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MANUFACTURING
STRATEGIES
American Connector
Company
Nitin Choudhary 66
Onkar Mohole 67
Palak Thakuria 68
Pankaj Sonawane 69
Pankaj Tadaskar 70
1
Flow of Presentation
2
3
American Connector Company
3
Four Plants
in US
Two Plants
in Europe
The Product : Connectors
Application
• Automobiles
• Electronic Goods
• Computers
• Army Equipment
• Telecom Intruments
Facts
• Constituted only 2% of final
product
• A one year contract with vendor
considered industry standard
• Cost ranged from a few cents to
several dollars
• Housing made of polyester raisin
and pins covered with different
metals
4
The Product : Connectors
5
Wire to Board
Board to Board
Wire to Wire
Chip to Board
The Connector Industry
• Rapid growth
• Growing demand due to computer application
1970s
• Demand started to slow
• Too many vendors & capacity
1980s • >900 suppliers
• Sales down by ~4%
1990s
The Connector Industry
0
500
1000
1500
2000
2500
3000
AMP ACC DJC
Sales $ Million FY ‘ 91
Sales $ Million
Tier 1
Tier 2
Tier 3
Total Worth of
Industry:
$ 16 Billion
The Kawasaki Plant • 1980 : Increased labor and raw material cost, rising yen and
increased import penetration
• Need for the highly automated and continuously operating
plant which meets following 3 goals
100% Asset Utilization
Yield on raw material must reach 99%
Customer complaint could not exceed 1/million units of
output
The Kawasaki Plant • Kawasaki :
• Near to major Japanese companies
• Near the major raw material suppliers ( Daily/ Weekly Supply )
• Capacity 800 Million per year
• Initially plant produced 80% to 90% of total volume
• 75% volume sold in Japan and 25% was sold in developing Asian Countries
• Plant operated 24 Hrs/day , 7 days /week and 330 days/year
Plant Layout
Terminal Stamping
Housing Molding
Assembly
Packaging
• Continuous flow because of shorter processing time
• Automatic Assembly
Wire to
Wire
Item to
Board
Board to
Board
Wire to
outlet
Cellular Layout
Quality Control
C B
A Quality Control Standards
Process Inspection
Precision
D Quality of designs
E Waste Reduction
11
Production and Inventory Control
12
Minimize
losses
Avoid unplanned
orders
Less SKU’s
Long run
Minimize WIP
Smooth Material Flow
Workforce
13
New
E
mp
loyees
Recruit New graduates
Paid more than average
Extensive Training
Old
E
mp
loye
es
Paid less than average
Reduce Employees
Preference to
Young workers
Discouraged
from staying
Organization Structure
14
Strategic Decisions
Tactical Decisions
Less employees in Control Group
Automation
Reliability
3 Layer Hierarchy
Product Technology • Goal – continuous and reliable operation and economize on
raw materials
• Cost reduction measures
• Mold design
• Less expensive resins
• Reduced mass of Housing
• Waste Reduction
• Tin Plating
• 2,000 packing Reel
15
Analysis of Kawasaki’s Material Cost Savings
0
5
10
15
20
25
Kawasaki'scost using
ACC'sdesign &
packaging
MoldDesign
LessExpensive
Resin
ReducedMass ofHousing
WasteReduction
Tin Plating 2,000 piecereel
Kawasaki1991
Sunnyvale1991
$20.90 0.21 0.48 0.18 1.05 3.50
0.59 $14.89
$11.49
16
Process Technology : Basic Principles
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Principle 1 “Pre-automation”
Principle 2 Preference to older reliable processes
Principle 3 Huge investment on Molding process &
maintenance
Principle 4 In-house Technology development
Principle 5 Inter functional co-ordination
Principle 1 • Process automation only after it was understood, properly
designed and laid out.
• Each Assembly line was laid out in a continuous straight
line from stamping to packaging
• Single operator can run two assembly lines
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Defining flows Optimizing
Worker movements
Elimination of inventories
Improving efficiency
Pre-automation
Principle 2 • It better to use old and reliable process rather than new, less
reliable one.
• Instead of taking chances, relied on continuous improvement
of existing processes
• Process were operated below max speed to ensure smooth runs
• Equipments were handled in order to reduce Downtime
19
Principle 3 • Absolute Reliability on upstream molding process
• Molding group comprises of experts in various fields
• High emphasis on mold maintenance and repair
• Frequent replacements to avoid risk of failure
20
• 99.99% Mold Yield
Principle 4 • Reliance on in-house technology development
• DJC was concerned about losing competitive edge if relied on
equipment vendors for process technology
• All proprietary modifications were made in-house
• All designing and 50% manufacturing of molds was in-house
with eventually aiming to build 100% molds in-house
21
Principle 5 • Inter-functional co-ordination of all it technological
developments
Technology Development
Division
Product Planning Section
Materials Section
Process Engineering
Molding Technology
Group
22
Sourcing • Close relations with few suppliers of key Raw Materials
• Rigorous quality standards for suppliers
• Quality improvement as result of joint effort of Kawasaki and
its suppliers
• Frequent delivery of RM(daily basis) leading to
• Low inventory levels
• Less space required for storage
23
24
PV-LF Matrix for Kawasaki Plant
25
Manufacturing Capabilities of Kawasaki Plant
Manufacturing Environments DJC
Environment :- Make to stock
• Less raw material inventory --(5 days)
• Carry finished goods inv. Stock for 56 days
• Standardization of product No customization
• Lead time is less( 2 days)
• Facility Utilization (100%)
• Variety – Low (640 No’s)
• Volume – High
• Focused area- Production focus
• Cost per unit - low
• Wastages– very low (0.0001%)
26
Manufacturing Levers 27
Manufacturing Levers
Human
Resources
Organization
Structure
Sourcing
Production
planning &
control
Process
Technology
Facilities
•Reduction in employees
•Higher wages
•Focus on training
•Hierarchical structure
•3 layers of hierarchy
•Close relationships
with few suppliers
•Rigorous Quality
standards
•Long production runs
•Non-flexible Schedule
•Focus on reducing WIP
•Highly automated
•Rigid flow
•Cellular Layout
•In-house designing
•Cross functional
co-ordination
•High investment on
equipments
•Yield upto 99.99%
Adult
3.0
Industry
Average
2.0
World
Class 4.0 Industry
average
2.0
Adult
3.0
World
Class 4.0
World
Class 4.0
28
American Connector Company
28
52% Profit Margin
Customization
High Performance
15%
85%
Custom Orders Standard Orders
29
American Connector Company
29
Million Dollars Investment
Sales
Sales Profit
Profit
52%
1984
43%
1991
Compete Globally
Steady Growth
Maintain
Profitability
30
Sunnyvale plant
1961 • Established with 1 million Capacity
• Capacity maintained ahead of Demand
• Utilization Exceed 85%
1986 • Capacity of 600 millions units per year
• Market Saturated with Connector Industry
1987 • Excess Capacity Industry wide
• Demand drop down
1988 • 50% utilization
31
PV-LF Matrix
• 4500 SKU’s
• 5 Production Areas
• Manual Operations
32
Manufacturing Outputs
Low Flexibility
Good Quality
High Performance
High Cost
Late Delivery
Less
Innovativeness
33
Manufacturing Environments American connector company
Environment :-Make to order
• Customization of product --(15% customization & 85% std product )
• Less finished good inv. Stocks (38 days)
• Lead time is more 10days for std. items & 2-3 weeks for customized orders
• More raw material required-- (10.8 days)
• Facility utilization -(50-85 %)
• Variety – Medium 4500 Nos.
• Volume – Low
• Focused on area-- Engineering and marketing
• Cost per unit – Medium
• Wastages -medium (2.60%)
34
Manufacturing Levers Manufacturing Levers Level of Manufacturing Capability
Human Resource • Employees were considered as investment
• Semiskilled
Organization Structure and
Controls
• Hierarchical, Centralized
• Importance to line than Staff
Productions Planning and
Control
• Complex
• High WIP
Sourcing • Short term contracts
Process Technology • Mature Technology
• Developed Externally
Facilities • Un-frequent changes
• Focused
35
Manufacturing Capabilities
Level of Manufacturing Capability
Manufacturing consists
of routine activities
Production systems keeps up
with competitors and
maintains the status quo.
36
SWOT S O
W T
American
Connector
Company
• Largest connector
company
• Brand Image
• Highly customized
products
• Huge manufacturing
Costs
• Deteriorating Quality
• Problems in Sunnyvale
plant
• Entry of New efficient
competitor
• Increasing operational
efficiencies
• Using Brand image to
drive competitors out
37
SWOT S O
W T
DJC
Corporation
of Japan
• Dominant supplier of
connector in Japan
• World’s most efficient
plant
• Low Price, High Quality
product
• No plant in US as of
now
• No suppliers n US
• Not recognized by US
customers
• No customization as per
customers
• Cartel formation by US
manufacturers may
prevent entry in US
• More demanding US
customers may have
effect plant efficiencies
• Entry into bigger US
market
• Price competition to
existing US connector
companies
COMPETITOR ANALYSIS
38
Case Battleground !!
39
40
Now what is
your
opinion?
They will Kill
us so Strike
first… No need to
panic…its not easy
for them to repeat
same story
Deniese
Jack Andrew
***** Do
competitor
Analysis
first !!!
At ACC Headquarters,1991
41
Follow These Steps !!!
Define Attributes
Classify Manufacturing
outputs set targets
Select the best production
system
Step 1 : Define attributes and collect data
42
Reduced Price
Improved Quality
Increased No. of
Suppliers
Faster Delivery
Attributes
Price Quality
Delivery Performance
Competitor Analysis
43
Attributes Delivery Cost Quality Performance Flexibili
ty
Innovativenes
s
Company
Current
30 days
10 Days LT
33.79 1.6% 1.06/Person
Market
Strong
Competitor
7 Days
2 Days LT
26.10 0.7%
7.45/ Person
Company
Target
Market
Qualifying,
Order
winning
-
Step 2 : Decide Order Winning Output
44
Cost Quality Delivery Performance
ACC: High
quality supplier
image in US
ACC : Cost of
manufacturing
was high
Order Qualifier
So if ACC will produce high quality product with low cost it will be a
“ WINNER”
Order Qualifier
Comparison of manufacturing cost (dollar per 1000 units)
45
DJC/ Kawasaki ACC/Sunnyvale
Raw Material, product 12.13 9.39
Raw Material , Packaging 2.76 2.10
Labor Direct 3.02 -----
Labor Indirect 0.75 ----
Total Labor ---- 10.30
Electricity 1.40 0.80
Depreciation 1.80 5.10
Others 4.24 6.10
Total 26.10 33.79
Comparison of manufacturing cost (dollar per 1000 units)
46
1 • Raw Material Cost of DJC is much higher than ACC Plant
2 • Total Cost of DJC product is 23% lower than ACC
3 • DJC - Equipment Paced Line Flow has good control over cost
4 • ACC – OPL needs to improve on cost even though of low R/M
Cost
MANUFACTURING ENVIRONMENTS Sr. No. Company DJC ACC
Environment Make to stock Make to order
1 Raw material inventory 5 days 10.8 days
2 Finished goods inventory. for 56 days , High 38 days, Low
3 Lead time less , 2 days 10days for std. items & 2-3
weeks for special orders
4 Customization of product No customization 15% customization & 85% std
product
5 Facility utilization 100%) 50-85 %
6 Variety of products Low 640 Nos. Medium 4500 Nos.
7 Volume of product High Low
8 Focused area Production focus Engineering and marketing
9 Wastages very low (0.0001%) medium (2.60%)
Step 3 :Selecting best production System
48
The current
production system is
required one
New Production System is required
Feasible
and can be
put into
service
Feasible
but can
not put
into
service
Not
feasible
New Plant
Raise
capabilities
Find
different
PS and OW
1 2 3
49
HR
OS
PPC
SO
PT
F
1 2 3 4
ACC
DJC
We want
50
EPL is poor
in flexibility
Challenges for ACC
51
ACC DJC
No. of SKU 640 No. of SKU 4500
High Automation Less Automation
ACC Design group should standardize Connector design for reducing no. of SKUs
Marketing group need to market standard product with limited no. of options
The production volume needed to increase to increase utilization
Utilization 30.2 % Utilization 75.4%
52
• Management philosophy
• Pull system though the plant
WHAT IT IS
• Employee participation
• Continuing improvement
• Total quality control
• Small lot sizes
WHAT IT REQUIRES
• Attacks waste
• Exposes problems and bottlenecks
• Achieves streamlined production
WHAT IT DOES
• Stable environment
WHAT IT ASSUMES
JIT Production
53
OPL
15%
JIT
85%
• For customized product share of 15 % - Dedicated OPL can be given to these
products
• For standard products which has share of 85% - 4 production lines will be
formed which will run on JIT production system
customized standard
Solution Suggested for ACC
54
HR
OS
PPC
SO
PT
F
1 2 3 4
1 1 1
2 2
3 3 3
4 4
5 5
6 6 6 6
Row Position :
Change in lever for
new production
system
Column Position :
Corresponding
manufacturing output
55
Manufacturing Lever Improvements
Human Resource • Cross-train workers
Organization Structure • Concurrent Engineering
Production planning •Stabilize production schedules
Sourcing • Develop long-term supplier relations
• Quality checks at suppliers
Process Technology • Reduce equipment breakdowns
Facilities • Make the factories more focused
Lever Adjustments
Strategy for both Market Segments
56
85% 15%
Market
Share
Customized
Product
Standard
Product
•Having just one type of Production
system cannot serve the purpose
•To Cater to both the market
segments, company have to adopt
different strategy
•Two different Production systems
must co-exist to accommodate
demands of different order winning
criteria OPLF EPLF
Concept of Focus Factory
57
Focus Factory: Edge on any one of manufacturing outputs (order winner)
Factory within Factory: Different production systems co-exist within same
factory each one focusing on creation of different manufacturing output
15%
85%
Focus on
customized
products :
OPLF
Focus on
standardized
products :
EPLF
Factory within factory
58
