American Connector Notes

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ACC

ACC Highlights

• 85% standard; 15% custom 4500 products (3,800 + 700) and 600m units pa

• Product variety and quality

• Flexible production

• Focus on product innovation rather than cost or manufacturing process

• Sales from $252m in 1984 to $800m, but gross margins dropping from 52% to 43%

• Fixed asset utilisation = 30.2% versus 75.4% DJC

- Defects rising and post production inspection

- Forecasting and manufacturing schedules difficult

- High indirect labour (46% of labour). Output per employee 1.06m units

- Low plant investment (zero since 96)

JDC Highlights

• 640 products – all standard

• Improved copies of US products

• In house R&D – manufacturing centric (versus marketing

• No export – close relationship and co-located to electronics companies in JPN

• 24 hour operation – excellent plant utilisation

• Invest in technology

- JIT delivery, reduced costs (such as tin), WIP low, low labour costs. Output pe 7.45m units

- Unable to customise

- Inflexible

- Dependent on utilisation and volume – customer concentration

- Susceptible to commodity shocks?

- Higher raw material cost versus US

Situation

- Commodity like and highly competitive market – costs of production critical

- Very real threats but not necessarily from JDC

- Will JDC get payback from investment cost setting up a new factory in USA

Summary

- Can’t be all things to all men – standardise or specialise or split divisions

- Standardise – invest in more efficient production (lose 15% revenue)

- Specialise – become a much smaller entity (sell existing plant to JDC – ready plant, customer base, logistics in place, personnel, etc) and remarket itself

- = review corporate strategy

- Marketing strategy, situational analysis

- Increase profitability versus growth through manufacturing improvements

Product and cost analysis, activity based costing, and pricing strategy;

production line optimization (continuous batch production for 85%);

process reconfiguration including material flows and WIP;

implementation of inventory control measures; and

minimization of indirect staff

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| |Sunnyvale |Kawasaki | |Year Facility Built |1961 |1986 | |Production Type |85% Batch Process |100% Continuous Flow | | |15% Job Process | | |Average Production Rate |420 million units |700 million units | | |(600 million units maximum) |(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 |4 Production Cells with Terminal Stamping, | | |Fabrication, Terminal Plating, Plastic Housing|Housing...
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