Carrier Mexico S.A. de C.V.

Abstract

The market for air conditioners is changing in Latin America. Consumers with greater purchasing power demand window units of differing sizes and capacities. These are being sold through new, mass distribution channels such as Sears and Wal-mart. This case involves the attempts of one manufacturer, Carrier, to respond to these changes by introducing a new “product delivery system” (PDS) that would enable the company plant to produce all models of window air conditioner each week. Carrier de Mexico, though a subsidiary of a U.S.-based multinational, is very much a Mexican company. It was founded with the purchase of a distributor in the northern city of Monterrey, and the subsequent merger with another Mexican company. Since that merger, there have been nine plant consolidations and a reduction from four factories to 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 absorbing the changes of recent years that had been guided by a philosophy of kaizen or continuous improvement. As consultants, the company had hired a group of ex-Toyota employees who had developed their own version of kaizen, which 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 particularly difficult during the peak summer months. Company practice had been to produce long runs of each model, thus reducing set-up times but increasing inventories. The adoption of a weekly mixed-model delivery schedule would necessitate significant changes both within the company and in supplier relations. 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 in Miami and Global Manufacturing at company headquarters. The decision facing the President of CMX, Roger Duarte, was how rapidly the PDS was to be implemented. Global Manufacturing had developed a detailed implementation schedule requiring 18 to 24 months, but this would have missed the peak summer sales period. Mr. Duarte was considering an accelerated 12-month program at CMX to have the RAC lines running under PDS by the summer of 1996. The case describes the air conditioner industry, Carrier background, and past change efforts, details the RAC production process, and focuses on the decision to accelerate PDS implementation. An accelerated program would take advantage 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.