AMERICAN CONNECTOR COMPANY

By G.V.L. Kasturi

Overview

American Connector Company (ACC) and DJC Corporation (DJC): Midlevel competitors in the highly fragmented and highly competitive electrical connector industry. ACC and DJC each had distinct strategies and practices related to the operations and manufacturing within their respective corporations. DJC relied mostly upon efficient manufacturing processes as the basis for their competitive strategy and as the means to achieve their annual profit goals. ACC relied mostly upon their ability to offer customized connector solutions and high end products. DJC recently announced the construction of an US-based manufacturing facility located near ACCs facility. Faced with the threat of a highly efficient competitor launching a nearby production facility, ACC must develop a plan of action to limit DJCs intrusion into their

The Two manufacturing plants

DJC: Kawasaki

ACC: Sunnyvale

Planned from Initiation Dedicated production unit for each of the four types of connectors developed, thus in effect having 4 production areas Packaging: Standard (2000 units/reel) different from industry standard (1500 units/reel) Finished goods inventory: 56 days Production Schedule: Fixed & no change for special orders

Capacity and technology was added as and when required The whole production area was used to develop all products Packaging: Wide range from 10 piece loaded pack to 1500 units/reel Finished goods inventory: 38 days Production Schedule: Changed to meet customer demands despite 30 days of advance planning

The Two manufacturing plants

DJC: Kawasaki

ACC: Sunnyvale

Continuous & Reliable Operations Low Raw Material Cost goal (twice as costly as US) Tin R&D: Reverse engineering removing extra redundant features Process Technology: Preautomation; Old & Reliable Technology; Reliable upstream molding; In-house technology development Inter-functional coordination: using technology development

Not Reliable operations Raw Material Cost not an issue: Gold plated connectors

R&D: Innovation and research

Process Technology: No perfect automation; Heavy investment in new technology; Technology from vendors as standards Inter-functional coordination: Individual division heads reporting to

Kawasaki Plant
DJC: Kawasaki Plant The chief goals of the Kawasaki plant are:

T he plant must achiever asset utilization of 100 % Yield on raw materials must reach 99 %

Customer complaints should not exceed 1 per million units per output fulfilment of the above three goals would mean that Kawasaki plant would be the lowest cost producers in Japan.

Also the following factors would allow it to maintain low costs & strategic advantage:-

Proximity to major Japanese electronics companies P roximity to major raw materials suppliers A vailability of young, highly skilled workers

Sunnyvale Plant
ACC: Sunnyvale The chief goals of the Sunnyvale plant are:

Flexibility: 1 month prior to actual date High reliability: Latest production equipment

Product Innovation: 4500 different models in 1991, buying latest technology for its production channels
Catered to custom models Low Cost: Raw Material for packaging and product at low costs in addition to cheaper electricity costs.

Is DJC a threat to ACC?

Kawasaki Raw Material, Product Raw Material, Packaging Labor, Direct Labor, Indirect Total Labor Per employee Electricity Depreciation Other Total Equipment, Molding 7.278 1.656 3.322 0.825 4.147 30.90 1.12 1.8 4.24 20.241 290000 (3 yrs) 99.99% yield Sunnyvale 9.39 2.1 5.562 4.738 10.3 10.92 0.8 5.1 6.1 33.79 400000 (8 yrs)

$/1000 units (Kawasaki in US) as per the cost indices

What can ACC do?

Kawasaki Connector output per sq foot of map space Connector output per employee Fixed Asset utilization Plant not operating Non-scheduled Process Failure Preventive Maintenance Process Changeover Quality Losses Effective Utilization 15.1 7.45 5.7 13.2 1 2 2 0.7 75.4 Sunnyvale 10.9 1000 units 1.06 1000 units 28.6 % 23.5 % 8.9 % 2.4 % 4.8 % 1.6 % 30.2 %

Comparison of Labor costs (%)

Kawasaki Production (m units) Employees Indirect Labor Control Technology Development Materials Handling Mechanics Direct Labor (Production) Total 700 94 Sunnyvale 420 396

11.7 12.8 3.2 4.3 68 100

16.7 6.8 10.4 11.9 54 100

What can ACC do?

They need to change their plant layout and have a separate cellular layout for the mass production of all four types of connectors which would be working 24*7considering the demand and have a separate layout for customization. They need to automate their process by which they can decrease their man power from 396.

Improve process efficiency in addition maintaining the flexibility of the process.