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Eastern Gear Inc Case Study

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Eastern Gear, Inc. Case Study In order to be efficient and to maximize growth and profitability, it is critical to evaluate basic operations and determine where the potential problem areas are. Before any analysis can be done, a clear and concise object in operations need to be defined. Eastern Gear is growing at a rapid rate and a plan for growth is necessary.
Currently, there are inefficiencies in taking in taking orders. Not all of the necessary information such as tolerances or finishes is obtained at the time that the order is placed. Also, at the time the order is placed is when the raw materials are ordered which adds an additional 1-2 weeks of processing time. Aside from the additional processing time from not keeping raw materials on hand, production time has increased from 2 weeks after receiving materials to 4 weeks. The increase in production time is due to recent addition of processing large orders, which subsequently increases the amount of time needed for smaller orders.
Time management is critical in managing efficiency. There are bottlenecks and they may vary from different machine centers. 90% of the time is spent waiting for a machine to become available and the other 10% is spent actually using the machine. In addition the layout of the facility allows for additional travel time than what is necessary. Each problem is described more in depth below.

Problem #1 – Issues with the order taking process. There is only one person who takes orders. And when the order is taken sometimes all the necessary information is not obtained, such as tolerances or finishes. When all of the information is not taken at the time the order is placed, someone has to take additional time during the processing time to call the customer and get the rest of the required information. Also, if there are a lot of orders, the process can be bottlenecked because only person can process and submit the orders. The process can be streamlined by having more than one person complete the order taking and establishing a guideline that the client has to follow when placing an order, that way there is less room for error and mistakes.

Problem #2 – Raw materials. Eastern Gear does not keep any raw materials in their facility. Every time an order is placed, once the order is submitted to Sam Smith, he then orders the raw materials for the order. It adds an additional one to two weeks to the processing time for the materials to come in. Although, the same two orders are rarely placed, the same materials are used several times. It would cut down processing time by keeping an inventory of a few of their most commonly used materials in their facility. Based on Exhibit 1, Material E is the most common material as it had $110,000 in usage in 2011.

Problem #3 – Processing time. After receiving the materials, the production process takes about two weeks. However, recently production time has increased to four weeks without any indication as to the reasoning for the increase. Production processing needs to re-evaluated to determine the exact cause for the increase in production time. Based on forecasting profits for 2012 can increase from $5M to $5.5M if Eastern Gear can reduce their processing time back down to 3-4 weeks.

Problem #4 – Production process. There is constant interference with the way the orders are fulfilled. The typical order spends 90% of its time waiting for a machine to become available and the other 10% of the time actually using the machine. Adding additional machines would help with the waiting. It would be an additional upfront cost, but they would easily recoup the cost by being able to fulfill more orders, quicker. Part of the issue is that 20% of their orders have rush tags on them which take priority and place regular orders on hold. Eastern Gear needs to establish a production control process to manage the rush orders and regular orders. There also needs to be a separate operational procedure for the large orders as opposed to the smaller orders since currently the smaller orders are taking longer to process now that they have to wait in line for the larger orders to be processed. Rush orders could be processed separately on their own machines.

Problem #5 – Facility layout. The way the facility is laid out adds extra time to the processing time for travel. Currently they have to zig zag around in order to get to the next phase in production. Establishing an assembly line would be more efficient. If not an assembly line at least rearranging the stations locations would help as demonstrated below.

Current Layout

New Layout

The new layout allows for the process to flow better throughout the facility.

Problem #6 – Operations objective. It is hard to determine what course of action to take to make the other problems that Easter gear is facing without knowing exactly what operations take to place emphasis on whether it be cost, quality, delivery or flexibility. Right now Eastern gear is trying to accommodate all of them, but one of them needs to have the emphasis. The area that needs the largest improvement is delivery. With focusing on delivery, they will also reduce cost. Also, at the rate that they are growing a strategy needs to be in place to maintain their success so they don’t face cash flow and staffing issues in the future.
Eastern Gear is facing a lot of problems as a newer company. With a focus in mind and a change in approach in the current issues, Easter Gear could be even more successful than they are now. They will be more successful with time management while cutting costs and allowing for more orders to be placed in less time than they currently operate.

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