American Connector

7/21/2019 American Connector

1/20

American connector co. (A)

Electrical Connectors

Product-market-technology characteristics:

volume: med-high

value: low-med

functionality: critical variety: med-high(in every electrical/electronic device)

PLC stage: mature

cometition: high technology: low-med caital intensive


2/20


Cometitive dimensions:

cost

!uality (si"e# weight# relia$ility# etc) delivery


3/20


%CC &'C %mong to * %mong to *

+ ,erves comuter# telecom# ,erves comuter# telecom#

scientific instrument industries consumer elec ndustries

. rmargin droed to 0.1 $y rmargin sta$le at 2*10 ,trategy: offer $road variety# ,trategy: low cost roducer3

including customi"ed roducts3 narrow range of high vol

emhasi"e fle4i$ility connectors

5istorically# the two cos were searated $y geograhical

mkt focus as well as strategic mkt osition


4/20


ACCs Sunnyvale plant

6erminal st7 fa$rication

6erminallating 5ousing

molding

%ssy 7testing

Packaging


5/20


6erminal st

7 fa$rication

6erminal

lating

5ousing

molding

%ssy 7

testingPackaging

DJCs Kawasaki plant


6/20


Cost item Change in 6 years Share in late 90s

DJC ACC DJC ACCr/m roduct *82 *9* .1 +81

r/m ackg *80 *9. 81 1

la$or *.8 + +*1 .*1

electricity *2; *00 1 +1

dereciation *+0 *9+ 91 21

other (***units): &'C: +*+3 %CC: ..8

Product

design

changes

%utomation3

?ulti-fn trg

5igh

caacity

util"n

?ore

,@As

?ore admin

7 coord


7/20


6rade-offs involved: caital cost v/s running cost

caital cost v/s BP holding cost

caital cost v/s cost of coordination# control#


8/20


6rade-offs involved (continued): sulier develoment cost v/s cost of delay# r/m !uality

in-house mfg of key e!uiment v/s risk of cometition

caacity thru imrovement v/s caacity thru addition risk of losing customers due to standardi"n v/s cost of

customi"ation


9/20


&'C vs %CC

&'C has lower costs# and has demonstrated the

a$ility to reduce costs over time

Potential sources of cost differentials:

DAtili"ation-driven cost differences

D&ifferences inherent in each firm>s strategy

D&ifferences in oerating effectiveness/efficiency


10/20


Atili"ation cost differences

&ereciation rate at current caacity utili"ation (=/>*** units):

2* (%CC) 8* (&'C)

Current outut ( ?illion =):

0+* (%CC) ;** (&'C)

&esired (rated) outut ( ?illion =):

** (%CC) 8** (&'C)

&ereciation rate at desired caacity utili"ation (=/>*** units):

0+* (%CC) 28 (&'C)

Only a small difference costs are due to utilization


11/20

American connector co. (A)Cost differences due to oerations strategy

Area DJC ACC

orgn structure mfg centered mktg 7 engg centered

layout roduct-focused rocess-focused

roduct engg standardi"ation# variety (21 customi"ed)

r/m cost# &?

rocess engg reduce matlflow# rocess-wise#

increimrovemnt# radical innovation#

new rocess re-auto new rocess has low yield

!uality low defect rate confto customer# insection

PPC long runs# short L6# short runs# long L6# ?FP#'6G?FP# hi f/g invy non-synchr# small f/g invy

caacity high utili"ation# maintains e4cess caacity#

imrovement addition

workforce hi worker dy# lo worker dy#

less indirect la$or more indirect la$or


12/20


Comarison of oerations tasks:

&'C %CC

minimi"e running cost# minimi"e initial investment cost(H)#

increase scale#

rocess engg-driven !uality# insection 7 PPC driven !uality#

customi"ed !uality#

imrovement led innovation# techac!uisition led innovation#

minimi"e lead time# PPC# /BP driven delivery#imrove on-time delivery lan for variety


13/20

American connector co. (A)Cost differences due to oerations strategy

Item DJC ACC

Low cost

Less innovative

Less fle4i$le

5i fle4i$ility

Cust resonsiveness

5igher costs

Cometitive

riorities

%vg selling rice = 2++* = 29+8

le4i$ility

Cost

&'C

%CC


14/20


Cost differences due to oerating effectiveness

le4i$ility

Cost

&'C

%CC

&'C+

,trategy related ga

Efficiency ga


15/20

American connector co. (A)Cost differences due to oerating effectiveness

Material cost differences:

Efficiency related: mold design (=*+) G less e4ensive resin (=*08)G less mass of housing (=*8) G less waste (=*2) I =9+

,trategy related: tin lating (=.2*) G +*** iece reel (=*29) I =0*9

a!or cost differences:

La$or cost difference# adJusting for A, oerations: =2

La$or cost difference# assuming %CC can oerate full caacitywithout additional la$or (0+1 increase in la$or dy): =.*+

"i#ed cost differences:

%CC>s underutili"ation due to inefficiency: unlandowntime (+.2) Grocess fail(89) G revmaint(+0) G !uality loss () I .21

%CC>s underutili"ation due to strategy: lant not oerating (+8) Grocess changeovers (08) I ..01

ACC is forfeitin$ a lot of efficiency !y servin$ commodity mktvia an o erations strate develo ed for customized mkt


16/20

Lets fit ACC & DJC in o!"Do#n $it $rame#or%

KPI or Ops Task Cost Quality Delivery Customization

Priority of KPI High (OW) Functional (OQ) High (OW) High for specializedneeds;Low for rest

Sub-KPI Element R/M cost;Fied opn! "ost;#n$entor% cost

&rocess 'ualit%(adherence)

Mfgproc leadtie;#n$entor%

*ariet%;+ew designs

Capacity

Productionsystem

Workforce

Marketing / sales

Product Design &Technology


17/20

ACC

KPI or OpsTask

Cost Quality Delivery Customization

Priority of KPI High (OW) Functional (OQ) High (OW) High forspecialized needs;Low for rest

Sub-KPI Element R/M cost;Fied opn! "ost;

#n$entor% cost


Mfgproc lead tie;#n$entor%

*ariet%;+ew designs

Capacity (,) F- in$entor% (.) High cushion ()

Productionsystem

(,) #nspection (.) MR& (,) (inade'uate) &rocess la%out ()all lots ()

Marketing /sales

(,) (.) (.) 0ictates prodn 1design$ariet%

()

Product Design& Technology

(,) Features (.) 0esign forar2eting ()


18/20

DJC

KPI or OpsTask

Cost Quality Delivery Customization

Priority of KPI High (OW) Functional(OQ)

High (OW) High forspecialized needs;Low for rest

Sub-KPIElement

R/M cost;Fied opn! "ost;

#n$entor% cost


Mfgproc lead tie;#n$entor%

*ariet%;+ew designs

Capacity Low cushion ()Low F- in$entor% ()

Low F- in$entor% () (,)

Productionsystem

&roduct la%out ()Large lots ()3utoation ()

Low W#& in$entor% ()

tandard 1autoatedprocess ()

&roduct la%out ()Low W#& in$entor% ()4#5 MR& ()

(,)

Marketing /sales

Low 67 range () () td! distri8utions%ste ()

(,)

Product Design& Technology

0esign for fg! 1procureent ()

0esign dri$en'ualit% ()

() (,)


19/20


strategyH


20/20


,ome lessons

,enc)markin$ competition re-uires comparison of c)an$esin performance measures. distin$uis)in$ !etween strate$y/related and efficiency/related differences. and controllin$for strate$y/related differences

Different product/market c)aracteristics re-uire differentcompetitive and operational strate$ies 0"ocus1. t)ou$) t)iscomes at a cost

Ali$nment of operations systems 2 practices to operations

strate$y must !e visi!le in all areas of operations

Sustainin$ operations improvements and !uildin$capa!ilities is a different !all$ame. t)ou$) an inte$rala$enda of operations strate$y

American Connector

Documents

Transcript of American Connector