Major facts
The case study focuses on Eastern Gear Inc., a firm that manufactures gears according to customers’ specifications. The firm has been in existence since 2007 to date. The firm has, managed to grow in terms of annual sales. However, it experienced a loss in the first two years of operation. The firm’s management comprises of the president, a sales manager, an engineer, a production supervisor, an expediter, and a controller.
The president arranges for the financing of the company while also handling contracts with large customers. The company engineer designs the company’s products. He also maintains the production equipment while procuring the required materials. The expediter reviews the work in progress and determines which orders are to be given priority (rush orders). The controller places orders on the required materials upon receipt of the customer’s order.
The workshop is arranged into different zones or areas with similar machines and processes placed in the same area. The processing of a gear involves the milling of a gear blank. They are then drilled in the drilling work center so as to insert the required number of holes. If the customer wishes, the gear may also go through the heat-treating process.
However, there has been a lot delays in the production of gears since the company started accepting larger orders. This has affected the production of smaller orders, which fetch equally good if not better sales than the larger orders.
Issues and problems faced by Eastern Gear Inc.
The company president managed to acquire large orders, which have affected the processing of smaller orders. Consequently, the deliveries of small orders have recently become late. The design of the orders is usually left to the customer so that they can express what they want. However, sometimes customers decide to change the design midway into the production process. This leads to wastage of time resource and production materials. It also leads to bottlenecks and queuing.
The blueprints brought forth by the customers are usually incomplete as they do not contain tolerances and finishes which are necessary for machining to be done. The production process is also not systematic. This is because the workshop layout is not arranged according to the production process but, according to the type of machine. Consequently, there is a lot of interference of the orders as they are processed.
The rush orders are given priority in the processing as compared to other orders. This has led to wastage of time as other orders are left pending. The orders have also increased substantially such that they have exceeded the capacity of the machines. Normal orders take longer to go through the workshop, and this leads to customer dissatisfaction. The high number of orders has also affected efficiency. There is a 6% return rate on completed orders with the main cause of return being the absence of the required holes.
The company may also experience problems with the government since the employees are not registered under any union which is critical especially in a production firm. The method of acquiring employees is also highly questionable. This is because the workforce is managed on a family type approach. The highest degree of professionalism should be observed of the maximum returns are to be obtained.
The company accepts rush orders from its clients. Some clients seem to be abusing this privilege since the number of rush orders is fairly high (20%). Small orders suffer the consequence of the acceptance of large orders. The large orders keep the company at full capacity while the profits derived from these orders are fairly small (per unit).
Alternatives Attempted to Resolve the Issues.
The production supervisor noted that there were bottlenecks in the production process that made it difficult for orders to be completed in a timely manner. The company reacted by hiring an expediter follows up on delayed and lost orders. He also explains to customers why their orders are late.
Rush orders are referred to the company president for approval. They are then followed up by Fred Dickson, a trusted employee, throughout the production process. So as to achieve efficient production standards, the company has hired highly skilled and semi skilled labor in the workshop.
Actions to Solve the Problems
The company should increase the production equipment so as to meet its orders (Tan and Matthews, 2009). The equipment acquired should be of high quality so that breakdowns will be at a minimum. This will mean that the downtime should also be short. The company technicians may require special training so that they can easily repair the new equipment (Waters, 2006).
The workshop layout should also be reconsidered and redesigned so as to avoid random movement of products. This will ensure products are systematically processed and duly completed. Consequently, the return rate on completed orders will reduce. The workforce should be managed in a profession manner and not a family approach (Lewis and Slack, 2003).
The management should also seek to delegate duties to other employees so as to increase efficiency. For example, the president should not handle the finances but instead a financial controller or manager should be hired. The vice- president should not be the marketing manager as this may eventually turn out to be a large entity.
Relation with operations strategy and process design
Operations strategy refers to the specific actions undertaken by a firm so as to meet its goals. It may involve acquisition of new premises. According to Poli (2001), the company should develop a new production process for the small orders so as to ease congestion and frustration of customers. This may require the acquisition of new premises or the expansion of the current premises. The company should seek to acquire a new supplier who can provide the required materials faster (Grewal, 2010). A lot of time is wasted in waiting for the necessary materials.
Tan, K., H, and Matthews, R. (2009). Operations Strategy in Action: A Guide to the Theory and
Practice of Implementation. Massachusetts. Edward Elgar Publishing.
Waters, D. (2006). Operations Strategy. London. Cengage Learning EMEA.
Lewis, M. and Slack, N. (2003). Operations Management: Critical Perspectives on Business and
Management. New York. Routledge.
Grewal, S. (2010). Manufacturing Process Design and Costing: An Integrated Approach.
London. Springer.
Poli, C. (2001). Design for Manufacturing: A Structured Approach. Amsterdam. Elsevier.
