ACC VS DJC

PREPARED BY
CHEPURU TARANI – 1901027
JL SOUJANYA – 1901058
MANYAM SREENATH – 1901063
NAGULA VISHAL – 1901071
Md SAQUIB - 1901065
  Analysis of DJC

 Analysis of ACC

 Threat to ACC

 Cost comparison between ACC and DJC

INDEX  Strategies to be adopted by ACC

 SWOT analysis of ACC and DJC

 Analysis of DJC
Manufacturing output of DJC
• Order winner : Cost
DJC viewed highly efficient manufacturing as critical to its competitive strategy
• Order qualifier : Quality, Delivery

Design Strategy
• Emphasized simplicity and manufacturability over innovation
• Based on reverse engineering
• Designed for maximum compactness
 Competitive Analysis of DJC
Delivery Cost Quality Performa Flexibility Innovativ
nce eness
Time Asset Utilization Process Failure Production Run Attributes
Reliability Material Yield Quality Losses
COGS/1000 units
75.4% 1% Avg 7 days Kawasaki
0.7 % Plant
$26.1
30.2% 8.9% Avg 1.5-2 days Sunnyvale
1.6% Plant
$33.37
100% 24 X 7 X 330 Target

Order Winner Order Order Qualifier OW / OQ

Qualifier
CURRENT STATE
AT KAWASAKI
PLANT
DECISIONS TAKEN-
STRUCTURAL
Process Technology :
1. Pre-automation
2. Better to use an old reliable process than a new, less
reliable one
3. Absolute reliability on upstream moulding process
4. Reliance on in-house technology development
5. Inter-functional co-ordination of all its technology
development activities
6. plant was organized in 4 cells, each of which was
responsible for producing one of the four general
types of connectors
DECISIONS TAKEN-
STRUCTURAL
Facilities: selected Kawasaki plant location because of
1. Close to major Japanese electronics companies
2. Near to major raw material suppliers
3. Highly automated, special purpose machines
Sourcing :
4. Close relationship with few key suppliers
5. Rigorous quality standards and certified quality of every product
6. Most of the raw materials delivered on daily basis
7. Relatively small warehouses
8. Reduce the amount of resources and raw material stock
9. Procurement dept uses JIT deliveries
DECISIONS TAKEN-
INFRASTRUCTURAL
Production planning and control :
• production runs were scheduled to be as long as
possible
• Long runs were possible due to the limited number
of SKUs.
• processing lead times and work-in-progress
inventories each averaged 2 days
• relatively high finished goods inventory of 56 days
Human Resources
• Reduce the number of direct production worker
and overhead staff due to highly automated
machines and high-quality standards
• Hire new graduates with high wages
• Extensive Cross-functional training
• Workers are not specialized to particular process or
function
 Organisation Structure and control

1) Top-Down approach organization

2) Plant manager – Longer terms planning
3) Production employee – tactical problem

Business
Strategy

Public Sales Managing International Scientific

R&D Administration Production
Relationship administration Director Business Institute
CURRENT ANALYSIS OF ACC
Manufacturing Outputs
1. Order Winner: Quality
Quality at ACC didn’t just mean meeting manufacturing specifications it meant conforming to
the customers need.
2. Order Qualifier:
Flexibility- ACC considered its customisation strategy to be an extension of its emphasis on
quality. (15% custom orders)
Cost- Costs were increasing as historical 52% gross margin reduced to 43%.
Lead Time- 10 days for standard items while 2-3 weeks for special items.
DECISIONS TAKEN-
STRUCTURAL
1. Process- A batch process or modular process
was followed because of following
advantages.
 High degree of Product flexibility.

 Suitable for High Variety, Low Volume

production
 The production takes place in modules, so that a
large variety of output options can be obtained by
combining various modules
DECISIONS TAKEN-
STRUCTURAL
2. Sourcing
 As flexibility considered to be a characteristic of ACC it had to be flexible as well.

3. Facility
 ACC had 4 plants in USA and 2 in Europe.

 ACC was always considered a technology leader as it had all the latest production equipment to
improve quality and productivity.
 But in 1990s as the gross margin and utilization had decreased ACC didn’t upgrade it existing
technology.
 The Sunnyvale plant produced about 4500 different models of connectors.
DECISIONS TAKEN- INFRA-
STRUCTURAL
1. Human Resources
 Engineering and Marketing people had more power than manufacturing people.

2. Organisation Structure and control

 The Production Control Department was responsible for scheduling the plant’s aggregate
production and for co-ordinating production across the five production areas.
DECISIONS TAKEN- INFRA-
STRUCTURAL
3. Production Planning and Control
 The production schedule on any day was supposed to be frozen thirty days in advance.
 In reality, however, the schedule was routinely changed to accommodate rush orders and
requests from important customers.
 Lead time was 10 days for standard items while 2-3 weeks for special items.
 ACC carried a finished goods inventory of 38 days.
 ACC had a high WIP which helped them to accommodate rush orders and also provided
optimized batch size for molding.
CURRENT STATE
AT SUNNYVALE
PLANT
ACC VS DJC PRODUCTION
PROCESS
 The DJC Kawasaki layout is made
primarily for mass production with high
volume of standardized products.
 The ACC Sunnyvale plant layout suggests
that it was designed for a high output
variety with low output volumes.
THREATS FROM DJC AND SUGGESTED COUNTER STRATEGY BY ACC

As ACC has 85% orders as standard orders, it is

Threat 1

85% of ACC's orders were standard orders while

only 15% were custom built connectors. Upon the advised that ACC shifts its method of production
entry of DJC into the US market, ACC stands to lose from batch process to lean production for this
it's 85% standard sales as DJC Would be selling the 85%. Having combination layout with a product

Solution
same standard equipment at almost half the price layout for standard orders and process layout for
custom orders.

The defect rate within the plant was relatively high - Making production of custom products and
Threat 2

26000 per million units of production in 1990. Yields standardised products as two different
on new designs was sometimes as low as 55 manufacturing layouts, and having inspection at
every stage (TQM) of production can reduce

Solution
defects and improve the first time yield rate
 Threats from DJC and Suggested counter strategy by ACC
Threat 3
From Exhibit No 6 of the case, it is observed
that 28.6% of loss in fixed asset utilization is
due to plant not operating
ACC should implement 24 hours a day, 7 days a
week and 330 days a year working of the plant.
This will reduce the lead time for customers and
also reduce shutdown and start-up cost all the
while increasing the fixed asset utilization
ACC can schedule more frequent maintenance of
equipment as the plant is aging. Also, some old
Solution
and aging equipment might be replaced for newer
ones to reduce this loss of asset utilization
CHALLENGES TO DJC IN IMPLEMENTING ITS KAWASAKI FACTORY MODEL
IN USA
Areas Existing Situation Situation in USA Remarks

Customer Contacts DJC cultivated and maintained
close links with the major
computer, telecom and electronics
companies and distributers in Japan
USA has more than 900 suppliers of
connectors. Of these 900, 28 firms
existed with a sales of greater than
$100 million
DJC would have to compete in
a new market without major
customer contacts. Thus, it
cannot leverage this strength to
compete in USA

Production and Long runs were possible because of 700 standard connector product Will DJC be able to maintain
Inventory Control the limited number of SKU's lines in North America alone such long run times when they
produced at the plant. ACC makes 4500 SKU's need to produce almost 8 times
the number of varieties of
connectors they produce at
Kawasaki?

Demand and FG The product-oriented layout works does USA have demand for
Inventory best for high volume, low variety such a huge volume of
production. connectors from DJC?

FG Inventory DJC carried 56 days of finished

goods inventory Given the short life cycle of
electronics, what about the risk
of obsoletion of the connectors
in inventory?
 COST
Categories DJC DJC ACC
Kawasaki USA Sunnyvale

Raw Material, Product 12.13 7.278 9.39

COMPARIS
Raw material, packaging 2.76 1.656 2.1
Raw material cost(Total) 14.89 8.934 11.49
Direct Labor 3.02 3.322 …….
Indirect labor
Total labor
0.75
3.77
0.825
4.147
…….
10.3
ON OF ACC
AND DJC
Electricity 1.4 1.12 0.8
Depreciation 1.8 1.8 5.1
Other 4.24 4.24 6.1
Total 26.1 20.241 33.79
Selling price per connector @40% 0.03654 0.02833 0.047306
margin

Note: Taking the Average Values of price for connectors for comparison and simplification.
OBSERVATIONS:
Quality losses of DJC and ACC over total production are 0.7% and 1.6%. So these losses will also include in the
product costing.
WIP inventory cost is high of ACC than DJC. It reduces connector output per Square foot as extra space is
required for WIP and FGs (15.1 of DJC Vs 10.9 of ACC)
Material handling cost of DJC is 3.2% and that of ACC is 10.4% of the total Labor cost as the WIP and FG
inventory is high of ACC, manpower required to handle excess inventory is also high.

Effective asset utilization is maximum for DJC (75.4% of DJC Vs 30.2% of ACC) and connector output per
employee is high(7.45 of DJC and 1.06 of ACC) accounts for high cost of ACC.
Raw material inventories of DJC averaging only 5 days as compared to 10.8 days of ACC. Thus, DJC is incurring
less inventory cost reduces finished good cost.
Process failure(1% of DJC to 8.9% of ACC), process changeover(2% of DJC to 4.8% of ACC), plant not
operating time are the factors for high price of ACC.
OBSERVATIONS:
Taking the cost indices of JAPAN and US and above cost factors, total cost will be decreased by
22.44% (26.1$ in Japan and 20.241$ in USA) planting the manufacturing facility.
If DJC will have manufacturing plant at USA, drastically reduce in raw material cost from
14.89$ to 8.93$(40% reduction)

• As the demand in USA was low and competition high, it is evident that running a plant at 99% capacity utilization
will be a tough task for DJC.
• Connector was a very small and inexpensive component formed only about 2% of the end product cost. As
electronic equipment has a short lifespan, thus flexible delivery is a more important aspect than cost of the
connectors.
• As DJC would be rigid with delivery dates, a customer would pay a few thousand dollars more to ACC to have a
special order made than lose out due to rigid schedules of DJC.
• ACC had 15% of its sales in custom build connectors, where it would be able to charge a premium. Thus, ACC
has the ability to reduce the prices of standard connectors below the price of DJC and offset the additional cost
with higher margins from custom build products.
STRATEGIES TO BE ADOPTED AT ACC SUNNYVALE PLANT

Cost Control:
• Current Operations, Labor costing and Depreciation rates etc. should be taken care

Quality control:
• High defect rates(26000 in a million=3.6), End Product inspection to be catered with Quality
control inspection required at each process levels.

Product design Innovation:

• To gain the competitive advantage which will not allow the reverse engineering of the product by
competitors.

R&D:
• Improving the compactness, less in size, reducing design flaws with technical innovation. It will
help in developing in house machinery to have technological edge.
STRATEGIES TO BE ADOPTED AT ACC
SUNNYVALE PLANT
Organizational hierarchy:
• Inclination should be more or equal towards Operations and improving quality rather than
Marketing and Engineering teams

Lead time:
• Controlling Processing Lead time from 10 days to substantial extent-less inventory piling up.

Fixed Asset utilization:

• It can be increased by controlling on startup and shutdown costs. It can be controlled using
increased amount of machinery to handle different moulds.

Changeover in Moulds:
• Specific fixed lines-Large sized order, Frequent changing lines- Small orders. The Moulds
Recycling time also has to be decreased.
STRATEGIES SHOULD
BE ADAPTED BY
SUNNYVALE PLANT
 SWOT Analysis for DJC Corp.
1. Reduction of Production costs and complexity due to
small variety of connectors.
2. Long production runs minimize yield and capacity 1. Standardization and limited variety restrict the company’s
losses.100% utilization of plant and equipment ability to meet customized needs.
3. Use of tin-plated pins and new type of resin maintains 2. Production of standardized, low-cost connectors might not
quality while reducing costs. be optimal strategy if customers place a higher value on
4. Just-in-time (JIT) delivery results in low raw materials other product characteristics.
inventory 3. DJC’s production capacity could lag demand.
5. Products are delivered frequently, usually daily but 4. Production schedules are very inflexible.
sometimes hourly

STRENGTHS
S W WEAKNESSES

OPPORTUNITIES THREATS

O T
1. Seizing market share from American connector
manufacturers by introduction of its low-cost 1. It can lose its customer base lying in the specific customization
manufacturing strategy from the companies like ACC.
 SWOT Analysis for ACC
1. Mass Customization Manufacturing Strategy -variety
(4,500) of connectors. It provides any kind of
connector that a customer could want 1. Customization and high variety place tremendous pressure
2. Production of large quantity of products (600 million on company’s forecasting and production schedules.
units per year) due to batch processing and automated 2. A relatively high percentage (46%) of the company’s
assembly workforce is employed in indirect labor activities.
3. Just-in-time (JIT) delivery results in minimal raw 3. High level of work-in-process inventory promotes
materials inventory. flexibility but increases finance costs
4. Short production runs maximize operational
flexibility.

S W WEAKNESSES
STRENGTHS

OPPORTUNITIES THREATS

O T
1. Adopt a product-focused strategy for standardizing
production of the 85% of connectors that do not require
customization 1. Threats from the low cost manufacturer companies.
2. Invest in new plant and equipment to meet the highly 2. Threats to its customer base as well if it doesn’t change
customized needs of the specialty market it’s mass customization approach to product-focused
3. Statistical process control methods to ensure product strategy.
quality. #03
4. Decrease the percentage of employees dedicated to indirect
labor
 Strategy Operation INEFFICIEN
High no. of employees Higher WIP CIES DUE
Low Technological Process Failure TO
Development
High customization Quality Loss/High defect rate
STRATEGY
Low employee productivity Low asset utilization (S)
&
No. of suppliers 75% capacity utilization (S)
OPERATIO
Materials used
N
High Variety of Packaging
 MANUFACTURING CAPABILITIES
ACC: Sunnyvale Plant DJC: Kawasaki Plant

Production Type Batch process, job process Continuous flow

Avg. Production Rate 420 Mn Units 700 Mn Units
Low-cost prod, Standard, superior
Competition Strategy Flexibility & customization
quality
Production 5 separate areas 4 production cells
Production Planning 120hrs./week 168hrs./week
Lead Time Long, prod, run- 2 days Short lead time
Capacity Utilization 50-85 % 100%
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