Quality and efficiency is the key to American Connector Company (ACC) success. ACC has lost market share to DJC over the recent years, which will be exacerbated if DJC opens a production facility in the United States. DJC has gained much knowledge from its Kawasaki plant and is going to enter the US market with factories that will be efficient. ACC is in trouble and needs to drastically change the way they do business if they want to survive.
Looking and emulating DJC is the first step American Connector needs to follow.
American Connector can regain market share and survive by focusing on quality and efficiency. ACC needs to do the following to ensure success before DJC enters the US market:1)Redesigning their factory layout for a more streamlined operation.
2)Purchase new equipment that is in better shape and more efficient. Institute a good maintenance program to ensure the equipment runs properly.
3)Work with the consumer to create a good simplistic design.
4)Continue to keep employees happy to make sure they remain at the company and ACC retains this intellectual property.
5)Implement a Quality Control Division. ACC cannot rely on identifying defective parts only after production. They need to implement quality control throughout the process, which will reduce costs and increase efficiency and profitability.
Japan and the United States have had a different mentality and work ethic over the past centuries but it has become especially apparent over the last 30 years. The United States relies on money, technological sophistication and reputation/name recognition.
Japan has been able to get ahead with hard work, innovations, and technological advances. To the dislike of many American companies, Japan has taken technologies created by US companies and reverse engineered and improved on them until they were the dominant company in the industry. A good example is shown with the DJC Corporation in Japan. They took ideas, concepts and technology from American companies and made them even more efficient and successful.
The electrical connector industry is large. These connectors do everything from attach wires to wires, wires to outlets, attach wires, components or chips to PC boards, or attach PC boards to other boards. These connectors have two main parts: a plastic housing and metal socket pins or terminals. The applications range from military and aerospace to computers to telecommunications to automobiles. There are thousands of standard connector product lines. The pricing of the connector depends on its level of technology and industry use.
In the 1970’s there was a large boom in the United States and companies took advantage of it. Demand slowed in the 1980’s leading to many suppliers for a reduced need leading to consumers being able to demand their prices.
The miniaturization of circuitry and technological advances led to the need for new connectors and manufacturing techniques. The demands of the consumer were highly specific. This allowed other competitors to enter the US market.
Lessons LearnedA. DJC at the Kawasaki Plant1) Efficiency – DJC continued to review and adjust their production facilities to find the most efficient way to operate. This focus on efficiency has created a cost efficient way of producing wire connectors that cannot be rivaled. It will take other companies years to match the efficiency of the Japanese production facilities.
The Just-In-Time delivery of resources and demand on their raw material suppliers to have almost daily deliveries of supplies, DJC reduced the need for large warehouses saving money. The use of tape rolls of connectors was a design that the consumer liked and found easy for use at their production facilities. The design of their product packaging led to a more efficient way to palletize and containerize their products for shipment to distributors. While DJC maintains about two months of finished goods, the design of the packaging reduces the room it requires in the warehouse.
2) Quality – Japan’s streamlined operations has allowed it to add quality assurance to their production process. Through this high quality and lack of flawed parts they have gained a good reputation, which was something that was normally reserved for American companies. The continuous inspections, replacement or worn parts and the high level of maintenance of the equipment allowed the factory to run smoothly. The focus on fixing problems before they happened has led to fewer problems encountered on the production line.
3) Links to Customers – DJC maintained a close link with its customer and took the customer input to adjust the connectors to meet customer needs. This allowed DJC to be proactive and stay ahead of changing trends within the computer industry. The simplified designs they created required fewer raw materials increasing efficiency and reducing costs.
4) Trade Secrets – DJC reverse engineered many of its early connectors from designs from other companies. This sped up the design process and allowed them to quickly enter the market. They did not want the same thing to happen to them so they had contracts written up with suppliers and created an internal design division that did their work in house. This allowed DJC to keep their innovative ideas to themselves, maintaining their advantage over the competition.
5) Plant Layout – DJC focused on the best way to produce connectors. Their plant layout and simplified design process allowed for an efficient operation, utilizing the factory space to its fullest. The process was set up in the most logical and efficient manner allowing for an increase in quality and reduction in personnel. The new Japanese plants were highly automated but DJC focused on “pre-automation” to ensure the plant runs smoothly. All people that work within the factory understand their role and are properly trained, materials are centrally located, quality and goals were clearly laid out and continuous improvements are sought. The limited number of products that DJC produces for their consumer allows them to schedule long production runs.
6) Goal Setting – The management was involved in all aspects of decision-making. They understood the importance of the having an overall goal that is understood by all divisions. They created the overall goal and allowed the managers of the different divisions to create their own goals that conformed to the focus of the company. Employees on the line knew the goal of the company and what management expected and solved many of the problems at the lowest level.
B. American Connector at Sunnydale1) Operating Problems – The American Connector facilities especially in California are experiencing increases in costs and deterioration in quality. The performance in the plant is leading to the consumer losing confidence in ACC. This will lead the consumer to other options like DJC with a better reputation.
2) Investments – Complacency allowed ACC to believe there was no foreign competition in the US. They did not invest time or money into upgrading their facilities, quality, or capacity. The equipment within the facility is becoming outdated and is not being replaced.
3) Efficiency – The production facility is not run efficiently. There five production areas in the plant. Different areas run at different speeds leaving stockpiles of parts. This leads to inefficiency and an increase in facility space required to hold all of the parts awaiting further assembly. The facility is not fully automated which leads to slower assembly on small runs, which are assembled by hand.
The packaging of the connectors is inefficient with the wide range of package designs awkward for storage and shipment. The awkward packaging does not lend itself to proper palletization or containerization taking up extra room in the warehouse.
It is hard to adjust production lines with the forecast being done three months in advance. With a difficulty among customers of predicting the success of their products, it is hard for ACC to get ahead or adjust quickly to changing demands. If a different producer is more adaptive they will steal the sales.
4) Quality – ACC quality has slipped at the Sunnyvale plant. There is a high rate of defective parts. While most of the defective parts do not make it to the customer, the waste of time and supplies costs ACC money.
RecommendationsAmerican Connector Company has two options: 1) stay with the status quo; or 2) learn from the success of DJC and change their approach to head off DJC’s competition in the US market. Really there is only one option for American Connector. Whether ACC believes it or not DJC will enter the US market. They need to change their mindset and do what is best for the company. With the way the US connector market has played out, it is open for international companies to enter the market. ACC must change their mindset and stop being complacent. The lack of rivalry did has not spurred ACC to be innovative and create new ideas but allowed them to stay with the status quo missing the surge from their competitors.
Complacency has led to outdated equipment and an inefficient plant operation. By taking the lessons that DJC learned at their Kawasaki plant, ACC can increase efficiency. If ACC streamlines their plant operations, buys new equipment, works with their customers to create a simpler product design, and makes more transportation friendly packaging they can have a more efficient operation.
ACC has a couple of advantages over DJC that they need to cash in on. First, they are already in the US market. ACC is already established in America and can avoid many of the barriers to entry i.e. tariffs, taxes and initial financial layout that international companies will experience. ACC needs to build on their good reputation with their US customers.
DJC is not keeping their employees longer than an average of 9 years. While they have a good salary for the entry-level employees, their advantage is reduced as employees advance within the company. They do rotate employees to different jobs yearly giving them good experience in different areas but cannot keep them until retirement. If ACC takes care of their employees and gives them a competitive wage, good benefits and advancement opportunities they should have an advantage over DJC with more efficient workers.