Major problems faced by Eastern Gear Inc.
Eastern Gear Inc., based in Philadelphia, is a manufacturing company that produces a variety of gears. Currently, the company faces several problems in the operations. The operations of the company indicate that it lacks proper strategies and operational objectives. The operations of the company should be based on a given objective. It can be observed that the company is struggling to attain flexibility by accepting overlapping orders and at the same, it strives to minimize cost, reduce idle time, and improve quality and delivery. Therefore, the management should choose one objective to focus on. Secondly, the company is experiencing a lack of proper control of the production process. It can be noted that the production process takes 4-6 weeks. Also, there are bottlenecks in the production process. Third, the company does not have a proper layout—the layout results in a disorderly flow of products. For instance, drilling should be located next to the milling machine and not heat area.
The fourth problem is that the company lacks a policy for the sizes of orders. It can be noted that smaller orders are mixed with large orders. The job shop cannot handle the large order efficiently, and this created congestion. The fifth problem is that the company lacks a proper method for ordering raw materials. Besides, it lacks an inventory for production. Therefore, they have to wait for a period of up to two weeks to receive raw materials ordered. The sixth problem is that the products produced by the company are of low quality. A return rate of 6% explains it. The rate is too high for a customized order. Further, the company lacks a proper organizational structure. For instance, the company lacks a production manager. Finally, the company does not have adequate capacity for large production. Larger orders require assembly point which the company does not have.
Actions to solve the problem
The first action that Rhodes should take to solve the problem is to come up with clear strategies for the company. The strategies should be related to the goals of operations. The management should not take a large order because the current capacity cannot support their production. Besides, the discount on larger orders should be eliminated to enable the company to cover the production overheads adequately. However, if the management decides to take large orders, then there will be a need to set up an assembly line so that the job shop can be used for small size orders. Besides, the management should come up with an operation schedule for the orders they have received. It will create an organization in the production process. Besides, it will improve the delivery time. Secondly, Rhodes should come up with an organization chart that creates efficiency in the company. For instance, the company should employ a production manager. The foreman should report to the production manager and not the engineer. Also, the role of the expediter is not necessary. Therefore, it should be eliminated. Also, quality concerns can be addressed in the organizational structure by recruiting a quality inspector. The inspector will check if all the products meet the set quality standards.
The third action is that Rhodes should come up with a proper inventory management system. This will define the closing balance of inventory for raw materials and the reorder levels. Even though the holding cost of the inventory will increase, the ordering costs will be reduced, and it will result in a reduction of the delivery time. The fourth action is to change the production layout. Heating should be swapped with drilling. This reduces waiting time and lowers the time spent on production. The next action is that Rhodes should reduce rush orders. This can be achieved by creating order in the job shop and coming up with job schedules.
The sixth action is that Rhodes should come up with an operation checklist for every stage of operation. The checklist will allow the quality control officer to check the quality of each product against the checklist. Thus, it will ensure that all products produced have passed through all stages and that they meet the requirements outlined in the checklist. The seventh action is that Rhodes should improve efficiency at the point of the order entry. The company allows customers to change the design of the order once they have placed an order. The company has to curtail the production of such an order and wait for the materials. However, they do not have a system where the customer charged for a change of design. Therefore, the company needs to come up with a system where they charge customers for such changes.
Further, customers need to sign for tolerances before the order begins processing. Finally, Rhodes should eliminate bottlenecks in the production process. This will improve the delivery time by reducing the production time.
Operations strategy and process design
First, the company needs to come up with an assembly line for larger orders. Even though it will require massive capital investment, it is efficient, and it leads to high-volume of production. Besides, the company needs to use assemble-to-order for this type of production flow because it allows faster fulfilment of customer orders. Secondly, the company should use job shop for small size orders. It allows the company to produce customized orders. It also allows for flexibility. In this case, the company should use make-to-order and make-to-stock as the approaches to order fulfilment. This will create efficiency and improve lead time.