Please answer discussion questions 1-3

Case Study Eastern Gear, Inc.: Job Shop Eastern Gear, Inc., in Philadelphia, Pennsylvania, is a be necessary to stop production and wait for new row manufacturer of custom-made gears ranging in weight materials or for the design to be clarified. The custom from a few ounces to over 50 pounds. The gears are er's prints submitted with the order do not always con made of different metals, depending on the customer's tain the tolerances or finishes required during machining. requirements. Over the past year, 40 different types of As a result, the customer is contacted directly when the steel and brass alloys have been used as raw materials information is needed See Exhibit 1 for details After the order is received, one copy is sent to the Eastern Gear sells its products primarily to engineer production supervisor, Joe Irvine, and the second copy Ing research and development laboratories or very small is sent to Sam Smith the controller. Upon receipt of the manufacturers. As a result, the number of gears in most customer's order. Smith places a purchase order for the orders is small rarely is exactly the same gear ordered raw materials required. These materials often take from more than once. The distribution of order sizes for one to two weeks to arrive, depending on the supplier March 2016 is shown in Exhibit 2. and the type of material ordered Recently, the president of Eastern Gear decided to After receiving the customer order, the supervisor accept a few larger orders for 100 gears or more reviews the order and places it on file until the raw mate Although lower prices were accepted on these orders.rial arrives. The customer order is then routed through they helped pay the overhead. It was found that the the shop along with the materials. In the past, the pro large orders caused many of the small orders to wait for duction process for most gears has taken about two a long time before being processed. As a result, some weeks after receipt of raw materials. Recently this pro deliveries of small orders were late. duction time has increased to four weeks Irvine expressed concern about the bottlenecks that ORDER ENTRY appear in the production process. One week the bottle When a customer wishes to order a gear, the order is neck may be in one machine center and the next week taken by James Lord, sales manager and marketing vice it is in another. These bottlenecks make it difficult to get president. The customer specifies the type of gear the orders out on time. desired by submitting a blueprint or sketch. The quantity of gears required and the type of material are also spec EXHIBIT 2 Sules, March 2016 ited by the customer. On occasion, the customer's engi- Total $ Value neer will call up after the order has been placed and request a change in the design in these cases, it may Order Size Number of Orders of Orders 1 80 $ 3.200 53 4,250 EXHIBIT 1 Raw materials 3 69 8,163 4 4.800 2015 Usage 5 16.392 Type of Material $1000) 8 47 15,987 $36 10 64 26,871 10 15 22 13.172 15 20 42 31,555 D 43 25 22 23.682 110 30 18 21,600 18 40 22 32,000 32 50 10 18,693 75 100 4 12.500 1 40 200 2 14,068 60 400 1 9,652 K 30 700 2 35.600 All Others 53 1.000 20,000 Total 5522 578 $312.185 This case was prepared as a basis for class discussion, not to illustrate other effective or ineffective handling of an administrative situation 417 Part Seven Cew Sadex PHYSICAL LAYOUT AND MATERIALS FLOW machines are in another work center. While this layout Eastern Gear utilizes a standard job shop layout, as facilitates development of worker skills and training.it shown in Exhibit 3. Each work center has a common set results in a jumbled flow of products through the shop of machines or processes. The materials flow from one There is constant interference of the orders being pro- work center to another depending on the operations cessed in the shop. The typical order spends 90 percent needed for a particular ordet of its time wating in line for a machine to become aval A typical order will take the following path. First, the able. Only 10 percent of the time is actually spent pro- raw material a gear blank, is sent to the milling work cessing the order on a machine. As a result, it takes a center Here the teeth are cut into the edge of the gear relatively long time four weeks) for an order to make its according to the customer's specifications. Next, the way through the shop gear blanks are sent to the drilling work center, where Large and small orders are processed together. No one or more holes may be drilled in the gear. The gear is special work flow is utilized for different order sizes. As then sent to a grinding center where a finish is put on matter of fact, large orders are helping to keep the the gear teeth and the surface of the gear. Next, the shop at full capacity gear may be sent to heat-treating if this operation is required by the customer. After the batch of gears is COMPANY BACKGROUND completed, they are inspected by the next available Business has been booming at Eastern Gear. For the worker and shipped to the customer. first two years the company lost money, but over the last In Exhibit 3, note how the machines are grouped by several months a small profit has been made Salies are similar type on the shop floor. For example, all drills are up by 100 percent in the last quarter. See Exhibit 4 for located together in one work center, and all maling more details Although sales are increasing rapidly a recent more ket survey has indicated that sales can be expanded EXHIBIT 3 Layout even more in the next few years. According to the mar ket survey, sales will be $5 million in calendar year 2016 Receiving deck if the current delivery lead time of five to six weeks is Receiving and raw Milling machines maintained. If total delivery lead time can be reduced to material storage the former three to four weeks, sales could be expanded to $5.5 million instead of $5 million Shipping and Because of increased delivery lead times, the com- Heat Finishing and finished pany has recently added an expediter, Matt Williams. treating grinding center Each moming Williams reviews the work in progress in the shop and select 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 Tool Drilling Lunch basis. At the present time, about 20 percent of the orders have rushtags on them. Williams also spends his Shipping dock EXHIBIT 4 Financial data 2013 5600 2014 1,500 2015 3.100 First Quarter 2016 1063 Sales Manufacturing costs Materials Labor Overhead Depreciation Total manufacturing costs Sales expenses G&A expense Total costs Proit before tax 63 136 70 172 441 70 75 586 126 273 587 216 398 1.474 130 110 11214 214) 522 1063 412 422 2.419 263 297 2979 121 214 327 140 150 831 80 93 1.004 59 Gare EXHIBIT 5 Organization chart President. Roger Rhodes Sales Manager, Jane Lord Engineer Sam Bartholom Expediter Mart Williams Controller Sam Smith Foreman Jee Insie time looking for past due raw materials and lost orders directly to Rhodes for approval. I the order is accepted, as well as explaining late orders to customers the raw materials are rush-ordered and received the The organization chart for the company is shown in next day. After receipt of the raw materials, the order is Exhibit S. Roger Rhodes is the president and founder of rushed through production in four days. This is accom- Eastern Gear. He handles contacts with some of the plished by Fred Dirkson a trusted employee who hand- large customers, arranges the financing needed by the carries the rush orders through all operations. About company and sits in on the weekly production meeting 10 percent of the orders are handled on a rush basis. During these meetings, scheduling problems, employee The workforce consists of 50 employees, who are problems, and other production problems are discussed highly skilled or semidfied. The milling machine operators The company engineer is Sam Bartholomew. His for example, are highly skilled and require at least two responsibilities include design of the company's prod. years of vocational technical training plus several months of ucts, procurement and maintenance of equipment and on the job training within the last quarter 10 new employ overseeing of the supervisor Joe Irvine. Bartholomew ces have been added to the workforce. The employees are also attends the weekly production meetings, and he not unionized, and good labor relations exist. The work spends about 10 hours a week on the factory oortolk force is managed using a family-type approach Ing with individual workers The company is currently experiencing about a 6 percent return rate on completed orders due to poor Discussion Questions quality. In 75 percent of the cases, the returned orders ? What are the major problems being faced by Eastern have failed to undergo one or more operations or the Gear? operations have been improperly done. For example, in 2. What action should Rhodes take to solve his one returned order, all the gears were missing a hole problems? Occasionally, the company will receive rush orders 3. How can this case be related to operation strategy from its customers. In this case, the order is referred and process design concepts