American Connector Company 5r6047

Antariksha Ganguly Pranita Kambli Vamshi Krishna

PGP/20/263 9619333635 PGP/20/283 9004212758 PGP/20/304 8500015978

 How big are the differences between DJC' plant and ACC's Sunnyvale plant?

Consider both DJC's potential in Kawasaki and its potential in America

 What s for these differences? How much of the difference is inherent in the

way in which these two companies compete? How much is due strictly to the efficiency of operations?

KAWASAKI PLANT Objective: The ultimate rationalization of mass production Vision: A highly automated, continuously operating plant which could meet the following goals• Asset utilization of 100% • Yield on raw material 99% • Customer complaints <1 per million units of output Advantage: located close to the major Japanese electronics companies and major raw material suppliers and ample supply of relatively young, highly skilled workers Wire-towire Plant layout: Four large cells each responsible for one of the four types of connectors

Wire-tooutlet

Item-toboard

Board-toboard

Each cell- 2 to 6 production lines Each production line Terminal stamping

Housing molding

Assembly

Packaging

Factors

Decisions and policies

Product Technology

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Product design of most connectors was standardized to reduce the number of product variations Tin was used instead of gold in order to economize Connectors were packed on tape and reels Extensive value engineering was performed to implement cost saving changes without compromising on quality

Process Technology

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Significant resources were allocated to pre-automation It was possible for one operator to run two assembly lines To ensure smooth runs, processes were generally operated below maximum speed Molding was particularly considered to be very significant and received daily maintenance Relied on in-house technology development There was inter-functional coordination of all its technology development activities

Sourcing

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Maintained close relationship with suppliers and quality was considered a t effort Suppliers required to certify the quality of products in every delivery It demanded frequent delivery, most on daily basis and few on weekly and monthly basis

Quality Control

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Pursued five objectives; improving quality control standards, process inspection system, precision of molded components, quality of product designs and reducing the plant’s waste

Production and Inventory Control

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Production runs were scheduled to be as long as possible and changes were not made for unplanned orders Work-in-process inventory was minimized to devote few resources to inventory control

Workforce

-

General approach to selecting workers was to hire new graduates from high schools for lower level positions and from universities for higher level positions Wages offered were above average for recent graduates in Japan and below average for experienced workers.

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Organization

-

The goals were set, but the plant manager was free to assume those in a way he chose The tactical problems were solved by production employees and plant manager, top staff was responsible for long term planning issues

Sunnyvale Plant: • Always had been a technological leader in the past but currently on the verge of losing that statues because of excess unutilized capacity for more than 5 years now. • The plant produced ~4500 different models • It was typically a process focused organization • Emphasized on maintaining healthy relationship with big clients by accepting customized orders even after finalization of production schedule Plant Layout: Bottle-neck process

Terminal Stamping and Fabrication Plastic Housing Molding

Holding Area

WIP Holding Area

Terminal Plating

Assembly and Testing Area

Packaging Area

Finished goods inventory

Comparison of Operational metrics for DJC and ACC: Criterion

DJC Kawasaki

ACC Sunnyvale

Remarks

Product Range

640 models

~ 4500 models

More customized models

Annual Cost per mold

$ 29000

$ 40000

Average life of mold

3 years

8 years

Plant layout

Product Focused

Process Focused

Packaging

2000 units per reel

10 to 1500 units per reel

Packaging as per customer requirement

Raw Material Inventory

5 days

10.8 days

Higher inventory costs

Processing lead time & WIP inventory

4 days

10 days

High lead time due to more customization of models

Finished goods inventory

56 days

38 days

Lower serviceability

Average Production run 7 days

1.5-2 days

Higher setup costs for ACC

Plant utilization

~ 90%

70%

Excess unused capacity

Employees

94

396

Kawasaki highly automated

Production(1991)

700 mn units

420 mn units

Comparison of labor use

Output/Sq ft

15.1

10.9

Effective Utilization

75.4%

30.2%

Less process failure for DJC

Comparison of DJC’s potential in Kawasaki and USA:

DJC/ Kawasaki, 1991 ACC/ Sunnyvale, 1991 Product Raw Material 12.13 9.39 Packaging Raw Material 2.76 2.10 Direct Labor 3.02 Indirect Labor 0.75 Total Labor Costs 3.77 10.30 Electricity 1.40 0.80 Depreciation 1.80 5.10 Other Costs 4.24 6.10 Total Costs 26.10 33.79

DJC/ USA, 1991 7.28 1.66 3.32 0.83 4.15 1.12 1.80 4.24 20.24

DJC in US is a substantial threat to ACC in a highly competitive market

Reasons for difference

Production process

High product variation led to frequent batch changes in ACC(1.5~2 days) reducing efficiency and expertise on any product.

Utilization

Continuous runtime at Kawasaki increases its overall utilization and also higher per employee output adds to efficiency at DJC

DJC had lesser variations and product focussed plants(similar to PWP) with average runs of 7 days

“Pre-automation” and similar such guidelines and disciplined practises ensured efficiency

Quality

Defect rate at Sunnyvale is too high at 26000 dpmo due to the final product inspection and newer measures like implementation of SPC and other measures have shown minimal progress DJC utilizes process inspection and thus better control; quality losses of DJC and ACC over total production are 0.7% and 1.6% which is substantial

Cost

Cost comparison indices of US/Japan indicates that Raw material and electricity is cheaper in US while labour is cheaper in Japan

Cost advantages to ACC will be lost once DJC enters US

Material Cost savings due to design changes : $6.01 per 1000 units DJC’s wise investment in technology development and lower mold life helped them in achieving less depreciation cost(6.89% contribution to total cost as against 15.09% for ACC)

FA Utilization

Kawasaki

Sunnyvale

Plant not operating

5.7%

28.6%

Non scheduled

13.2%

23.5%

Process Failure

1%

8.9%

Process Changeover

2%

4.8%

AMCC

DJC

• • •

• Highly flexible and driven by marketing/sales team

Process focus

More cost or time consuming

• Carefully planned schedules tightly connecting processes with manufacturing favoured

Product focus

Highly optimized for cost and time

Process wise, both are optimized and operate at highly efficient scales; however DJC has a more focussed manufacturing strategy that allows lesser variations but is much more efficient. The suitability of the processes is the major reason for cost advantage to DJC For example, ACC uses only final inspection as its quality measure while DJC undertakes process while quality checks that ensures lesser defects in the final product

Efficiency of operations are not the major source of the cost differences, it is whole process that needs to be adapted to better scale