Incredible India

Question 3:
Is DJC’s entry into American Market a threat to American Connector Company? Give reasons. Substantiate your answer as much as possible with data available in the case.
Solution:
Yes DJC’s entry into the American Market is a threat into the American Company because of the following reasons: A. Raw material costs:

For DJC plant in Kawasaki, raw material costs were twice as much of that in the US.
From exhibit 7 and 8, if a DJC plant was to be set up in the US:
New cost of raw material = 0.6 x (12.13 + 2.76) = 8.93
Total cost of finished goods inventory in Kawasaki = 26.10
Therefore: Cost of raw material/ Total cost of finished goods = 57%
Since, the cost of raw materials constitute more that half of the total cost of finished goods, this reduction in cost of raw materials will act as a major advantage if Kawasaki shifts its plant to US.

B. Quality Losses:

In DJC quality control was mainly process centric, and a collaborative effort with the suppliers, where the suppliers had to meet rigorous quality standards and were required to certify their product in every delivery. But in ACC, the quality inspection process was old as it was ACC who inspected it leading to defect rates as high as 26000 per million units of production in 1990. Quality losses in Kawasaki was 0.7% as compared to 1.6 % in ACC. (Exhibit 6)

C. WIP inventory:

DJC maintained small warehouse deliberately to reduce WIP inventory in comparision to ACC which had higher WIP leading to higher per square foot output by DJC (15.1) as compared to ACC which was 10.9. (Exhibit 6)

D. Asset Utilization:

As the DJC plant works at 24 hours per day, its fixed asset utilization is 75.4% as compared to 30.2 % of ACC. Continuous running of the plant also avoided start up and shut down costs.

E. Product Variety:

ACC catered to a large product variation, which was 4500 in 1991, thus leading to a complex production schedule and addition in the workforce. In contrast , product designs in DJC was standardized and limited , 640 SKU’s in 1991 because of costs and complexities associated with shorter production schedules were reduced. Moreover the long run production schedules in DJC had less unreliability because they refused to accommodate unplanned orders which was reverse in case of ACC whose short run production schedules would often get disrupted due to rush orders.

Hence because of the low cost manufacturing strategy focusing on standardized connectors of JDC in comparision to ACC who focuses mainly on mass customization and wide variety, JDC might prove a threat in seizing market share of ACC if the former’s strategy is more effective than that of ACC. However since the customer segments of both are different i.e ACC caters to customers who demand customized products in contrast to JDC whose customers are satisfied with standardized products, both may stand together in the market without risk to each other.

Question 1.

What are the strategies of ACC and DJC?

Solution:

DJC | ACC | Product Technology Strategy:1. Product design was standardized and variability was low leading to long run production cycles.2. Packaging was done only in reel and tapes. | Product Technology Strategy:1. Products were offered in a wide variety and were customized often exceeding customer expectations leading to short run complex production cycles.2. ACC offered a wide variety of packaging formats. | Process Technology Strategy:1.The entire process was highly automated2.JDC used old reliable processes rather than new unreliable ones.3.JDC mostly relied on in-house technology development, because their goal was to achieve a competitive edge in process technology.4.Quality control was process driven, JDC set rigorous standards for their vendors to meet quality standards.5.The whole production schedule was manufacturing driven.JDC refused to entertain changes for unplanned orders.6.The organizational hierarchy laid more equal emphasis to technology and production. | Process Technology Strategy:1.Only the assembly process was automated2.ACC never hesitated in to buy the latest production equipments if it was thought to improve productivity and quality.3.ACC depended on its vendors for procurement and design of their equipments4.Quality control was carried out through inspection.5.The production schedule was set up by the PCD but was often disrupted due to rush customer orders and requests.6.The organizational hierarchy laid more emphasis to marketing rather than on production. |

Question 4.

What is your recommendation for ACC?

Answer:

1. The basic emphasis of the company should be on cost reduction since costs are steadinly increasing. 2. ACC can build its own in-house R&D division since it will help them in having a competitive edge over competitors. 3. The method of end product quality inspection should be replaced by in process inspection since the defects are increasing. 4. ACC should develop innovations in its products so that they cannot be reverse engineered by competitors. 5. ACC organizational hierarchy was more inclined towards marketing and engineering teams and lesser stress on production team which was different in case of DJC which had equal stress on the production team; this was a motivational factor for increase in productivity at DJC.ACC needs to follow similar model for operations set up in the organisation to promote production oriented structure and greater balance. 6. ACC should minimise warehouse space and WIP inventory to minimise inventory holding costs. 7. ACC should control its processing lead time of 10 days son that its finished goods pile up is reduced. 8. ACC should concentrate on continuous running of its plants thus minimising shut down and start up costs.

Question 2:
Develop activity system charts for ACC and DJC. Are these systems appropriate for their respective strategies?
Answer: