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Introduction
Problem statement
American connector company was one of the leading connector supplier in US
market
DJC Corporation was one of the leading supplier of the connector in japan
In 1980 there were too many suppliers and too much capacity
But in 1990 , firm experienced downfall in sales, OEM had reduced their suppliers from
10 or 12 to 3 or 4.
Different industries were finding it difficult to meet increasing number of specification
In 1992, attempts were made to standardize product specification
$2.6 billion
Second tier
Third tier
Above
18
others
Remaining
1172
DJC were planning to attack US market, and were planning to build new plant in
the US.
This was main concern for the ACC , that if DJC come in to the American market
DJC will quickly grab some market share
Market condition
AMC
DJC were having one of the most efficient connector plants in the world
Market share
AMP, Inc
16%
others
42%
Above
$100
million
11%
second
tier(AMC
& DJC)
25%
Third tier
6%
In order to remain competitive Mr.Esaka devised a vision based on rational of the mass
production
facilities
2. Better to use an old reliable process than a new less reliable one.
Process technology
5.Interfunctional coordination of all technological development activities
Plants technological development division was responsible for coordinate and
manage with all the activities involved in manufacturing
Aim was:
Reliable process technology to keep the process running slowly without inventory on continuous
basis
Machines were generally operated below maximum speed so as to eliminated unschedu led down
time.
Kawasaki s processing lead time and WIP inventory each averaged 2 days
Less WIP, but relatively high finished good inventory of 56 days
Rating=4
Manufacturing capability
Sunnyvale plant
Rating
HR
Organisation Structure
Sourcing
Production Planning
And Control
Process Technology
Facilities
Average
3.8
The sunnyvale plant produced the four major types of connectors used in
computers
Telecommunications equipment and
scientific instruments
4 5 0 0 s ku
Production areas
Terminal
stamping and
fabrication
Terminal
plating
Plastic
housing
molding
Assembly and
t e s t i ng
Packing
Thus from the rating we can say that manufacturing capability of the Kawasaki plant is
near about word class
PPC
Production control Departmentaggregate planning and master schedule based on marketing forecast
PCD set annual production schedule which specified monthly production
targets
Frozen period 30 days
But schedule was routinely changed to accommodate rush orders and request
from important customers.
Marketing dominated over manufacturing resulting in frequent disruptions in
the production schedules which resulted into lower machine utilization
As a result the level of WIP increased
Expediting has become important task
Invested $500000 in software to relieve stress on control staff
It started with leased plant in 1961 with capacity of million connectors per year
In 1963 operations moved to new plant
Capacity expanded several times to accommodate the growing demand
Last major expansion in 1986 with 600 million parts per year
Capacity was increased with anticipation of demand growth and 85% utilization
Plant losing technology leadership due to non availability of funds to invest into upgrading
technology
UTILIZATION OF THE
PLANT
S KU
utilization
50
70
5000
0
85
42
65
1984
1991
control staff
Quality
26000 defects per million
High % defects were attributed to complex pin configurations and extremely high
tolerances
c o n t ro l s ta f f
100
0
The threat of DJC to American Connector Company is very high following are the
reasons:
If DJC sets up manufacturing base in USA, as per the exhibit 7 and exhibit 8 the raw
material cost for DJC in USA will drastically reduce. Current Raw material product
and packaging cost is 14.89 which will reduce to 8.93 in USA.As the raw material
cost is almost half of the total finished goods cost, the raw material cost reduction
would be substantial.
As Sunnyvales defect rates are at 26000 PPM of production which is relatively
high. The Quality control of DJC is process centric where each process is QC
monitored unlike in Sunnyvale its end product inspection. The quality losses of
DJC and ACC over total production are 0.7% and 1.6%. So, Quality is one grey zone
which needs to be addressed by ACC
Work in process inventory cost is very high in case of ACC in comparison to DJC. This in
turn is reduces connector output per square foot as extra space is required for WIP and
finished goods(15.1 of Kawasaki VS. 10.9 of Sunnyvale).
As Kawasaki plant is working for 24hrs/day thus the asset utilisation is maximum and
Connector output per employee is very high. (75.4% of Kawasaki VS. 30.2% of
Sunnyvale)
Due to high number of product variations in customer orders of Sunnyvale which is
employing batch production system there is frequent changes in product
manufacturing lines thus resulting in lower efficiency which could be obtained in case of
standardised products.(Product lines were as small as 1.5 to 2 days)
The raw material inventories of DJC is averaging only 5 days as compared to 10.8 days of
ACC. So, DJC is incurring less Inventory cost which again reduces finished good cost.
The speed of customer order delivery of DJC is one day (because of highly
automated production process at Kawasaki plant) whereas the speed of customer
order delivery of ACC is more than one day (because of batch production process
producing about 4,500 varieties of connectors).
The Only positive point which ACC has over DJC is:- 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.
Product design innovations which will not allow reverse engineering of product by
competitors to a greater level.
As ACC was having both standardize and custom products, ACC can set separate
production lines for each as competitive strategy for both is different.
Improving the compactness of the connectors will bring some competitive advantage.
There is requirement of in-house R&D to develop technical innovations for production
process. It would help in developing in-house machinery to have a technological edge
over competitors.
ACC organizational hierarchy was more inclined towards marketing and engineering
teams and lesser stress on production team which was different in case of DJC which
had equal stress on the production team this was a motivational factor for increase in
productivity at DJC.ACC needs to follow similar model for operations set up in the
organisation to promote production oriented structure and greater balance.
ACC needs to decrease mould recycling time. This will save time.