1

MANUFACTURING STRATEGIES
American Connector Company
Nitin Choudhary Onkar Mohole Palak Thakuria Pankaj Sonawane Pankaj Tadaskar 66 67 68 69 70

Flow of Presentation

American Connector Company

Four Plants in US

Two Plants in Europe

The Product : Connectors

Application
Automobiles Electronic Goods Computers Army Equipment Telecom Intruments

Facts
Constituted only 2% of final

product A one year contract with vendor considered industry standard Cost ranged from a few cents to several dollars Housing made of polyester raisin and pins covered with different metals

The Product : Connectors

Wire to Board

Board to Board

Wire to Wire Chip to Board

The Connector Industry

Rapid growth Growing demand due to computer application

1980s
Demand started to slow Too many vendors & capacity

>900 suppliers Sales down by ~4%

1970s

1990s

The Connector Industry

Sales $ Million FY 91
3000 2500 2000 Tier 1 1500 1000 Sales $ Million Tier 2 Tier 3 AMP ACC DJC

Total Worth of Industry: $ 16 Billion

500 0

The Kawasaki Plant

1980 : Increased labor and raw material cost, rising yen and

increased import penetration Need for the highly automated and continuously operating plant which meets following 3 goals
Customer complaint could not exceed 1/million units of output

100% Asset Utilization

Yield on raw material must reach 99%

The Kawasaki Plant

Kawasaki :
Near to major Japanese companies Near the major raw material suppliers ( Daily/ Weekly Supply ) Capacity 800 Million per year

Initially plant produced 80% to 90% of total volume

75% volume sold in Japan and 25% was sold in developing Asian Countries Plant operated 24 Hrs/day , 7 days /week and 330 days/year

Plant Layout
Continuous flow because of shorter processing time Automatic Assembly

Terminal Stamping Cellular Layout Housing Molding

Wire to Wire
Item to Board

Wire to outlet
Board to Board

Assembly

Packaging

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Quality Control
E
D
Waste Reduction

C B
A
Precision

Quality of designs

Process Inspection

Quality Control Standards

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Production and Inventory Control

Long run Less SKUs Avoid unplanned orders

Minimize losses

Smooth Material Flow Minimize WIP

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Workforce
Reduce Employees
New Employees

Recruit New graduates Paid more than average Extensive Training

Preference to Young workers

Discouraged from staying

Old Employees

Paid less than average

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Organization Structure
3 Layer Hierarchy
Strategic Decisions

Tactical Decisions

Less employees in Control Group

Automation Reliability

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Product Technology
Goal continuous and reliable operation and economize on

raw materials Cost reduction measures

Mold design
Less expensive resins Reduced mass of Housing

Waste Reduction
Tin Plating 2,000 packing Reel

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Analysis of Kawasakis Material Cost Savings

25
$20.90 0.21

20 15 10 5 0
Kawasaki's cost using ACC's design & packaging Mold Design

0.48

0.18

1.05

3.50 0.59

$14.89
$11.49

Less Reduced Expensive Mass of Resin Housing

Waste Tin Plating 2,000 piece Kawasaki Sunnyvale Reduction reel 1991 1991

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Process Technology : Basic Principles

Principle 1
Principle 2 Principle 3 Principle 4 Principle 5
Pre-automation

Preference to older reliable processes Huge investment on Molding process & maintenance In-house Technology development

Inter functional co-ordination

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Principle 1
Process automation only after it was understood, properly

designed and laid out.

Pre-automation
Defining flows Optimizing Worker movements Elimination of inventories Improving efficiency

Each Assembly line was laid out in a continuous straight

line from stamping to packaging Single operator can run two assembly lines

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Principle 2
It better to use old and reliable process rather than new, less

reliable one. Instead of taking chances, relied on continuous improvement of existing processes Process were operated below max speed to ensure smooth runs Equipments were handled in order to reduce Downtime

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Principle 3
Absolute Reliability on upstream molding process Molding group comprises of experts in various fields

High emphasis on mold maintenance and repair

Frequent replacements to avoid risk of failure

Mold Yield

99.99%

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Principle 4
Reliance on in-house technology development DJC was concerned about losing competitive edge if relied on

equipment vendors for process technology All proprietary modifications were made in-house All designing and 50% manufacturing of molds was in-house with eventually aiming to build 100% molds in-house

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Principle 5
Inter-functional co-ordination of all it technological

developments
Technology Development Division Product Planning Section Molding Technology Group

Materials Section

Process Engineering

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Sourcing
Close relations with few suppliers of key Raw Materials Rigorous quality standards for suppliers

Quality improvement as result of joint effort of Kawasaki and

its suppliers Frequent delivery of RM(daily basis) leading to

Low inventory levels Less space required for storage

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PV-LF Matrix for Kawasaki Plant

Manufacturing Capabilities of Kawasaki Plant

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Manufacturing Environments
DJC Environment :- Make to stock

Less raw material inventory --(5 days) Carry finished goods inv. Stock for 56 days Standardization of product No customization Lead time is less( 2 days) Facility Utilization (100%) Variety Low (640 Nos) Volume High Focused area- Production focus Cost per unit - low Wastages very low (0.0001%)

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Manufacturing Levers
Highly automated Rigid flow Adult Cellular Layout
Human Resources

Reduction in employees Adult wages Higher Focus on training 3.0

3.0

In-house designing Cross functional co-ordination High investment on equipments World Yield upto 99.99% 4.0 Class

Facilities

Organization Structure

World Manufacturing Levers Class 4.0

Process Technology Production Sourcing

Industry Average Hierarchical structure 2.0

3 layers of hierarchy

Long production runs Non-flexible Schedule Focus on reducing WIP

planning &

Industry average 2.0

control

Close relationships Class 4.0 with few suppliers Rigorous Quality standards

World

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American Connector Company

52% Profit Margin
Custom Orders Standard Orders

15%

Customization
High Performance
85%

28

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American Connector Company

Million Dollars Investment
Steady Growth 43% Profit
Compete Globally Maintain Profitability

52%

Profit Sales

Sales

29

1984

1991

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Sunnyvale plant
1961 Established with 1 million Capacity Capacity maintained ahead of Demand Utilization Exceed 85% 1986 Capacity of 600 millions units per year Market Saturated with Connector Industry 1987 Excess Capacity Industry wide Demand drop down

1988 50% utilization

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PV-LF Matrix
4500 SKUs 5 Production Areas Manual Operations

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Manufacturing Outputs

Late Delivery

High Cost

Good Quality

High Performance

Low Flexibility

Less Innovativeness

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Manufacturing Environments
American connector company Environment :-Make to order

Customization of product --(15% customization & 85% std product ) Less finished good inv. Stocks (38 days) Lead time is more 10days for std. items & 2-3 weeks for customized orders More raw material required-- (10.8 days) Facility utilization -(50-85 %) Variety Medium 4500 Nos. Volume Low Focused on area-- Engineering and marketing Cost per unit Medium Wastages -medium (2.60%)

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Manufacturing Levers
Manufacturing Levers
Human Resource Organization Structure and Controls Productions Planning and Control Sourcing

Level of Manufacturing Capability

Employees were considered as investment Semiskilled Hierarchical, Centralized Importance to line than Staff Complex High WIP Short term contracts

Process Technology Facilities

Mature Technology Developed Externally Un-frequent changes Focused

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Manufacturing Capabilities
Level of Manufacturing Capability Production systems keeps up Manufacturing consists with competitors and of routine activities maintains the status quo.

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SWOT

American Connector Company

Largest connector company Brand Image Highly customized products Huge manufacturing Costs Deteriorating Quality

Increasing operational efficiencies Using Brand image to drive competitors out

Problems in Sunnyvale plant Entry of New efficient competitor

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SWOT

DJC Corporation of Japan

Dominant supplier of connector in Japan Worlds most efficient plant Low Price, High Quality product

Entry into bigger US market Price competition to existing US connector companies

No plant in US as of now No suppliers n US Not recognized by US customers No customization as per customers

Cartel formation by US manufacturers may prevent entry in US More demanding US customers may have effect plant efficiencies

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COMPETITOR ANALYSIS

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Case Battleground !!

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At ACC Headquarters,1991
Now what is your opinion?

They will Kill us so Strike first

No need to panicits not easy for them to repeat same story

***** Do competitor Analysis first !!!

Jack Deniese Andrew

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Follow These Steps !!!

Define Attributes

Classify Manufacturing outputs set targets

Select the best production system

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Step 1 : Define attributes and collect data

Reduced Price

Price

Quality

Increased No. of Suppliers

Attributes
Delivery Performance

Improved Quality

Faster Delivery

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Competitor Analysis
Attributes
Company Current

Delivery
30 days 10 Days LT 7 Days 2 Days LT

Cost
33.79

Quality
1.6%

Performance
1.06/Person

Flexibili ty

Innovativenes s

Market
Strong Competitor Company Target 26.10 0.7% 7.45/ Person

Market Qualifying, Order winning

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Step 2 : Decide Order Winning Output

Cost

Quality

Delivery

Performance

ACC : Cost of manufacturing was high

ACC: High quality supplier image in US

Order Qualifier

Order Qualifier

So if ACC will produce high quality product with low cost it will be a WINNER

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Comparison of manufacturing cost (dollar per 1000 units)

DJC/ Kawasaki Raw Material, product Raw Material , Packaging 12.13 2.76 ACC/Sunnyvale 9.39 2.10

Labor Direct
Labor Indirect Total Labor Electricity Depreciation Others Total

3.02
0.75 ---1.40 1.80 4.24 26.10

-------10.30 0.80 5.10 6.10 33.79

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Comparison of manufacturing cost (dollar per 1000 units)

1 Raw Material Cost of DJC is much higher than ACC Plant 2 Total Cost of DJC product is 23% lower than ACC 3 4 DJC - Equipment Paced Line Flow has good control over cost ACC OPL needs to improve on cost even though of low R/M Cost

MANUFACTURING ENVIRONMENTS
Sr. No. Company Environment 1 2 3 Raw material inventory Finished goods inventory. Lead time DJC Make to stock 5 days for 56 days , High less , 2 days ACC Make to order 10.8 days 38 days, Low 10days for std. items & 2-3 weeks for special orders

4
5 6 7 8 9

Customization of product
Facility utilization Variety of products Volume of product Focused area Wastages

No customization
100%) Low 640 Nos. High Production focus very low (0.0001%)

15% customization & 85% std product

50-85 % Medium 4500 Nos. Low Engineering and marketing medium (2.60%)

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Step 3 :Selecting best production System

1
The current production system is required one 2 3

New Production System is required

New Plant

Feasible and can be put into service

Feasible but can not put into service Raise capabilities

Not feasible

Find different PS and OW

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ACC

We want

DJC
HR

OS
PPC SO

PT
F
1 2 3 4

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EPL is poor in flexibility

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Challenges for ACC

ACC No. of SKU 4500 Less Automation Utilization 30.2 %

DJC
No. of SKU 640

High Automation
Utilization 75.4%

ACC Design group should standardize Connector design for reducing no. of SKUs Marketing group need to market standard product with limited no. of options The production volume needed to increase to increase utilization

JIT Production
WHAT IT IS Management philosophy Pull system though the plant WHAT IT DOES

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Attacks waste Exposes problems and bottlenecks Achieves streamlined production

WHAT IT REQUIRES

WHAT IT ASSUMES Stable environment

Employee participation Continuing improvement Total quality control Small lot sizes

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Solution Suggested for ACC

For customized product share of 15 % - Dedicated OPL can be given to these products For standard products which has share of 85% - 4 production lines will be formed which will run on JIT production system

OPL 15%

JIT 85%

customized

standard

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Row Position : Change in lever for new production system

HR

1 2 3 4 5 6
1 2 3 4

1 2 3 4 5 6

1 3

OS
PPC SO

Column Position : Corresponding manufacturing output

PT
F

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Lever Adjustments

Manufacturing Lever

Improvements

Human Resource
Organization Structure Production planning Sourcing Process Technology Facilities

Cross-train workers
Concurrent Engineering Stabilize production schedules Develop long-term supplier relations Quality checks at suppliers Reduce equipment breakdowns Make the factories more focused

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Strategy for both Market Segments

Having just one type of Production

Market Share

85%

system cannot serve the purpose 15% To Cater to both the market segments, company have to adopt different strategy

Customized Product

Standard Product

Two different Production systems must co-exist to accommodate demands of different order winning

OPLF

EPLF

criteria

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Concept of Focus Factory

Focus Factory: Edge on any one of manufacturing outputs (order winner) Factory within Factory: Different production systems co-exist within same factory each one focusing on creation of different manufacturing output

Focus on standardized products : EPLF

15%
85%

Focus on customized products : OPLF

Factory within factory

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