1. What are the major problems being faced by Eastern Gear?
2. What action should Mr. Rhodes take to solvehis problems?
3. How can this case be related to operations strategy and process design concepts?

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 be necessary to stop production and wait for new raw made of different metals, depending on the customer's materials or for the design to be clarified. The custom- requirements. Over the past year, 40 different types of er's prints submitted with the order do not always con- steel and brass alloys have been used as raw materials. tain the tolerances or finishes required during machining. See Exhibit 1 for details. As a result, the customer is contacted directly when the Information is needed. Eastern Gear sells its products primarily to engineer- After the order is received, one copy is sent to the ing research and development laboratories or very small production supervisor, Joe Irvine, and the second copy manufacturers. As a result, the number of gears in most is sent to Sam Smith, the controller Upon receipt of the orders is small; rarely is exactly the same gear ordered customer's order, Smith places a purchase order for the more than once. The distribution of order sizes for raw materials required. These materials often take from March 2016 is shown in Exhibit 2. one to two weeks to arrive, depending on the supplier Recently, the president of Eastern Gear decided to and the type of material ordered. accept a few larger orders for 100 gears or more, After receiving the customer order, the supervisor Although lower prices were accepted on these orders, reviews the order and places it on file until the row mate- they helped pay the overhead. It was found that the rial arrives. The customer order is then routed through large orders caused many of the small orders to wait for the shop along with the materials. In the past, the pro- a long time before being processed. As a result, some duction process for most gears has taken about two 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 Sales, March 2016. ified by the customer. On occasion, the customer's engl- Total $ Value neer will call up after the order has been placed and Order Size Number of Orders of Orders request a change in the design. In these cases, it may 80 3.200 53 4.250 EXHIBIT 1 Raw materials. 69 8. 163 4 32 4,800 2015 Usage 5 82 16.392 Type of Material $(000) B 47 15.987 $ 36 10 64 26,871 10 15 22 13.172 15 20 42 31.555 43 25 27 23,682 110 30 18 21,600 18 40 22 32,000 32 50 10 18.693 75 100 4 12,500 40 200 14,068 60 400 9.652 30 700 35.600 K 53 1,000 N - N 20.000 All Others $522 578 $312,185 Total This case was prepared as a basis for class discussion, not to illustrate either effective or ineffective handling of an administrative situation. 417418 Part Seven Case Studies 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 order. of its time waiting in line for a machine to become avail- 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 why 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 a 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. Sales 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 milling more details. Although sales are increasing rapidly, a recent mar. ket survey has indicated that sales can be expanded EXHIBIT 3 Layout. even more in the next few years. According to the mar- Receiving dock ket survey. sales will be $5 million in calendar year 2016 if the current delivery lead time of five to six weeks is Milling machines Hegetving and raw materials storage maintained. If total delivery lead time can be reduced to the former three to four weeks, sales could be expanded Shipping and to $5.5 million instead of $5 million. Heat Finishing and Finished Because of Increased delivery lead times, the com- treating grinding center Foods Shipping dock 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 Tool Drilling red tag. indicating that it should be treated on a rush crib Lunch room basis. At the present time. about 20 percent of the orders have rush tags on them. Williams also spends his EXHIBIT 4 Financial data. 2013 2014 2015 Sales First Quarter, 2016 560 Manufacturing costs 1,500 3.100 1.063 Materials 63 Labor 273 136 587 522 214 Overhead 70 216 1,063 327 Depreciation 172 398 412 140 Total manufacturing costs 441 422 150 Sales expenses 70 1,474 130 2.419 831 G & A expense 75 Total costs 586 110 263 80 Profit before tax (26) 1.714 297 93 (214) 2.979 121 1.004 59 All figures in thousands of dollar