Philadelphia Case

Eastern Gear, Inc. is based in Philadelphia, Pennsylvania and manufactures custom-made gears of varying size and composition. Orders are rarely duplicated, as most products are ordered for engineering research and development labs or smaller manufacturers. The design process is lengthy. Blueprints or sketches are submitted, revised and redefined through an undetermined number of stages. Raw materials are not ordered until production is scheduled to begin and the production process itself is susceptible to bottlenecks as there is no formal plan with respect to prioritizing orders. Errors persist in spite of a relatively skilled labor force.

Eastern Gear is led by Roger Rhodes, who has seen increased profits over recent years. There are opportunities for continued growth however the current lead time of 5 to 6 weeks must be reduced to achieve optimal performance. An Expediter, Matt Williams has been brought on board to assist with pushing though "priority" orders via a red tag system however there are currently 20 such rush jobs in queue. There is a need for better planning and alignment of Eastern Gears manufacturing operations with its business strategy.

1. What are the major problems being faced by Eastern Gear?

The major problems being faced by Eastern Gear are order entry, materials management, production layout, quality control and order processing. Order entries/requests are inconsistent with respect to blueprints and customer specifications, often resulting in delays due to confirmation of specs or rework. Raw materials are not ordered until an order has been received and is awaiting production. The production area layout does not foster a smooth workflow. Errors are commonplace. Finally, orders are not processed for optimal use of capital or labor; planning and prioritization of the work queue is desperately needed. The aforementioned problems have resulted in a lead time of 5 to 6 weeks, which will translate to a $500,000 profit reduction if not addressed prior to the forecasted demand increase.

2. What actions should Rhodes take to solve his problems?

Rhodes needs to better define the order entry process by requiring customers to submit complete information (tolerances and finishings). The customer's engineer needs to be more involved in the approval process to reduce rework and materials and inventory should be managed so that the most commonly used components are readily available versus ordering all materials each time a submitted order reaches production.

The production layout needs redesign for better workflow and interaction between adjacent processes; this offers an opportunity to reduce errors as well as congestion. Additionally, there is an overall need for tighter final quality control activities. Planning and prioritization of large and small orders will