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    American Connector Company: Case Analysis Report

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    Kalyan Mukkamula
    The document is a case analysis report submitted by students to their professor regarding American Connector Company. It analyzes the potential threat from DJC, a Japanese competitor, entering the US market. Key points discussed include: - DJC relies on in-house technology development and has lower costs that could allow it to offer similar products at lower prices than ACC. - Major cost differences between DJC's Kawasaki plant and ACC's Sunnyvale plant include lower raw material, packaging, electricity and labor costs for DJC. - The differences are due to factors like higher utilization rates, continuous production processes, and lower defect rates at DJC compared to ACC's batch production approach with higher quality issues

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    American Connector Company: Case Analysis Report

    Uploaded by

    Kalyan Mukkamula
    113 views5 pages
    The document is a case analysis report submitted by students to their professor regarding American Connector Company. It analyzes the potential threat from DJC, a Japanese competitor, entering the US market. Key points discussed include: - DJC relies on in-house technology development and has lower costs that could allow it to offer similar products at lower prices than ACC. - Major cost differences between DJC's Kawasaki plant and ACC's Sunnyvale plant include lower raw material, packaging, electricity and labor costs for DJC. - The differences are due to factors like higher utilization rates, continuous production processes, and lower defect rates at DJC compared to ACC's batch production approach with higher quality issues

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    The document is a case analysis report submitted by students to their professor regarding American Connector Company. It analyzes the potential threat from DJC, a Japanese competitor, entering the US market. Key points discussed include: - DJC relies on in-house technology development and has lower costs that could allow it to offer similar products at lower prices than ACC. - Major cost differences between DJC's Kawasaki plant and ACC's Sunnyvale plant include lower raw material, packaging, electricity and labor costs for DJC. - The differences are due to factors like higher utilization rates, continuous production processes, and lower defect rates at DJC compared to ACC's batch production approach with higher quality issues

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    113 views5 pages

    American Connector Company: Case Analysis Report

    Uploaded by

    Kalyan Mukkamula
    The document is a case analysis report submitted by students to their professor regarding American Connector Company. It analyzes the potential threat from DJC, a Japanese competitor, entering the US market. Key points discussed include: - DJC relies on in-house technology development and has lower costs that could allow it to offer similar products at lower prices than ACC. - Major cost differences between DJC's Kawasaki plant and ACC's Sunnyvale plant include lower raw material, packaging, electricity and labor costs for DJC. - The differences are due to factors like higher utilization rates, continuous production processes, and lower defect rates at DJC compared to ACC's batch production approach with higher quality issues

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 5

    American Connector Company

    Case Analysis Report

    Submitted To - Prof. Janat Shah

    Submitted by – B 14

    Shailendra Singh | Shivam kamboj

    Shwet Nisha | Vivek Rathore

    In Partial Fulfillment of the Requirement for

    Operations Management Course

    Q1. How serious-is the threat of DJC to American-Connector Company?


    DJC, if enters the US market, can give some serious competition to American Connector
    Company due to the following factors:
    1) DJC relies on in-house technology development which is developed by engineers with
    strong competencies. This gives them a competitive edge over ACC who relies on
    outsourcing their manufacturing process development. The same technology can be
    accessible to the competitors of ACC generating similar outputs in terms of quality.
    2) Entering US, the Raw Material costs for product as well as packaging will reduce by
    40% making it to $8.9 per 1000 units as opposed to $14.89 before. Electricity costs
    will also decline by 10%. Even though the labour costs for both direct as well as
    indirect will increase by 10% the overall change in costs will be negative reducing
    overall costs.
    3) DJC offered lower lead times averaging 2 days as compared to ACC for which it
    averaged 10 days.
    4) Output per employee for DJC’s Kawasaki plant is 702.8% of ACC’s Sunnyvale plant
    which is a primary reason behind DJC’s high production. Also, utilization of fixed
    asset for DJC is-74.5% in comparison with 30.2% for ACC’s Sunnyvale plant.
    5) Kawasaki plant due to standardization of its products has lower quality losses as
    compared to ACC which offers custom products as per customer’s requirements.

    The above-mentioned advantages will help DJC make similar product offerings at lower
    prices. Consequently, DJC can capture the market share of ACC in the segment of standard
    connector products.
    The factors that give ACC the advantage is quality assurance and custom offerings which
    made up to 15% of ACC’s total sales volume.

    Q2. How big are-the cost differences-between DJC’s plant and American Connector’s
    Sunnyvale-plant? Consider both DJC’s-performance in Kawasaki and its potential in US.
    The major differences in cost for DJC, if we compare it to Sunnyvale, they are followings
    Raw material: If we see, the current situation of current-raw material-cost for the product
    and packaging in Kawasaki plant then we see that it is comparatively high then ACC
    Sunnyvale’s plant. DJC is planning to set up a plant in USA, therefore there is the possibility
    of cost reduction, as the cost ratio of Japan vs US is (1:0.6)
    Cost-head USA Plant Kawasaki-($/1000 units)
    Packaging+ product, Raw- 0.60*14.89 = 8.936 2.76+12.13=14.89
    material

    Cost of packaging: As compared to Sunnyvale, the packaging cost of Kawasaki plant is


    lesser due to some factor like standardisation in product packaging technology.
    Cost of labour: Due to finished goods inventory and WIP being high at-ACC Sunnyvale
    plant in comparison with Kawasaki the requirement of man power to handle the excess
    inventory due to that the inventory space increased due to that complexity increased of the
    labour cost and plant environment.
    Cost of electricity: The comparison of Sunnyvale’s plant and Kawasaki plant. The
    electricity cost of Kawasaki is Higher as electricity cost ratio Japan vs US is (1:0.8).
    Cost head Plant in USA Kawasaki
    Electricity 0.80 * 1.4 = 1.12 1.4

    Moulding process: Since there is high batch housing during the time of plating operations
    in the lower runtime for moulding operation. If we take into consideration the COGS ratio of
    Japan vs US and above cost factor and manufacturing operation of DJC in US seems to be
    low up to 25% of present production cost of $26.10.

    Q3. What accounts-for these differences? How-much of the difference is-inherent in the way
    each of-the two company-competes? How much is due strictly to differences in the efficiency
    of the operations?
    The reasons for these differences are:
    a) The raw material, in Japan costs almost double of-that in the US.
    b) Because they have a policy of operating the plant 24 hrs. a day, 7 days a week and 330
    days a year, they avoided the start-up and shut- down costs. This helped in reaching very high
    Fixed asset utilization for DJC as compared to American Connector company's Sunnyvale
    plant.
    c) DJC followed the principle of continuous production which reduced the number of
    variations in their product whereas in ACC, due to batch production, any changes in product
    required changes in production line. This led to lower efficiency.
    d) The quantity of defective goods that were produced was very low in DJC as compared to
    American Connector.
    The inherent difference in the way these companies compete are-
    a) DJC believed in in-house Research and Development which gave them an advantage over
    their competitors. They did not require to procure machines from outside as they produced as
    well as customized their own machines according to the changes in customer's needs.
    b) DJC maintained a relatively low raw material as inventories as they followed a pull
    strategy in their manufacturing process. This led to low inventory cost.
    c) Their Kawasaki plant was in such a way that their suppliers as well as prominent
    electronics companies were near. This helped them in reducing their logistics costs.
    The efficiency parameters in DJC was such that they produced very few defective outputs
    whereas the Sunnyvale plant was producing 26000 defective units per million.
    If DJC came to the US then, American Connectors would lose to them as DJC operated at
    very low cost. Also, the finance department in ACC was not providing funds for getting
    technologically better machines which was resulting in low efficiency. Other than that, the
    management was more interested in other aspects like marketing and engineering rather than
    production.

    Q4. What should-American Connector’s-management at the-Sunnyvale plant do?


    Following are the recommendations for American connector management to increase
    productivity:
    For ACC current operations there is a need for taking cost control measures because it has
    increased and figures for quality control have gone worse.
    At Sunnyvale, there are quality control issues with defect rate of 26,000 per million. It
    implies that imperfections are there in the processing of the batch. So, quality control
    inspection is required at all levels of the process rather than the current method of inspecting
    at the end.
    Innovations on product design which can restrict the competitors on reverse engineering of
    ACC’s product. Also, increase in the connector’s compactness will help in developing
    competitive advantage.
    For technical innovations within production process an in-house Research & Development is
    required. This would result in producing in-house machinery to have a competitive edge in
    terms of technology.
    In ACC, organizational hierarchy has less focus on production team in comparison to their
    inclination towards engineering and marketing team. Whereas in DJC they have set equal
    priorities to all departments. This helps in motivating employees to increase the productivity.
    There is a need to follow similar model by ACC for operations so that production can be
    increased, and a better balance can be formed.
    Recycling time for molding is high at ACC. Reducing it will save time and will help in
    introducing new designs. Also, ACC should minimize inventory holding cost and line up the
    layout of the facility. Pull strategy should be followed for raw materials in the production-line
    for better results.
    The major issue at ACC is the quality control issue. A lot of these issues have been identified
    and needs focus. Better quality of raw materials and R&D can help in the reduction of design
    flaws which will further helps in improving the low yields. Good quality material does not
    require too much testing and by following strict standards for raw material there will be no
    need to check all batches of materials.
    Color coded connectors and cables in longer run may be beneficial so ACC can save cost on
    them.
    Control on lead time for processing from 10 days to a substantial amount is required to
    improve order management and reduce the inventory pileup of finished products.
    ACC should decrease operational cost and increase the utilization of fixed asset by looking at
    shutdown costs and start-up. If the amount of machinery increases to handle molds then it can
    be controlled, also those molds that are producing less type of connectors needs frequent
    changeover. For large size order specific fixed line should be used and for smaller orders
    frequent changing lines should be used.

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