Download - 2. American Connector
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MANUFACTURING STRATEGIES
American Connector Company
Nitin Choudhary 66Onkar Mohole 67Palak Thakuria 68Pankaj Sonawane 69Pankaj Tadaskar 70
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Flow of Presentation
IntroductionIndustry
ProfilesProduction Systems
Competitive Analysis
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American Connector Company
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Four Plants in US
Two Plants in Europe
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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
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The Product : ConnectorsWire to Board
Board to Board
Wire to Wire
Chip to Board
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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
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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
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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
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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
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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
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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
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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
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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
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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!!!