Group - 5

Abhishek Sharma 14PGP062

Bora KiraN Kumar
Abhay Ray
Somal Kant

14PGP073
14PGP061
14PGP043

Amit Choudhory 14PGP012

Chandan Kumar 14PGP074

Some Aspects of both the companies

Quality and Customization

Highly efficient manufacturing

Attention to customer needs

Design and Performance

52% to 43% decrease in gross margin

from 1984-1991

ACC

Dont follows production alter

schedules
Dont do customization

DJC

DJC: Kawasaki plant Manufacturing

Strategies

Production Type

Completely
Continuous Flow

Production Planning

Operates 168
hours/week on a
24 hour per day,
330 days a year

Average Production Rate

700 million units

(800 million units
maximum)

Lead Time

short lead-times,
large finished
good inventory

Competitive Strategy

Low cost
production,
standardization
and superior
design
Capacity Utilization

100% utilization

Production Areas

4 Production Cells with

Terminal Stamping,
Housing Moulding,
Assembly, Packaging

Equipment

All technology in
house. Emphasis
on older technology.
Equipment bought
from vendors
changed to suit
needs.

ACC: Sunnyvale plant Manufacturing

Strategies

Production Type

Majority Batch
Process, rest Job
Process

Production Planning

Operates 120
hours/week on a 3
shift per day, 5
day per week
schedule, 50
weeks of the year

Average Production Rate

420 million units

(600 million units
maximum)

Lead Time

Relatively long lead

times, short
production runs
(averaging 1.5 to 2
days), and small
finished goods
inventory (38 days).

Competitive Strategy

Flexibility and
customization

Capacity Utilization

only from 50-85%

Production Areas

5 Separate Areas Terminal Stamping and

Fabrication, Terminal
Plating, Plastic Housing
Molding, Assembly and
Testing, Packaging

Equipment

Outsourced
design of
equipment.
Emphasized
cutting edge
equipment.

1.How serious is the threat of DJC to

American Connector Company?

Sales may further decline in

pessimistic situation
apart from 15%
Sales
Customized
Product
Remaining
sales

500
15%
425

<-- =C15C15*C16

DJC is not currently threat to the

ACC as it is having 4500 SKUs where
as DJC is having 600 SKUs. DJC cant
capture the all the market of ACC due
to its limited offerings

Cost of Production will decrease

by half as raw material cost is
half in USA comparing to
Japan which would help in selling
more
as
the
point
of
differentiation has minimised and
the cost is the only compositing
factor
USA

Japan

Raw
6.51
Material cost

14.32

Raw
Material
Packaging

3.27

3.27

Total Raw
Material
Cost

9.78

17.32

1.How serious is the threat of DJC to

American Connector Company? Cont..
Quality

As the increased rate of defect rates almost 26000per million as compared to

the DJC, it may possible that quality conscious customer will prefer DJC after
some period of time.

Production
Scheduling

ACC is having problem with managing WIP as well as in production scheduling

due to 4500 SKUs

Supplier Relationship

As DJC investing in suppliers for improving in quality of raw material and

technical support, it will help the DJC to have competitive advantage at
difficult time as compared to the competitors

Organisational
Structure

As the organisational structure of DJC corporation is flat in structure as

compared to the ACC which is having hierarchical structure, DJC will be
able to take fast decision in the changing environment

2. How big are the cost differences between DJCs plant and
American Connectors Sunnyvale plant? Consider both DJCs
performance in Kawasaki and its potential in the United
States.

Raw Material (Product & Packaging):

Present raw material cost of product and packaging in Kawasaki plant is
relatively.
Raw material cost will reduce if DJC set up there plant in US, as the cost
indices US v/s Japan is lower (0.6:1).

DJC (Kawasaki) cost indices US v/s Japan

DJC (US)

Raw Material Product

12.13

0.6

7.278

Raw Material Packaging

2.76

0.6

1.656

Total Cost

14.89

8.934

Q.2 -Labour Cost :

WIP and finished goods inventory is high in ACC
Sunnyvale plantin comparison to Kawasaki plant
Manpower requirement to handle this excess inventory
space is also increased.
Increased complexity of the plant environment and
labour cost.(Material handling cost of Kawasaki 3.2% v/s
10.4% of Sunnyvale).
But, DJC will have to pay 10% more in US as per US
labour wages.
This increase in cost will get offset by less requirement
of labours due to automation.

Q.2
Packaging Cost
In comparison to Sunnyvale, the packaging cost of Kawasaki plant is lower due to
adaptability of standardized product packaging technology.

Electricity Cost

In comparison to Sunnyvales plant the electricity cost of production is higher for

Kawasaki as electricity cost indices of US v/s Japan is 0.8: 1.

Runtime for molding process

Due to high batch of housings assembledduring plating operationsresulted in

lower runtime for molding operations which was already down to 1.5 days and any
further reduction would affect costs.

Depreciation

High reduction in cost from 1986 to 1991 for DJC was due to decrease in
depreciation over investment.

Depreciation is a major contributor to cost for ACC. Cost difference between DJC
and ACC will reduce after a period when ACC will reach its BEP for the investment
done during the period 1983 to 1986

Q.2
Cost of manufacturing operations of DJC in US would reduce the current
production cost of $26.10 by 23% to $20.25
1986

Raw
material
product
Raw
material
packaging
labor direct
labor
indirect
total labo
electricity
depreciation
other
total

1991

DJC
(Kawasaki)

ACC (US)

DJC
(Kawasaki)

cost indices US
ACC (US)
v/s Japan
DJC (US)

14.32

10.4

12.13

9.39

0.6

7.278

3.27
7.63

2.25
0

2.76
3.02

2.1

0.6
1.1

1.656
3.322

2.3
9.93
2.47
7.63
4.12
41.74

0
8.53
1.8
5.52
4.41
32.91

0.75
3.77
1.4
1.8
4.24
26.1

1.1
1.1
0.8
1
1

0.825
4.147
1.12
1.8
4.24
20.241

10.3
0.8
5.1
6.1
33.79

Q3: What accounts for these differences?

Quality issues:
Number of defects per million
in ACC is very high as
compared to the DJC

Raw material cost

Raw material cost in the japan
is twice as compared to the
USA

Production Process:

Fixed Asset utilisation

Due to the Batch production

adopted by the ACC needs
frequent changes in production
line as compared to DJC which is
having Continuous production
line.

DJC
operated
24*7,330
days
throughout the year which helps in
maximum asset utilization rate of
75.4% as compared to ACC having
30.2% asset utilization rate.

11

12

3.How much of the differences is inherent in the way each of

the two companies compete?
Equipment

DJC reliance on
in-house
technology
development
whereas ACC
reliance on
buying
technology
equipment

Geographic Location

DJC established
its plant near the
suppliers and
major equipment
companies.

Cost of Inventory
DJC maintained very
less raw material
inventory
as
compared to ACC.
But in terms of
finished goods, DJCs
finished
good
inventory is high
of56 days comparing
to ACC which is
having 38days.

Production Scheduling

DJC is having
600 SKUs
whereas ACC is
having 4500
SKUs which
making ACC
problems in
managing W-I-P
inventory

13

3.How much is due strictly to differences in

the efficiency of the operations?

Though the production

schedule for any given
day was supposed to
be done 30 days before
but in realty they
routinely changed to
weekly or daily basis
for the important
customers.

DJC is having
organisational structure
where specific people are
there to guide production.
Whereas ACC
management is more
focusing on marketing
and sales and they dont
have any specific people
for managing production

Though ACCs
competitive
advantage is its
quality, but they
have now like 26000
per million defect
products per million
units of production

14

4.What should American Connector's management at

the Sunnyvale plant do?
They should go for the decreasing cost of production by controlling
the current defect rate. They should go for pro-active quality
instead of reactive quality.
Pro-active quality will result in reduction of time and resource
requirement for monitoring and inspection of finished goods
inventory.
They should go for collaborative relationship with the supplier for
high quality products and make sure that quality should be checked
at the suppliers end.
They should go for reduction of some of SKUs by removing non
value-added designs which will help in managing WIP as well as
production scheduling
Investment required for the up-gradation of technology and inhouse R & D as no up-gradation has been done since 1986.

15

Recommendation Cont..
ACC needs to change organisational hierarchy from mechanistic to
organic which will give more autonomy to their production level
manager. This will help fast tactical operational decision making.
Identify bottleneck in the production process (e.g. Plating process)
and try to exploit and elevate it. It will result in asset utilization.
Only 15% of the total product portfolio are the customized
products. They should go for standardization of the remaining 85%
standardized product and layout design.
Focus on cross-functional integration and information sharing
between production and marketing team.

16

Thank you