2. COMPANY’S MOTTO
Our simple design is extremely reliable,
and easy to install ~ Saving time
Our experienced customer service
personnel are available to answer any
questions
Most parts are in stock ~OR~ can be
quickly manufactured to meet your
needs
3. INTRODUCTION
American Connector Company (ACC) and DJC Corporation (DJC) were
both second tier competitors in the fragmented $16 billion electrical
connector industry.
DJC, a Japanese corporation, relied heavily upon efficient manufacturing
processes as the basis for their competitive strategy and as the means to
achieve their annual profit goals.
ACC viewed their success as dependent 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 ACC’s Sunnyvale, CA facility.
Faced with the threat of a highly efficient competitor launching a nearby
production facility, ACC must develop a plan of action to limit DJC’s
intrusion into their established North American market.
4. PROCESS & OBJECTIVES OF
ACC
High quality supplier
Customization
Maximization of profit
Marketing strategy
5. PROCESS & OBJECTIVES OF
DJC
DJC’s corporate objective was profit
maximization.
The ultimate rationalization of mass production
Highly automated
Three goals were to be met:
1) 100% asset utilization
2) 99% yield on raw material
3) a customer satisfaction level of one
complaint per million units of output
Customer satisfaction on the basis of Six Sigma
methodology
6. Sunnyvale Kawasaki
Year Facility Built 1961 1986
Production Type
85% Batch Process
15% Job Process
100% Continuous Flow
Average Production Rate
420 million units
(600 million units maximum)
700 million units
(800 million units maximum)
Types of Connectors 4 4
Competitive Strategy Focus on customer need
Low cost production, customization
and superior design
Models 4500 640
Production Areas
5 Separate Areas - Terminal Stamping
and Fabrication, Terminal Plating,
Plastic Housing Molding, Assembly and
Testing, Packaging
4 Production Cells with Terminal
Stamping, Housing Molding, Assembly,
Packaging
Packaging
Multiple – 10-piece bagging to 1500-
unit loaded reel
One – 2000-unit strips
ACC’s Sunnyvale facility and DJC’s Kawasaki
facility are best summarized in the following table:
7. Processing Lead Time
10 days for standard items, 2-3 weeks for
special orders
2 days, no special orders
Runs Most are 1.5 to 2 days One week and some continuous
Average Annual Cost per Mold $40,000 $29,000
Average Life of Mold 8 years 3 years
Raw Materials Inventory 10.8 days 5 days
Work in Process
Various, but high to accommodate special
orders
2 days
Finished Good Inventory 38 days 56 days
Management Engineering and marketing focus Production focus
Production Schedule
Attempt to freeze 30 days out. Could
change daily for SO’s. 15% of orders were
custom orders.
Complete control by the plant. No change
to the schedule for unplanned orders.
Utilization 50-85% 100%
Indirect Staff
46% - Heavily weighted towards control
staff.
32% - Weighted towards Technology
Department.
Defects 2.60% 0.0001%
Yields 55% to 98% after one year 99%
Other
Outsourced design of equipment.
Emphasized cutting edge equipment.
All technology in house. Emphasis on
older technology.
8.
9.
10. DJC has a lower cost of production compared to the Sunnyvale
plant of ACC. The cost per 1000 units for DJC is lower by around
40% compared to the Sunnyvale plant
The market in US has become very saturated and competitive. In
such a market, DJC’s lower costs will give them a very good
competitive advantage.
DJC manages to keep a low raw material inventory of 5 days due to
which they will enjoy a strong advantage over ACC which has a raw
material inventory of 10.8 days. This results in higher costs for ACC
due to handling of this raw material
DJC enjoys an advantage in having a lower lead time than ACC
(processing lead time of 2 days for DJC). This will allow them to ship
products in a faster manner. One reason for this is due to the high
variety in product mix for ACC.
Reasons why DJC can pose as a threat:
11.
12. Reasons why DJC might not be able to replicate
the success in US markets:
DJC has a very rigid production schedule and will not be able to
satisfy the unpredictable demand requirements of US companies
which need custom products
If DJC enters the US market, they might have to introduce a
higher variety in their product mix. There is a demand for
flexibility in terms of design in the US market due to which ACC
will enjoy a competitive advantage
DJC manages to keep a low raw material inventory of 5 days, but
this is dependent on the frequent delivery by the suppliers. They
will need to form strong relations with the suppliers in the US
market to ensure that this competitive advantage is maintained.
The flexibility of production process at DJC is less when
compared to that of ACC. ACC has batch production process
which allows it to have high customization of products to its
customers.
13.
14. Raw Material: - Current raw material cost for
product and packaging in Kawasaki plant is
relatively high in comparison to ACC Sunnyvale’s
plant. In the event of DJC setting up a plant in
USA, there would be a considerate cost reduction,
as the cost indices US v/s Japan is lower (0.6:1).
Packaging Cost
Labour Cost
Electricity Cost
Cost head Kawasaki
($/1000 units)
Plant in USA
Raw
material,product+
packaging
12.13+2.76=14.8
9
14.89*0.6=8.93
15. ACC’s Sunnyvale plant’s total
manufacturing cost is higher than DJC’s
Kawasaki plant by $13.549/1000 units for
1991 which produces a cost difference of
40.10%.
The cost difference is mainly due to
difference in the labour cost. For ACC the
labour costs show an increase from $ 8.53
to $ 10.30 from 1986 to 1991. On the other
hand for DJC the labour costs have
decreased considerably from $ 9.93 to $
3.77.
