Eastern Gear is in the business of manufacturing small to large gears at one central facility in Philadelphia, Pennsylvania. Eastern Gear receives, manufactures, and ships gear orders from this singular location. The firm accepts orders mostly from engineering research and development laboratories. The order size is historically small but larger orders have been taken. The facility has a modular layout that houses all major processes needed to transform the raw materials into the finished product of gears. The facility can be described as Work Center with each module consisting of a common set of machine or processes. Eastern Gear has hired 10 new employees in the last quarter to meet the increased demand that they have witnessed in the last three years. The firm currently has 50 employees with 10 new employees added in the previous quarter.
The company is currently experiencing major delays in processing their orders. It is estimated that presently 20% of the orders have rush tags on them. The process is also experiencing bottlenecks and returned sales of 6%. The production floor is poorly laid out and the actual amount of time that is spent working on the units is only at 10% The result of these poor process is that the time it takes to produce a gear is up from two to four weeks, not including the lead time to order and receive raw materials. Eastern Gear has seen a large rise in sales and had a strong possibility of future revenues if they are able to reign in the delivery lead time to 3-5 weeks from it’s current position of 5-6 weeks.
Further analysis shows that a revision of three main processes will help eliminate some of the unnecessary time and costs with the gear making process. The three main areas of focus and process revision are Order Submittal, Production Process, and Return Rate. Our team feels that addressing the individual issues inside these three focus areas we will be able to enhance production from a quality and time perspective.
II. Process/Project Analysis.
A. Analysis of the Situation
i. Identification/Definition of the Issue
Eastern Gear has seen their sales more than double in the last 3 years. For the last quarter alone, their sales are up 100 percent. They have turn this increase of sales into a profit in the last 16 months. The bright side is that Eastern Gear is in a booming industry in which they have been riding the wave of revenue to generate a profit. Our suggestions to the internal processes in which Eastern Gear operates in will increase sales further and from an operational perspective make the company operates in a more lean fashion.
We are going to focus our improvement efforts on three areas. These three areas are the Receiving Orders and Raw Materials, Production Process, and Return Rate.
Eastern Gear has only recently started to take on large quantity orders. Most orders in the past were small orders of one to ten gears. Also, you can get an idea of the relationship that Eastern Gear had with their suppliers. Eastern Gear was a smaller company that worked closely with the research and development laboratories and small manufacturers. The old way in which Eastern Gear handled these orders may have been a viable option for the 500 million dollar revenue company with fewer employees and a smaller customer base. However, the company has grown in order numbers and with the number of employees. The old way of accepting orders is not a viable option as the company grows. Multiple customer contact points to clarify an order submission and rework on behalf of the customer’s request has led to the current lengthy delivery lead time.
Further to order receiving and submission process, Eastern Gears takes hold no inventory. Exhibit 1 in the case lists the Types of Raw Materials and Usage in dollar amounts. To supplement this exhibit, we recommend that Eastern Gear track the order time for certain raw materials.…