AMERICAN CONNECTOR COMPANY

Submitted By:

Arun Kabra
11BM60046

ACC·s response plan to possible threat from DJC
y ACC competes on its ability to provide customized products to its clients y y y y

along with high quality and efficiency. ACC should respond by limiting the number of SKUs and produce standard size connectors. The same applies for packing and batch jobs. Improve its inventory management by reducing its WIP goods and raw material. Automating the entire plant operations with new machinery thus eliminating manual errors and rework. Building and Implementing Quality Control team to avoid efforts for manual check for defective pieces thus delivering superior quality.

Seriousness of threat from DJC
y DJC basically competes on its cost effective operational model based on y y

y

y

y

more productive use of resources. Marketing strategy of DJC is based on large volume and standardization with the core objective of profit maximization. With DJC plan to enter US market, it does not posses a major threat to ACC for the reason being ACC was able to survive stiff competition in US market where more than 2/3rd of total manufacturers worldwide existed. While comparing the costs we see that the historical costs are lower for ACC as compared to DJC by $15.83/1000 piece. The static costs for ACC exceeds DJC by $7.69/1000 pieces. This less cost of DJC is achieved by fixed asset utilization, Batch production process, use of advanced technology, lower inventory handling cost and automation improving quality thus reducing cost. Thus if ACC is able to reduce its static cost by improving its operational effectiveness, DJC doesn·t posses a serious threat to ACC as it has already survived in tough market.

How serious is threat from DJC if real?
y Threat from DJC to ACC comes mainly from the static cost difference

and operational efficiency. y From Exhibit 7 in given case we see that DJC can saves the following percentage of its costs over ACC if it is operated in USA
y Raw material ² 29.02% y Packaging ² 26.81% y Labor ² 148.37% y Electricity consumption ² (-28.57%)

y From exhibit 6 it is clear that the effective utilization of fixed asset for

DJC is 75.4% compared to 30.2% of ACC y Only advantage that ACC has over DJC is customization which gives ACC a 15% of total profit share. y Thus based on its cost effectiveness and effective resource utilization, it can eat into market share of ACC in US market and pose a serious threat to ACC

Resource available with ACC to respond
y Plant modeled like Kawasaki facility has tremendous advantage over

Sunnyvale facility mainly due to high efficiency, integrated production facility with implementation of automation process and continuous improvement plans. y ACC has a head start as it already has a plant while DJC has to incur additional fixed costs to set up one. y The current fixed asset utilization for ACC is only 30.2 % and thus has a lot of room for improvement. y ACC supports a much larger number of SKUs, servicing markets where there is no competition from DJC.

Business & Operational Strategy for ACC
y Automate the material handling which would reduce variable costs.

y y y y y

This would reduce costs from the present 10-11% to 3-4%. This would also increase resource utilization to about 68%. Create two distinct divisions, one for regular products and the other for customized products , the rarer SKUs and out of turn orders. Create a linear process flow with longer batch runs to reduce setup time needed for each production run. Reduce WIP inventory and raw material. Along with this it also needs to reduce the lead time. Introduce Quality control in process which would include the suppliers as well. This would reduce the rejection rate. Standardize the products that they manufacture on regular basis.

Mail from Denise Larsen
y Most of the ideas shared by Denise are feasible, but few of them as

mentioned below are skeptical:
y Training workers to use statistical process control and other state of art QC

techniques is a bit difficult to implement for the reasons like large labor force to train, costly training, etc. This can be implemented if automation is implemented with reduction in dependency on manual labor. y ImplementingWork teams: Instead of identifying new team members and implementing work teams, its is better and more appropriate to identify the team members from existing teams and training them to work towards the goal. y 7 day work production is not feasible due to maintenance requirements for machinery and downtimes due to continues usage.

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