American Connector Company Essay

American Connector Corporation makes electric connectors at a ground in Sunnyvale, California. With applications from military, aerospace to consumer electronics and appliances, there is great difference in terms of specifications also. Standard designs were established by International Institute of Connectors and connect Technology, the National Electronics Distributors Association or by the end user. There is account of entry of DJC Corporation of Japan which was a dominant supplier of electrical connectors in Japan. DJC had not established itself in the US as it had no plants in the US and but a small sales force. This created puzzle for ACC who also had problems of their own with regard to Sunnyvale plant where courts were increasing and quality of production was decreasing. Threat of DJC to American Connector CompanyDue to the in operation(p) excellence that DJC has, ACC should be extremely concerned with their entrance to the US. DJC pull up stakes be willing to comman d at smaller margins to capture the commercialise share. The fanaticism of the market competitiveness can result in compounding of the terror of the ruggeder prices. ACC will piss a limited amount of sequence for the realization of this little terror and to evaluate the next course of action. Main flagellum to ACC from DJC comes from the operational efficiency and static cost difference and hence no matter the arrival of unnerving competitor like DJC can immediately disassemble ACCs pricing strategy and long term profitability. Following factors reinforces the threat of DJC to ACC-(1) dismay Material products cost Following prorogue shows that cost incurred by DJC as examined to ACC is lower in both the years 1986 and 1991. In 1986, DJC had 7% more COGS incurred as compared to ACC while at the end 1991, they were reduced by 40%. If DJC sets up manufacturing base in US Landscape, there will be substantial raw material cost reduction for DJC as compared to ACC. (2) lower break rate and greater efficiency- The quality losses for ACC is 1.6% against 0.7% of DJC. The defect rates at Sunnyvales are as high as 26000ppm of production and its quality control is end product inspection as compared to movement centric quality control in DJC. (3) Higher dogged Asset utilization- The effective utilization of fixed assets (in %) for DJC is 75.4% as compared to mere 30.2% of ACC. (4) Lower Work In process inventory- Kawasaki full treatment of DJC had processing lead generation and work-in-process inventories averaging for only two days against high inventory levels of ACCs Sunnyvale Plant. (5)Lower Raw Material Inventories- The raw material inventories of ACC averaged for 10.8 days which is more than multiply than DJCs average of only 5 days, which in results in slight inventory cost and reduced finished good cost. (6) Higher responsiveness to customer order delivery- Because of highly automated production process at Kawasaki plant of DJC, the speed o f order delivery is one day whereas ACC plant on batch production process which produces about 4,500 varieties of connectors, hence they occupy more than one dayHowever, DJC will face a public figure of challenges in implementing its Kawasaki Factory model in regular army which are mentioned below- (1) node Contacts- DJC would not be able to leverage its strength to the fullest in USA as it would have to compete in a new market with no major contacts. (2) Flexibility of Production process- Batch production process of ACC renders it great flexibility in terms of customization of products to its customers as compared to DJC. (3) Production and descent Control- There are 700 standard connector product lines in northmost America alone and ACC makes 4500 SKUs and some product lines were run on almost continuously basis. So it would be very difficult for DJC to be able to maintain such long run times when they indispensability to produce almost 8 times the number of varieties of c onnectors they produce at Kawasaki. (4)Finished Goods Inventory- DJC carries 56 days of finished goods inventory as compared to 38 days of ACC and given the short life cycles of electronics, DJC faces high risk of macrocosm obsolete. (5) Demand Variability- DJCs product oriented layout operated on high volumes and low variety production, thus reducing costs. However USA does not have a certain demand for such high volume products. How biggish are the cost differences between DJCs plant and ACCs Sunnyvale plant? Consider both DJCs performance in Kawasaki and its potential in the United States. To study the cost difference between DJCs Plant and ACCs Sunnyvale plant, we need to remember the important fact that the two plants operate in an entirely different scenarios (Countries). Thus in order to read in a direct comparison between the two the cost indices between United States and Japan in 1991 comes very handy. The various indices that compare Japan with US are given in the f ollowing table Cost Indices (Us to Japan)