpower
THANK YOU