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MANUFACTURING STRATEGIES
American Connector Company
Nitin Choudhary Onkar Mohole Palak Thakuria Pankaj Sonawane Pankaj Tadaskar 66 67 68 69 70
Flow of Presentation
American Connector Company
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
The Product : Connectors
Wire to Board
Board to Board
Wire to Wire Chip to Board
The Connector Industry
Rapid growth Growing demand due to computer application
1980s
Demand started to slow Too many vendors & capacity
>900 suppliers Sales down by ~4%
1970s
1990s
The Connector Industry
Sales $ Million FY 91
3000 2500 2000 Tier 1 1500 1000 Sales $ Million Tier 2 Tier 3 AMP ACC DJC
Total Worth of Industry: $ 16 Billion
500 0
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
Customer complaint could not exceed 1/million units of output
100% Asset Utilization
Yield on raw material must reach 99%
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
Continuous flow because of shorter processing time Automatic Assembly
Terminal Stamping Cellular Layout Housing Molding
Wire to Wire
Item to Board
Wire to outlet
Board to Board
Assembly
Packaging
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Quality Control
E
D
Waste Reduction
C B
A
Precision
Quality of designs
Process Inspection
Quality Control Standards
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Production and Inventory Control
Long run Less SKUs Avoid unplanned orders
Minimize losses
Smooth Material Flow Minimize WIP
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Workforce
Reduce Employees
New Employees
Recruit New graduates Paid more than average
Preference to Young workers
Extensive Training
Discouraged from staying
Old Employees
Paid less than average
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Organization Structure
3 Layer Hierarchy
Strategic Decisions
Tactical Decisions
Less employees in Control Group
Automation Reliability
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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 Kawasakis Material Cost Savings
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$20.90 0.21
20 15 10 5 0
Kawasaki's cost using ACC's design & packaging Mold Design
0.48
0.18
1.05
3.50 0.59
$14.89
$11.49
Less Reduced Expensive Mass of Resin Housing
Waste Tin Plating 2,000 piece Kawasaki Sunnyvale Reduction reel 1991 1991
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Process Technology : Basic Principles
Principle 1
Principle 2 Principle 3 Principle 4 Principle 5
Pre-automation
Preference to older reliable processes Huge investment on Molding process & maintenance In-house Technology development
Inter functional co-ordination
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Principle 1
Process automation only after it was understood, properly
designed and laid out.
Pre-automation
Defining flows Optimizing Worker movements Elimination of inventories Improving efficiency
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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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
Mold Yield
99.99%
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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 Molding Technology Group
Materials Section
Process Engineering
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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 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 Nos) Volume High Focused area- Production focus Cost per unit - low Wastages very low (0.0001%)
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Manufacturing Levers
Highly automated Rigid flow Adult Cellular Layout
Human Resources
Reduction in employees Adult wages Higher Focus on training 3.0
3.0
In-house designing Cross functional co-ordination High investment on equipments World Yield upto 99.99% 4.0 Class
Facilities
Organization Structure
World Manufacturing Levers Class 4.0
Process Technology Production Sourcing
Industry Average Hierarchical structure 2.0
3 layers of hierarchy
Long production runs Non-flexible Schedule Focus on reducing WIP
planning &
Industry average 2.0
control
Close relationships Class 4.0 with few suppliers Rigorous Quality standards
World
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American Connector Company
52% Profit Margin
Custom Orders Standard Orders
15%
Customization
High Performance
85%
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American Connector Company
Million Dollars Investment
Steady Growth 43% Profit
Compete Globally Maintain Profitability
52%
Profit Sales
Sales
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1984
1991
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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
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PV-LF Matrix
4500 SKUs 5 Production Areas Manual Operations
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Manufacturing Outputs
Late Delivery
High Cost
Good Quality
High Performance
Low Flexibility
Less Innovativeness
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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%)
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Manufacturing Levers
Manufacturing Levers
Human Resource Organization Structure and Controls Productions Planning and Control Sourcing
Level of Manufacturing Capability
Employees were considered as investment Semiskilled Hierarchical, Centralized Importance to line than Staff Complex High WIP Short term contracts
Process Technology Facilities
Mature Technology Developed Externally Un-frequent changes Focused
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Manufacturing Capabilities
Level of Manufacturing Capability Production systems keeps up Manufacturing consists with competitors and of routine activities maintains the status quo.
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SWOT
American Connector Company
Largest connector company Brand Image Highly customized products Huge manufacturing Costs Deteriorating Quality
Increasing operational efficiencies Using Brand image to drive competitors out
Problems in Sunnyvale plant Entry of New efficient competitor
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SWOT
DJC Corporation of Japan
Dominant supplier of connector in Japan Worlds most efficient plant Low Price, High Quality product
Entry into bigger US market Price competition to existing US connector companies
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
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COMPETITOR ANALYSIS
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Case Battleground !!
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At ACC Headquarters,1991
They will Kill us so Strike first Now what is your opinion?
No need to panicits not easy for them to repeat same story
***** Do competitor Analysis first !!!
Jack Deniese Andrew
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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
Price
Quality
Increased No. of Suppliers
Attributes
Delivery Performance
Improved Quality
Faster Delivery
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Competitor Analysis
Attributes
Company Current
Delivery
30 days 10 Days LT 7 Days 2 Days LT
Cost
33.79
Quality
1.6%
Performance
1.06/Person
Flexibili ty
Innovativenes s
Market
Strong Competitor Company Target 26.10 0.7% 7.45/ Person
Market Qualifying, Order winning
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Step 2 : Decide Order Winning Output
Cost
Quality
Delivery
Performance
ACC : Cost of manufacturing was high
ACC: High quality supplier image in US
Order Qualifier
Order Qualifier
So if ACC will produce high quality product with low cost it will be a WINNER
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Comparison of manufacturing cost (dollar per 1000 units)
DJC/ Kawasaki Raw Material, product Raw Material , Packaging 12.13 2.76 ACC/Sunnyvale 9.39 2.10
Labor Direct
Labor Indirect Total Labor
3.02
0.75 ----
-------10.30
Electricity
Depreciation Others Total
1.40
1.80 4.24 26.10
0.80
5.10 6.10 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 4 DJC - Equipment Paced Line Flow has good control over cost ACC OPL needs to improve on cost even though of low R/M Cost
MANUFACTURING ENVIRONMENTS
Sr. No. Company Environment 1 2 Raw material inventory Finished goods inventory. DJC Make to stock 5 days for 56 days , High ACC Make to order 10.8 days 38 days, Low
3 4
5 6
Lead time Customization of product
Facility utilization Variety of products
less , 2 days No customization
100%) Low 640 Nos.
10days for std. items & 2-3 weeks for special orders 15% customization & 85% std product
50-85 % Medium 4500 Nos.
7 8
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Volume of product Focused area
Wastages
High Production focus
very low (0.0001%)
Low Engineering and marketing
medium (2.60%)
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Step 3 :Selecting best production System
1
The current production system is required one 2 3
New Production System is required
New Plant
Feasible and can be put into service
Feasible but can not put into service
Not feasible
Raise capabilities
Find different PS and OW
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ACC
We want
DJC
HR
OS
PPC SO
PT
F
1 2 3 4
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EPL is poor in flexibility
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Challenges for ACC
ACC No. of SKU 4500 Less Automation Utilization 30.2 %
DJC
No. of SKU 640
High Automation
Utilization 75.4%
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
JIT Production
WHAT IT IS Management philosophy Pull system though the plant WHAT IT DOES
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Attacks waste Exposes problems and bottlenecks Achieves streamlined production
WHAT IT REQUIRES
WHAT IT ASSUMES Stable environment
Employee participation Continuing improvement Total quality control Small lot sizes
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Solution Suggested for ACC
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
OPL 15%
JIT 85%
customized
standard
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Row Position : Change in lever for new production system
HR
1 2 3 4 5 6
1 2 3 4
1 2 3 4 5 6
1 3
OS
PPC SO
Column Position : Corresponding manufacturing output
PT
F
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Lever Adjustments
Manufacturing Lever
Improvements
Human Resource
Organization Structure Production planning Sourcing Process Technology Facilities
Cross-train workers
Concurrent Engineering Stabilize production schedules Develop long-term supplier relations Quality checks at suppliers Reduce equipment breakdowns Make the factories more focused
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Strategy for both Market Segments
Having just one type of Production
Market Share
85%
system cannot serve the purpose 15% To Cater to both the market segments, company have to adopt different strategy
Customized Product
Standard Product
Two different Production systems must co-exist to accommodate demands of different order winning
OPLF
EPLF
criteria
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Concept of Focus Factory
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
Focus on standardized products : EPLF
15%
85%
Focus on customized products : OPLF
Factory within factory
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