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 ...view middle of the document...
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....