$7-2$ Five Star Tools $[$LO A$1]$

$($Note: This case relates to the appendix on the Theory of

Constraints.$)$

Five Star Tools is a small family$-$owned firm that manufactures diamond$-$coated cutting tools $($chisels and

saws$)$ used by jewelers. Production involves three major processes. First, steel $$blanks$($tools without the diamond coating$)$

are cut to size. Second, the blanks are sent to a chemical bath that

prepares the tools for the coating process. In the third major process, the blanks are coated with diamond chips in a proprietary

process that simultaneously coats and sharpens the blade of each

tool. Following the coating process, each tool is inspected and defects are repaired or scrapped.

In the past $2$ years, the company has experienced significant

growth and growing pains. The company is at capacity in the coating and sharpening process, which requires highly skilled workers

and expensive equipment. Because of the bottleneck created by

this operation, the company has missed deadlines on orders from

several important customers.

Maxfield Turner, the son of Frederick Turner, founder of

Five Star Tools, is the president of the company. Over lunch he

and Betty Spence, vice president of marketing, discussed the

situation. $$We$$ve got to do something,$$ Betty began. $$If we don$$t

think we can meet a customer$$s order deadline, we should turn

down the business. We can$$t simply keep customers waiting for

product or we$$ll develop a reputation as an unreliable supplier.

You know as well as I do that this would be devastating to our

business.$$

$$I think there may be another approach, Betty,$$ replied Max.

$$Some of our products are exceptionally profitable. Maybe we

should concentrate on them and drop some of the less profitable

ones. That would free up our production resources. Or maybe we

can figure out a way to run more product through the coating

process. If we could just loosen that constraint, I know we could

improve our response time and profitability. I$$ll tell you what I$$ll

do$.$ I$$ll get the accounting department to prepare an analysis of

product profitability. That should help us figure out which products to concentrate on$.$ And I$$ll get the production people thinking about how to free up some time in coating. We$$ll meet early

next month and try to get a handle on how to deal with our production constraints.$$