Carrier Mexico SA de CV

The market for air conditioners is changing in Latin America. Consumers wit h greater purchasing power demand window units of differing sizes and capac ities. These are being sold through new, mass distribution channels such as Sears and Wal-mart. This case involves the attempts of one manufacturer Ca rrier, to respond to these changes by introducing a new "product delivery s ystem" (PDS) that would enable the company plant to produce all models of w indow air conditioner each week. Carrier de Mexico, though a subsidiary of a U.S.-based multinational, is very much a Mexican company. It wets founded with the purchase of a distributor in the northern city of Monterrey, and the subsequent merger with another Mexican company. Since that merger, ther e have been nine plant consolidations and a reduction from four factories t o one. Manufacturing space was reduced by 32% while production increased by 38%. At the time of the proposed change to PDS, the company was still abso rbing the changes of recent years that had been guided by philosophy of kai zen or continuous improvement. As consultants, the company had hived a grou p of ex-Toyota employees who had developed their own version of kaizen, whi ch was carried out through events in which radical change was produced. The new challenge facing the company was to supply the new mass merchandising channels with a full variety of window air conditioners, which was particul arly difficult during the peak summer months. Company practice had been to produce long runs of each model, thus reducing setup times but increasing i nventories. The adoption of a weekly mixed-model delivery schedule would ne cessitate significant changes both within the company and in supplier relat ions. However, it is no longer a matter of whether Carrier de Mexico (CMX) would adopt PDS, which was being pushed both by Latin American Operations i n Miami and Global Manufacturing at company headquarters. The decision faci ng the President of CMX, Roger Duarte, was how rapidly the PDS was to be im plemented. Global Manufacturing had developed a detailed implementation sch edule requiring Is to 24 months, but this would have missed the peak summer sales period. Mr. Duarte was considering an accelerated 12-month program a t CMX to have the RAC lines running under PDS by the summer of 1996. The ca se describes the air conditioner industry, Carrier background, and past cha nge efforts, details the RAC production process, and focuses on the decisio n to accelerate PDS implementation. An accelerated program would take advan tage of the growing demand for a broad variety in mass merchandise outlets, but it would entail some risk of failure. This trade-off between risk and reward is a central issue of the case. (C) 2000 Elsevier Science Inc. All r ights reserved.