1

MANUFACTURING STRATEGIES

American Connector Company

Nitin Choudhary 66Onkar Mohole 67Palak Thakuria 68Pankaj Sonawane 69Pankaj Tadaskar 70

2

Flow of Presentation

IntroductionIndustry

ProfilesProduction Systems

Competitive Analysis

3

American Connector Company

3

Four Plants in US

Two Plants in Europe

4

The Product : ConnectorsApplication

• 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

5

The Product : ConnectorsWire 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

AMP ACC DJC0

500

1000

1500

2000

2500

3000

Sales $ Million FY ‘ 91

Sales $ MillionTier 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

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Quality Control

CB

AQuality Control Standards

Process Inspection

Precision

DQuality of designs

EWaste Reduction

Objectives

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Production and Inventory Control

Minimize losses

Avoid unplanned

orders

Less SKU’sLong run

Minimize WIP

Smooth Material Flow

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WorkforceAUTOMATION

New

E

mp

loye

es

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

14

Organization StructureStrategic Decisions

Tactical Decisions

Less employees in Control Group

Automation

Reliability

3 Layer Hierarchy

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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

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Analysis of Kawasaki’s Material Cost Savings

0

5

10

15

20

25

$20.90 0.21 0.48 0.18 1.053.50

0.59 $14.89

$11.49

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Process Technology : Basic PrinciplesPrinciple 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

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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

Defining flowsOptimizing

Worker movements

Elimination of inventories

Improving efficiency

Pre-automation

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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

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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

• 99.99%Mold Yield

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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

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Principle 5• Inter-functional co-ordination of all it technological developments

Technology Development

Division

Product Planning Section

Materials Section

Process Engineering

Molding Technology

Group

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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

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PV-LF Matrix for Kawasaki Plant

Manufacturing Capabilities of Kawasaki Plant

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Manufacturing EnvironmentsDJC

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%)

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Manufacturing Levers

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%

Adult3.0

Industry Average

2.0

World Class 4.0

Industry average

2.0

Adult3.0

World Class 4.0

World Class 4.0

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American Connector Company

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52% Profit Margin

Customization

High Performance

15%

85%

Custom Orders Standard Orders

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American Connector Company

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Million Dollars Investment

Sales

SalesProfit

Profit

52%

1984

43%

1991

CompeteGlobally

Steady Growth

MaintainProfitability

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Sunnyvale plant1961

• 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 Industry198

7• Excess Capacity Industry wide• Demand drop down

1988

• 50% utilization

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PV-LF Matrix

• 4500 SKU’s• 5 Production Areas• Manual Operations

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Manufacturing Outputs

Low FlexibilityGood Quality

High PerformanceHigh CostLate Delivery Less Innovativeness

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Manufacturing EnvironmentsAmerican 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%)

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Manufacturing LeversManufacturing

LeversLevel 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

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Manufacturing Capabilities

Level of Manufacturing Capability

Manufacturing consists of routine

activities

Production systems keeps up with

competitors and maintains the status

quo.

Average 2.0

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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

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SWOT S O

W T

DJCCorporati

on 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

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COMPETITOR ANALYSIS

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Case Battleground !!

ACC DJC

Cost

Quality

Delivery

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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

JackAndrew

***** Do competitor Analysis first !!!

At ACC Headquarters,1991

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Follow These Steps !!!

Define Attributes

Classify Manufacturing

outputs set targets

Select the best production

system

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Step 1 : Define attributes and collect data

Reduced Price

Improved Quality

Increased No. of

Suppliers

Faster Delivery

Attributes

Price Quality

Delivery Performance

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Competitor AnalysisAttribute

sDelivery Cost Qualit

yPerforman

ceFlexibi

lity Innovative

ness

Company Current

30 days10 Days

LT

33.79

1.6% 1.06/Person

Market

Strong Competit

or

7 Days2 Days LT

26.10

0.7% 7.45/ Person

Company Target

Market Qualifying, Order winning

-

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Step 2 : Decide Order Winning Output

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

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Comparison of manufacturing cost (dollar per 1000 units)

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

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Comparison of manufacturing cost (dollar per 1000 units)

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 ENVIRONMENTSSr. 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%)

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Step 3 :Selecting best production System

The current production system is

required oneNew 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

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HR

OS

PPC

SO

PT

F

1 2 3 4

ACC

DJC

We want

50

EPL is poor in flexibility

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Challenges for ACC

ACC DJC

No. of SKU 640No. of SKU 4500

High AutomationLess 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%

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• 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

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OPL15%

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

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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

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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

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Strategy for both Market Segments

85% 15%MarketShare

Customized Product

StandardProduct

•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

criteriaOPLF EPLF

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Concept of Focus FactoryFocus 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

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THANK YOU!!!