Operations Management Case Study: American Connector Company

OPERATIONS MANAGEMENT CASE STUDY

AMERICAN CONNECTOR COMPANY

Submitted to:

Professor Jishnu Hazra

Submitted by:

GROUP 2 (SECTION B)

Itee Aggarwal 1411095

Preetam Das 1411117

Siddharth Nayak 1411129 Abhishek Singh 1411072

Ashish Pawar 1411084

Nakul Sehgal 1411106

INTRODUCTION

American Connector Corporation (ACC) is a supplier of electrical connectors based out of Sunnyvale, California since 1961. ACC relied on its ability to produce high quality customized products for its users. In USA, 1991 had seen sales fall by 3.9% over the last year and the industry was seeing a decline since 1987. ACC was struggling with increasing costs and deteriorating quality In line with the industry trends. Its

QUESTION 1

Q1: How serious is the threat of DJC to American Connector Company?

In the case of DJC establishing a Kawasaki – style plant in the US, Sunnyvale would be competing directly with Kawasaki’s high volume / low cost products and faces the possibility of losing lower margin, price sensitive customers. The extent of threat of DJC to American Connector Company can be analysed based on the following factors:

1. Increase in competition

Total orders can be divided into four types; while only 15% of ACC’s total production volume was custom orders, 1% was prototype orders and 10% were very low volume orders, the remaining share of the volume can be assumed as high volume / standard product. This will be the market segment that will be the hardest to compete with DJC’s low cost products.

DJC followed price penetration strategy. This cost advantage could potentially take away a number of mass-market ACC customers who are not too keen on customization. This threat is compounded by the already prevalent high rate of competition in the industry.

2. Operational superiority

Mr. Esaki’s four principles and their efficient application were the reasons for DJC’s superiority can be found

Market Positioning: Focus on differentiation via customization and generate higher margins vs. cost cutting to compete in the low cost category.

6. R&D upgrade: ACC needs to invest much more in technology to reduce losses as it has been 5 years since the last improvements were made.

QUESTION 2

Q2: How big are the cost differences between DJC’s plant and ACC’s Sunnyvale plant? Consider both DJC’s performance in Kawasaki and its potential in the United States.

The cost differences between plants of ACC at Sunnyvale and DJC at Kawasaki has been compared by calculating their manufacturing cost. In 1991, the two plants are located in different countries (US & Japan) and therefore, to compare the costs between the two, the cost indices values that have been provided in the case have been used. The main cost differences between the two companies: DJC and ACC with respect to their plant operations for the years 1986 & 1991 have been shown in Table 1.

As both plants are located at different places so for effective comparison the cost indices value is used for year 1991, to compare the cost difference between the two, which is presented in Table 2.

Table 1: Cost differences between DJC’s plant and ACC’s Sunnyvale plant ($ per 1,000 units) DJC ACC DJC ACC Cost Difference (%) Cost Difference