1. Develop a Cause and Effect Diagram based on the Eastern Gear Case using Increased Lead Time as your effect.

Case Study Eastern Gear, Inc.: Job Shop Eastern Gear, Inc., in Philadelphia, Pennsylvania, is a manufacturer of custom-made gears ranging in weight from a few ounces to over 50 pounds. The gears are made of different metals, depending on the customer's requirements. Over the past year, 40 different types of steel and brass alloys have been used as raw materials. See Exhibit 1 for details. Eastern Gear sells its products primarily to engineer- ing research and development laboratories or very small manufacturers. As a result, the number of gears in most orders is small; rarely is exactly the same gear ordered more than once. The distribution of order sizes for March 2016 is shown in Exhibit 2. Recently, the president of Eastern Gear decided to accept a few larger orders for 100 gears or more. Although lower prices were accepted on these orders, they helped pay the overhead. It was found that the arge orders caused many of the small orders to wait for a long time before being processed. As a result, some deliveries of small orders were late. be necessary to stop production and wait for new raw materials or for the design to be clarified. The custom- er's prints submitted with the order do not always con- tain the tolerances or finishes required during machining. As a result, the customer is contacted directly when the information is needed. After the order is received, one copy is sent to the production supervisor, Joe Irvine, and the second copy is sent to Sam Smith, the controller. Upon receipt of the customer's order, Smith places a purchase order for the raw materials required. These materials often take from one to two weeks to arrive, depending on the supplier and the type of material ordered. After receiving the customer order, the supervisor reviews the order and places it on file until the raw mate- rial arrives. The customer order is then routed through the shop along with the materials. In the past, the pro- duction process for most gears has taken abou weeks after receipt of raw materials. Recently this pro- duction time has increased to four weeks. Irvine expressed concern about the bottlenecks that appear in the production process. One week the bottle- neck may be in one machine center, and the next week it is in another. These bottlenecks make it difficult to get the orders out on time. ORDER ENTRY When a customer wishes to order a gear, the order is taken by James Lord, sales manager and marketing vice president. The customer specifies the type of gear desired by submitting a blueprint or sketch. The quantity of gears required and the type of material are also spec- ified by the customer. On occasion, the customer's engi- neer will call up after the order has been placed and request a change in the design. In these cases, it may EXHIBIT 2 Sales, March 2016. Order Size Number of Orders EXHIBIT 1 Raw materials. 1 2 3 4 5 2015 Usage $(000) $ 36 10 15 43 Type of Material A B D 80 53 69 32 82 47 64 22 42 27 Total $ Value of Orders $ 3,200 4,250 8,163 4.800 16,392 15,987 26,871 13,172 31,555 23,682 Go Gooo 15 20 25 dbouw appear in the production process. One week the bottle- neck may be in one machine center, and the next week it is in another. These bottlenecks make it difficult to get the orders out on time. ORDER ENTRY When a customer wishes to order a gear, the order is taken by James Lord, sales manager and marketing vice president. The customer specifies the type of gear desired by submitting a blueprint or sketch. The quantity of gears required and the type of material are also spec- ified by the customer. On occasion, the customer's engi- neer will call up after the order has been placed and request a change in the design. In these cases, it may EXHIBIT 2 Sales, March 2016. Total $ Value of Orders Order Size Number of Orders EXHIBIT 1 Raw materials. 1 2 3 4 5 8 Type of Material 80 53 69 32 82 47 64 22 42 27 18 22 10 2015 Usage $(000) $ 36 10 15 43 110 18 32 75 40 60 30 53 $522 L-IOT MonoD 15 20 25 30 40 $ 3,200 4,250 8,163 4,800 16,392 15,987 26,871 13,172 31,555 23,682 21,600 32,000 18,693 12,500 14,068 9,652 35,600 20,000 $312,185 50 10 G H J K All Others Total 100 200 400 700 1,000 4 2 1 2 1 578 PHYSICAL LAYOUT AND MATERIALS FLOW Eastern Gear utilizes a standard job shop layout, as shown in Exhibit 3. Each work center has a common set of machines or processes. The materials flow from one work center to another, depending on the operations needed for a particular order. A typical order will take the following path. First, the raw material, a gear blank, is sent to the milling work center. Here the teeth are cut into the edge of the gear according to the customer's specifications. Next, the gear blanks are sent to the drilling work center, where one or more holes may be drilled in the gear. The gear is then sent to a grinding center, where a finish is put on the gear teeth and the surface of the gear. Next, the gear may be sent to heat-treating if this operation is required by the customer. After the batch of gears is completed, they are inspected by the next available worker and shipped to the customer. In Exhibit 3, note how the machines are grouped by similar type on the shop floor. For example, all drills are located together in one work center, and all milling machines are in another work center. While this layout facilitates development of worker skills and training, it results in a jumbled flow of products through the shop. There is constant interference of the orders being pro- cessed in the shop. The typical order spends 90 percent of its time waiting in line for a machine to become avail- able. Only 10 percent of the time is actually spent pro- cessing the order on a machine. As a result, it takes a relatively long time (four weeks) for an order to make its way through the shop. Large and small orders are processed together. No special work flow is utilized for different order sizes. As a matter of fact, large orders are helping to keep the shop at full capacity. EXHIBIT 3 Layout. Receiving dock Receiving and raw materials storage COMPANY BACKGROUND Business has been booming at Eastern Gear. For the first two years the company lost money, but over the last several months a small profit has been made. Sales are up by 100 percent in the last quarter. See Exhibit 4 for more details. Although sales are increasing rapidly, a recent mar- ket survey has indicated that sales can be expanded even more in the next few years. According to the mar- ket survey, sales will be $5 million in calendar year 2016 if the current delivery lead time of five to six weeks is maintained. If total delivery lead time can be reduced to the former three to four weeks, sales could be expanded to $5.5 million instead of $5 million. Because of increased delivery lead times, the com- pany has recently added an expediter, Matt Williams. Each morning Williams reviews the work in progress in the shop and selects those orders that appear to be behind schedule. Each order that is behind receives a red tag, indicating that it should be treated on a rush basis. At the present time, about 20 percent of the orders have rush tags on them. Williams also spends his Milling machines Heat treating Finishing and grinding center Shipping and finished goods storage Shipping dock Tool crib Lunch room Drilling EXHIBIT 4 Financial data. 2013 2014 2015 First Quarter, 2016 560* 1,500 3,100 1,063 214 Sales Manufacturing costs Materials Labor Overhead Depreciation Total manufacturing costs Sales expenses G & A expense Total costs Profit before tax 63 136 70 172 441 70 75 586 (26) 273 587 216 398 1,474 130 110 1,714 (214) 522 1,063 412 422 2,419 263 297 2,979 121 327 140 150 831 80 93 1,004 59 *All figures in thousands of dollars. EXHIBIT 5 Organization chart. President, Roger Rhodes Sales Manager, James Lord Engineer, Sam Bartholomew Expediter, Matt Williams Controller, Sam Smith Foreman, Joe Irvine time looking for past-due raw materials and lost orders as well as explaining late orders to customers. The organization chart for the company is shown in Exhibit 5. Roger Rhodes is the president and founder of Eastern Gear. He handles contacts with some of the large customers, arranges the financing needed by the company, and sits in on the weekly production meeting. During these meetings, scheduling problems, employee problems, and other production problems are discussed. The company engineer is Sam Bartholomew. His responsibilities include design of the company's prod- ucts, procurement and maintenance of equipment, and overseeing of the supervisor, Joe Irvine. Bartholomew also attends the weekly production meetings, and he spends about 10 hours a week on the factory floor talk- ing with individual workers. The company is currently experiencing about a 6 percent return rate on completed orders due to poor quality. In 75 percent of the cases, the returned orders have failed to undergo one or more operations or the operations have been improperly done. For example, in one returned order, all the gears were missing a hole. Occasionally, the company will receive rush orders from its customers. In this case, the order is referred directly to Rhodes for approval. If the order is accepted, the raw materials are rush-ordered and received the next day. After receipt of the raw materials, the order is rushed through production in four days. This is accom- plished by Fred Dirkson, a trusted employee, who hand- carries the rush orders through all operations. About 10 percent of the orders are handled on a rush basis. The workforce consists of 50 employees, who are highly skilled or semiskilled. The milling machine operators, for example, are highly skilled and require at least two years of vocational-technical training plus several months of on-the-job training. Within the last quarter, 10 new employ- ees have been added to the workforce. The employees are not unionized, and good labor relations exist. The work- force is managed using a family-type approach. Discussion Questions 1. What are the major problems being faced by Eastern Gear? 2. What action should Rhodes take to solve his problems? 3. How can this case be related to operations strategy and process design concepts