With the threat of a Japanese competitor's plan to build an "ultimate" plant in the US, American Connector Co. is challenged and saw the need to look into its plant operations in Sunnyvale.
Gary P. Pisano; Sharon Rossi
Harvard Business Review (693035-PDF-ENG)
October 06, 1992
Case questions answered:
Case study questions answered in the first solution:
- How should American Connector Co. respond to the potential entry of DJC into the U.S. market?
- Simulate DJC’s costs in the U.S. Analyze ACC’s and DJC’s cost structure and performance.
- What should ACC’s future Strategy and Operations be? (HINT: Consider costs due to “strategy” vs. costs due to “operations”).
- Provide analysis and action recommendations. How should ACC respond to the JCC ‘Threat,’ and how urgently should they do it? Why?
Case study questions answered in the second solution:
- How serious is the threat of DJC to American Connector Co.?
- How big are the cost differences between DJC’s plant and American Connector’s Sunnyvale plant? Consider both DJC’s performance in Kawasaki and its potential in the United States.
- What accounts for these differences? How many of the differences are inherent in the way each of the two companies competes? How much is due strictly to differences in the efficiency of the operations?
- What should American Connector’s management at the Sunnyvale plant do?
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American Connector Co. (A) Case Answers
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As DJC Corporation contemplates entering the US market, American Connector Co. (ACC) faces the imperative to fortify its competitive stance.
To effectively counter DJC’s potential threat, ACC must undertake a fundamental overhaul of its manufacturing processes, prioritizing cost control and quality enhancement. This strategic shift is crucial for ACC to maintain its market share and ensure sustainable growth.
In consideration of DJC’s potential entry into the US market, ACC should strategically position itself to strengthen its competitiveness.
To effectively confront DJC, American Connector Co. will need to initiate a fundamental change in its manufacturing processes. This will entail addressing present operational issues, with a particular emphasis on establishing cost control methods to reduce increasing expenses and outperform DJC in terms of quality control.
ACC would need to address quality control difficulties by examining all stages of the process rather than limiting itself to the end, as demonstrated by a defect rate of 26,000 per million. To acquire a competitive advantage, product design innovations must be pursued, with a focus on improving connector compactness.
The launch of an in-house Research & Development department will push technical advances throughout the manufacturing process, giving ACC a competitive advantage. Recognizing the importance of balance in organizational grading, ACC should prioritize the production team, as DJC does across all departments, promoting motivation and greater output.
As part of its transformation strategy, American Connector Co. has to overcome high molding recycle times, reduce inventory holding costs, and implement a raw material pull strategy.
Additionally, ACC needs to concentrate on improving quality control, not using color-coded connectors and cables to avoid spending resources and controlling processing lead time to increase overall efficiency and competitiveness.
ACC attempts to reduce operational costs, maximize fixed asset utilization, and streamline order management by measuring shutdown and start-up costs, optimizing machinery allocation, and adopting tailored production lines based on order size.
DJC’s Kawasaki plant had an annual capacity of 640 different stock-keeping units (SKUs) in 1991, while American Connector Co.’s Sunnyvale plant produced about 4,500 different models in 1991. DJC’s Kawasaki plant aimed for 85% utilization by 1996, while ACC’s Sunnyvale plant experienced utilization rates as low as 50% in 1988 and rebounded to 70% by 1991.
Both of these plants have multiple production areas, including terminal stamping, plating, molding, assembly, testing, and packaging. However, DJC’s plant emphasizes continuous flow and synchronization of operations, while ACC’s Sunnyvale plant experiences longer processing lead times and maintains a finished goods inventory of 38 days.
DJC’s Kawasaki plant achieved mold yields in excess of 99.99%, with a strong emphasis on pre-automation and process reliability, while ACC’s Sunnyvale plant faced relatively high defect rates (26,000 per million units in 1990), with intentions to implement SPC and improve defect prevention.
DJC’s plant invested in new equipment and technology, particularly in molding processes, to maintain competitiveness.
American Connector Co.’s Sunnyvale plant faced challenges in…
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