Daikin Industries Case Study

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Recommendations Daikin Industries’ residential air conditioning products faced a fierce domestic market in Japan. Their Shiga Factory was paired in a market with over 10 strong competitors such as Matsushita (Panasonic and National), Mitsubishi, Sharp, Sanyo and Fujitsu General. Although, the company had the lowest market share in the 1997 season, it tried to countered the low-cost strategies of some of their rivals, such as sourcing from China, by offering the widest product line-up in the industry. The trouble with this versatile product variety was that most of the inventory needed to be produced ahead of the peak season. If Japan experienced an unseasonably cold summer as in 1998, the remaining inventories left unsold will have to be markdown in order to be sold before the next year, since product designs changed every year. Daikin Industries is recommended to reconfiguring its residential air conditioning plants in Shiga and supply chain in order to become more competitive and improve overall profitability for the company. They need to consider a strategy that allows them to reduce their current batch sizes and lead times. Both of which are important aspects within the current market where customers want air conditioners to be installed quickly and sales companies are scared of stocking out. There exist a lack of integrity between the sales companies and factories, where the dealers falsify orders, which in turn affects the factory’s projected demand forecast for the year/season. The Shiga Factory should consider building their inventory in a way where they produce their “standard” products within their supply chain in advance of the peak season, which will then free up the factory’s capacity during the season for the slower-moving items that yield higher profits. To help with forecasting to see how many “standard” products that need to be
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