POM ACC Connectors Case

8/3/2019 POM ACC Connectors Case

1/7


2/7

ACCs response plan to possible threat from

DJC

y ACC competes on its ability to provide customized products to its clients

along with high quality and efficiency.

y ACC should respond by limiting the number of SKUs and produce

standard size connectors. The same applies for packing and batch jobs.

y Improve its inventory management by reducing its WIP goods and raw

material.

y Automating the entire plant operations with new machinery thus

eliminating manual errors and rework.

y Building and Implementing Quality Control team to avoid efforts for

manual check for defective pieces thus delivering superior quality.


3/7

Seriousness of threat from DJCy DJC basically competes on its cost effective operational model based on

more productive use of resources.

y Marketing strategy ofDJC is based on large volume and standardizationwith the core objective of profit maximization.

y With DJC plan to enter US market, it does not posses a major threat toACC

for the reason beingACC

was able to survive stiff competition in USmarket where more than 2/3rd of total manufacturers worldwide existed.

y While comparing the costs we see that the historical costs are lower forACC as compared to DJC by $15.83/1000 piece. The static costs forACC exceeds DJC by $7.69/1000 pieces.

y This less cost ofDJC is achieved by fixed asset utilization, Batchproduction process, use of advanced technology, lower inventory handlingcost and automation improving quality thus reducing cost.

y Thus ifACC is able to reduce its static cost by improving its operationaleffectiveness,DJC doesnt posses a serious threat toACC as it has already

survived in tough market.


4/7

How serious is threat from DJC if real?y Threat from DJC toACC comes mainly from the static cost difference

and operational efficiency.

y From Exhibit 7 in given case we see that DJC can saves the following

percentage of its costs overACC if it is operated in USA

y Raw material 29.02%

y Packaging 26.81%y Labor 148.37%

y Electricity consumption (-28.57%)

y From exhibit 6 it is clear that the effective utilization of fixed asset for

DJC is 75.4% compared to 30.2% ofACC

y Only advantage thatACC has over DJC is customization which givesACC

a 15% of total profit share.

y Thus based on its cost effectiveness and effective resource utilization, it

can eat into market share ofACC in US market and pose a serious threat

toACC


5/7

Resource available with ACC to respond

y Plant modeled like Kawasaki facility has tremendous advantage over

Sunnyvale facility mainly due to high efficiency, integrated

production facility with implementation of automation process and

continuous improvement plans.

y ACC has a head start as it already has a plant while DJC has to incuradditional fixed costs to set up one.

y The current fixed asset utilization forACC is only 30.2 % and thus

has a lot of room for improvement.

y ACC supports a much larger number of SKUs, servicing markets

where there is no competition from DJC.


6/7

Business & Operational Strategy for ACCy A

utomate the material handling which would reduce variable costs.This would reduce costs from the present 10-11% to 3-4%. This

would also increase resource utilization to about 68%.

y Create two distinct divisions, one for regular products and the other

for customized products , the rarer SKUs and out of turn orders.y Create a linear process flow with longer batch runs to reduce setup

time needed for each production run.

y Reduce WIP inventory and raw material.Along with this it also

needs to reduce the lead time.y Introduce Quality control in process which would include the

suppliers as well. This would reduce the rejection rate.

y Standardize the products that they manufacture on regular basis.


7/7

Mail from Denise Larsen

y

Most of the ideas shared by Denise are feasible, but few of them asmentioned below are skeptical:

y Training workers to use statistical process control and other state of art QC

techniques is a bit difficult to implement for the reasons like large labor

force to train, costly training, etc. This can be implemented if

automation is implemented with reduction in dependency on manual

labor.

y Implementing Work teams: Instead of identifying new team members and

implementing work teams, its is better and more appropriate to

identify the team members from existing teams and training them towork towards the goal.

y 7 day work production is not feasible due to maintenance requirements

for machinery and downtimes due to continues usage.

Documents

POM ACC Connectors Case