OM-1 case Study assignment

Submitted By::

Tanushree Dwivedi 177

Tanvi Manek 178

Tanvir Raza 179

U Suman Sastry 180

Ved Prakash 181

Vishal Goel 182

Overview of the case

American Connector Company (ACC) and DJC Corporation (DJC) were both mid

level 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.

Like most of the Japanese 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 ACC’s 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. By answering the questions mentioned in the following slides

we will try to explore the above mentioned issue.

comparison of the manufacturing structures and strategies of

DJC’S Kawasaki plant and ACC’S Sunnyvale plant

Through the following bullet points we will try to highlight the major differences

between the manufacturing structure of DJC’S Kawasaki plant and ACC’S

Sunnyvale plant

Kawasaki : Planned from Initiation. Sunnyvale: Capacity and technology was

added as and when required.

Kawasaki had a dedicated production unit for each of the four types of connectors

developed, thus in effect having 4 production areas. In comparison, at Sunnyvale,

the whole production area was used to develop all products.

In terms of packaging, the Sunnyvale plant was quite flexible whereas at

Kawasaki, packaging was standard, and was different from the industry standard.

Sunnyvale plant maintained a finished goods inventory of 38 days, whereas

Kawasaki maintained a finished goods inventory of 56 days.

In Kawasaki, the production schedule was fixed and would not change under any

circumstance or for any special order from customers. This gave them an upper

edge, in terms of controlling costs. Whereas, in Sunnyvale, although policy stated

that the production schedule for any given day was to be decided upon 30 days in

advance, actually the schedule was changed quite frequently to meet customer

demands. Thus , while the buzz word for the Kawasaki plant was cost cutting, for

the Sunnyvale plant it was flexibility.

In terms of products, the Kawasaki plant stressed on continuous and reliable

operations and low raw materials cost. This was because, in Japan, the cost of raw

materials was twice as high as in the United States. So while the Kawasaki people

studied and adapted designs from American companies, they did away with most

of the extras that they felt did not add any value for their customers. Thus, despite

high difference in raw material prices, Kawasaki cost per units were only slightly

higher than Sunnyvale’s cost per unit connector.

In terms of process, for Kawasaki, the idea was to concentrate on automation.

Thus a lot of pre-automation work was performed, in order to perfect the

efficiency of the automated process. This was different from Sunnyvale.

At Kawasaki, technology used was old and reliable upgraded in-house, as

compared with Sunnyvale, where in the growth years heavy investment had been

made into buying new technology as per requirements, which would lose its edge

in a few years’ time.

Kawasaki identified moulding as a key area, and investments were accordingly

made. Required experts were hired for the moulding technology group, the moulds

received regular maintenance, besides basic daily maintenance. At Sunnyvale, this

was merely bought from vendors as standards and requirements changed.

There was a dedicated “Technology development division “ at Kawasaki to co-

ordinate between various divisions in product planning. In terms of hierarchy, the

senior management took long term decisions, but staff was given freedom in day

to day decisions. In Sunnyvale, each division was headed by a supervisor who

reported to a director.

Impact of manufacturing strategy of each plant on its ability to

achieve different competitive objectives, such as low cost, high

reliability, flexibility and product innovation

DJC’s Kawasaki Plant

The chief goals of the kawasaki plant are::

The 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

Fulfillment 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

Proximity to major raw materials suppliers

Availability of young, highly skilled workers

DJC Corporation, dedicated to process positioning and robust systems engineering,

required that the Kawasaki facility be highly automated. The pre-automation

process helped analyze process flows, worker movements, and raw material

consumption. DJC also believed it better to utilize an older, more established

process, rather than implementing newer unproven processes. Continuous

improvement of existing processes was highly relied upon.

Flexibility-Kawasaki plant had complete control over its schedule and mix and

refused to make changes for unplanned orders.

-They used to ensure a smooth flow of materials

-Hold less raw material inventory

Product Innovation

-In-house technology development

- Made all proprietary design modification in-house

-It used to simplify production and reduce cost by packaging its connectors only on

tape and reels.

-Pre-automation

-The technology development department coordinated various functions to improve

product characteristics. It removed any design feature that didn’t add value to the

customer.

ACC’s Sunnyvale Plant

Flexibility

They decide on the production schedule 1 month prior to the actual date. This

helps to accommodate rush orders and requests from more important customers.

To maintain flexibility the company tried to expand capacity ahead of expected

growth in demand.

High reliability

Till 1986 it used the latest production equipments to improve quality. After

1986,the finance people hasn’t let the manufacturing people buy the latest

equipments due to the fall in demand. The company used to ensure that the defect

shouldn’t exceed 1 defect per 1 million units. It met customer delivery

requirements with quality and on time.

Product Innovation

It used to cater to computers, telecommunication equipments and scientific

instruments sectors. The plant produced 4500 different models in 1991 while in

1981, the plant produced 3000 models due to increase in number of individual

product manufactured. It used to buy latest technologies for its production

channels. It also used to cater to custom models.

Low Cost

The company ensures that they get the raw material for product and packaging at a

lesser costs making the total cost lesser. Also, cheaper electricity costs.

If DJC builds a new plant in US then the factors on which they

should focus more are

They should drop that IN-HOUSE technology development strategy at least for the

first few years till the time they acquire substantial market share in the US and

have sales to achieve break even for that.

They have improve their flexibility as 15% of ACC’s production is from

customization and the rest is from four types of products that means 85%, which if

divided equally among them is 21.25% of production . Therefore one looking to

compete with ACC in the US cannot ignore this sector.

As one knows how fast electronic industry is growing and everyday or every

weekend one can see a new product in the market so to cater to fast changing

environment they should also look for new technologies and improve them with

time too, which they have been ignoring.

If Sunnyvale plant doubles its production run length then it will be very difficult for

them to schedule this much complex production considering they at present are

making more than 4500 different connectors. Moreover, it WIP inventory will

increase and finished goods inventory will increase, which will further aggravate

the situation.

DJC is a very serious threat to ACC as by their current at Kawasaki is able to compete

them in international arena when they are working on raw material which is

double of the cost of raw material at which ACC is working.

Changes recommend in the operations of ACC’s

Sunnyvale plant

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*7

considering the demand and have a separate layout for customization.

They need to have a particular standard for packaging i.e. they are currently

packaging at 10 piece plastic bag to 1500 pieces of loaded reel, which would

decrease the worker needed to handle packaging.

They need to automate their process by which they can decrease their man power

from 396.