e D r k n u A y r d u o C h s a n i v A l p i r S u t a D e S j n a r i N V T t i h o R S s a H i r h

y t S J D s / v C : 1 # p u o r G i m e d a c A

3 1 7 / 2 0

About the Product: Commonly used in electrical and electronic devices Type of connector depends on application Cost of component is less than 2% of total product cost

Product and Market

Companies and Competition

Comparing Strategies

y u d I s n o C a i r t c e l E
The US Connector Market 700+ players, intense competition Declining market in terms of total volume OEMs going for vendor rationalization Demands: Prices, Discounts, Quality, Delivery
Analysis of Data Key Takeaways

ACC, the Differentiator

Market share 5% with sales of $1 billion Primary Market: USA

DJC, the Cost Leader

Market share 4% Primary Market: Japan Gross Margins historically been about 50% Low Cost, Narrow Range, High Volume Cost per 1000 pieces: $ 20 Focus on product design to reduce raw material costs Standardization of products, process automation, multi-skilling of workers Production Driven Firm

Declining Gross Margins (40% as of late 1990s) Broad Variety, Customization Cost per 1000 pieces: $ 34 High Overheads due to large no. of SKUs produced Low capacity utilization, keeping cushion for customized products Marketing Driven Firm

Product and Market

Companies and Competition

Comparing Strategies

Analysis of Data

e h t g n i r a p m o : J D s / v C A
Key Take-Aways

Establishing Product Differentiation

Target: Operational Flexibility, degree of customization Short Production Runs Increased No. of Changeovers MRP Based system of Production Demand Forecasting driven planning Common Issue: Delivery Delay

Generic Points

Process Based Layout Process Flexibility Empowerment of lower level managers Leeway for better outcome Wide and Deep product Products and Companies and portfolio
Market Competition

: s i g a r S f t n m y o l p e D
Establishing Cost Leadership
Targets: Efficiency and Cost of Manufacturing Incremental Process Improvement In-house Automation Longer Production Runs Lower Lead Times, MTS Production Combination of MRP and JIT

Generic Product Points Based Layout

Economies of Scale Centralized Organization Structure Cost Reduction at all levels Low Bandwidth of product Comparing portfolio Analysis of Data Key Take-Aways
Strategies

Comparing Cost Structures of ACC and DJC

Cost Item Raw Material Packaging Material Labour Electricity Depreciation Overheads Cost ($ per 1000 units) Share in late 1990s DJC ACC 36% 28% 8% 6% 20% 30% 6% 2% 9% 15% 21% 18% 20 34 Change in last 6 years DJC ACC 0.85 0.9 0.84 0.93 0.38 1.21 0.57 0.44 0.24 0.92 1.03 1.38

On the face of it, it looks like DJC is highly cost effective when compared to that of ACC.

Products and Market

Companies and Competition

Comparing Strategies

Analysis of Data

Key Take-Aways

More Analysis on ACC v DJC

DJC in ACC DJC (in ACC (in ACC in DJC in DJC in US Cost Item number Next %) %) numbers US Next Year s Year Raw 36% 7.20 28% 9.52 9.67 9.67 9.52 Material Product Raw 8% 1.60 6% 2.04 2.20 2.20 2.04 Material Packaging 20% 4.00 30% 10.2 10.40 10.40 10.2 Labour 6% 1.20 2% 0.68 0.75 0.75 0.68 Electricity Depreciati 9% 15% 5.1 1.80 1.95 5.25 1.80 on 18% 6.12 4.20 4.43 6.35 4.20 Overheads 21% Cost (per 1000 20 34 28.44 29.40 34.62 units) It is a good strategy for DJC to set up its manufacturing in US

considering from the cost perspective. Because the total cost per 1000 units by DJC is lesser than that of ACC even after considering the expected increase in its cost items.
Products and Market Companies and Competition Comparing Strategies Analysis of Data Key Take-Aways

ACC
Labour intensi ve Low utilizati on Flexible producti on Strong Eng & Mktg High quality & Superior design High Customer Satisfacti on

Custom er collabor ation High no. of SKU Solution provider

Custom er centric

High defect rates

High produc tion cost

Stron g Eng & Mktg

Comparing Strategies

Less Finishe d goods

Customis ed design

Products and Market

Companies and Competition

Analysis of Data

Key Take-Aways

DJC
Low SKU s Simple Design & product standardi zation Extensi ve Value Engg High Yield Pre Automati on Continuo us Improve ment
Products and Market Companies and Competition

High FG High Asset Utilizati on Technolo gy Develop ment Division Cost Leader ship JIT & MRP High Quality and Low rejectio n

High Operatin g efficiency

Low RM and WIP

Less work force Compa ct Layout

Comparing Strategies

Reliable Technolo gy

Automati on

Analysis of Data

Key Take-Aways

Key Recommendations
ACC should exploit its own strengths Attack on competitor operation based weakness ACC needs to adopt pull strategy for of raw materials in production line Look at out sourcing option for standard parts Work on improving operating efficiency, optimize work force, automate, reduce rejections More focus on Differentiated products and Niche segments, In house technology ACC can take advantage of highly fragmented and customized market

Products and Market

Companies and Competition

Company Strategies

Analysis of Data

Key Take-Aways

THANK YOU