GROUP A

 Aniruddha Majumdar - 2018PGP005

 Anurag Pareek - 2018PGP086
 Paritosh Malondkar - 2018PGP082
 Pritish Reddy - 2018PGP094
 Vipul Garg - 2018PGP121
 Deeksha Dohare - 2018PGP143
HOW SERIOUS IS THE THREAT OF DJC TO
AMERICAN CONNECTOR COMPANY?
 Raw material
cost
If DJC sets up manufacturing
base in USA, it will benefit
from lower raw material costs
which will be reduced from
14.89 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
Cost head
Raw material, Product + Packaging
Inventory
Period
The raw material inventories of
DJC is averaging at 5 days
compared to 10.8 days of ACC. So,
DJC is incurring less Inventory cost
which reduces finished good cost
Finished Goods Cost
KAWASAKI ($/1000 Units) PLANT IN USA
12.13+2.76=14.89 14.89 * 0.6 =8.93
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 Operational Disadvantages
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 utilization is maximum (75.4% of Kawasaki VS.
30.2% of Sunnyvale)

Due to high number of product variations in customer orders of

Sunnyvale which uses batch production there is frequent changes
in product manufacturing lines hence resulting in lower efficiency
which could be obtained in case of standardized products
(Product lines were as small as 1.5 to 2 days)

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 .
The speed of customer order As Sunnyvale’s defect rates
delivery of DJC is one day are at 26000 PPM of
(because of highly automated production which is
production process at relatively high as compare
Kawasaki plant) to DJC

Quality
the speed of customer order Control The Quality control of DJC
delivery of ACC is more than is process centric where
one day (because of batch each process is QC
Delivery
production process monitored whereas in
Speed
producing about 4,500 Sunnyvale only end
varieties of connectors) product is inspection

The quality losses of

DJC and ACC over
total production are
0.7% and 1.6% 5
HOW BIG ARE THE COST DIFFERENCES BETWEEN DJC’S
PLANT AND AMERICAN CONNECTOR’S SUNNYVALE PLANT?
CONSIDER BOTH DJC’S PERFORMANCE IN KAWASAKI AND
IT’S POTENTIAL IN THE UNITED STATES.
 DJC’s Plant vs American Connector’s Sunnyvale Plant

Raw Material

• The raw material cost in the Kawasaki plant is relatively high compared to ACC Sunnyvale’s plant
• In the event of a new plant being set up by DJC in the United States there could be a considerate cost
reduction, since the cost indices US vs Japan is lower (0.6:1)

Cost Head Kawasaki ($/1000units) Plant in US

Raw Material 12.13+2.76=14.89 14.89*0.6=8.93

Packaging Cost

The packaging cost of Kawasaki plant is lower, when compared to Sunnyvale, due to the adaptability of
standardised product packaging technology

Moulding Process

• Due to a higher batch of housings being assembled during plating operations, there was lower run
time for moulding operations (already down 1.5 days)

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 Labour Cost

• The Work In Progress and Finished Goods Inventory is higher in ACC Sunnyvale plant when
compared to Kawasaki plant
• The man power required to handle this excess inventory space also goes up
• This leads to an increased complexity in the plant environment and higher labour cost

Electricity Cost

• On comparing the electricity cost of production at the Kawasaki plant and the Sunnyvale plant,
we can see that the cost is higher for the Kawasaki plant
Note: Electricity cost indices of US vs Japan is 0.8:1

Cost Head Kawasaki ($/1000 units) Plant in US

Electricity 1.40 1.40*0.8=1.12

When the cost indices of US vs Japan are taken into account, we can see that the cost of manufacturing operations of
DJC in US could be as low as 25% of the current production cost of $26.10.
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WHAT ACCOUNTS FOR THESE DIFFERENCES? HOW MUCH
OF THE DIFFERENCE IS INHERENT IN THE WAY EACH OF THE
TWO COMPANIES COMPETES? HOW MUCH IS DUE
STRICTLY TO DIFFERENCES IN THE EFFICIENCY OF THE
OPERATIONS?
• The overall utilisation of • The cost of raw material
fixed assets is higher for in Japan is twice of what it
DJC Kawasaki due to is in America
continuous factory
runtime in comparison to
ACC Sunnyvale’s plant

Raw
Fixed Asset
material
Utilisation
cost

Quality Production
issues Process

• Compared to ACC, the • DJC uses continuous

number of defective production process, as it
products produced by has a smaller product line
DJC is very low • ACC uses batch
production process,
reducing efficiency due to
higher setup time

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 • DJC has in-house R&D
team that produces
machines based on their
Technological need
Advantage
• Customizability eliminates
need for external
innovation

• DJC ordered raw material

Low as per requirement,
inventory maintaining low inventory
cost • Implemented pull strategy
for manufacturing

• Location was chosen near

major Japanese
electronics companies and
Location also raw material
Advantage
suppliers
• This eliminated logistical
challenges

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 • 26,000 defective units were produced in 1
million at Sunnyvale
Operations • The low quality led to reduced productivity and
profitability

• ACC wasn’t funding technology upgradation,

leading to low operational efficiency
Finance • DJC’s high efficiency plants, like the one in
Kawasaki, can lead to loss of business for ACC

• The hierarchy at ACC focused on marketing and

Organization engineering more than production
Structure • DJC laid equal emphasis on all departments,
motivating an improvement in productivity

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 WHAT SHOULD AMERICAN CONNECTOR’S
MANAGEMENT AT THE SUNNYVALE PLANT DO?
ACC needs to decrease mould recycling time to save
process time

ACC can save cost on colour coded cables/connectors

which may be beneficial in longer run

ACC needs to control processing lead time from 10 days

to a substantial extent for better order management and
less finished product inventory will pile up

ACC need to line up the facility layout and minimize

inventory holding costs. It needs to follow pull strategy for
raw materials in production line

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 Focus on increasing fixed asset utilization
It can be controlled using increased amount of machinery to
handle different moulds. The moulds producing less number of
specific type of connectors can be for frequent changeover and
using specific fixed lines for large size order which would run for
longer period and frequent changing lines fixed for smaller
orders.

Focus on quality through R&D

Reducing design flaws through better R&D support and good
quality raw materials will help reduce the low yields and adoption
of stringent standards for raw material will eliminate the trouble
to check every batch of raw materials

Organizational focus should on production team

ACC organizational hierarchy was more inclined towards
marketing and engineering teams and lesser stress on
production team which is stark contrast from DJC which had
equal stress on the production team; this was a motivational
factor for increase in productivity at DJC. ACC needs to follow on
similar model for operations set up in the organization to
promote production oriented structure and greater balance

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 ACC current operations could use
cost control measures, as the
same has been increasing
Improving the compactness of the
connectors will bring competitive
advantage
Defect rate of 26,000 in a million
implies imperfections that there is
need of quality control inspection
required at each process level
unlike the current practice of end
product inspection
There is requirement of in-house
R&D to develop technical
innovations for production
process to have a technological
edge over competitors
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