The purpose of this report is to assist the production process of Eastern Gear, Inc. and increase the profitability of the company. Immediately after picking up large orders, Eastern Gear doubled their profit in the last quarter. However, there are some negative implications of this change in their strategy and it has caused their business to suffer. There has been some degradation in their production process, including increased production time and poor production quality. According to the survey, reducing the delivery lead time by 1-2 weeks would expand their profit by an additional10%. Currently, the major problem is not having an efficient production line. After consideration of several alternatives, we have made some suggestions to set up a highly efficient supply chain, reduce production lead time, avoid defective products, improve customer satisfaction, and ultimately, increase revenue. Central Issues and Problem Statement
The current production process is inefficient and disorganized. Below are some issues: * Increased production time
Production time increased from 3-4 weeks to 5-6 weeks, decreasing the capability to handle more orders. * Policies not being agreed upon with customers ahead of time Any changes after production time results in a waste of the previous efforts and raw materials, and has caused an increase in non-value added cost. In addition, agreements should be made with customers to make sure their prints have the tolerances or finishes required by Eastern Gear’s machining. * Bottlenecks in the production process make it difficult to get orders out on time Too much time is spent in the production process waiting for a machine to become available. * Poor layout results in a jumbled flow of production through the shop Tools are not centralized and equipments are organized by type instead of being placed in proper production order. * Poor production quality
6% of the products are returned due to poor quality, and 75% of them resulted from the poor production process * Lack of communication between the sales team and production/manufacturing team The production team has no visual of size of the orders being generated by the sales team, which leads to no coordination in the use of equipments, causing bottlenecks in the production process. * Need to hire less new employees and more efficiently utilize current staff They currently have fifty employees, and they just hired ten additional employees within the last quarter. Based on the case, ninety percent of the production time is spent waiting for the machine to become available and only ten percent of the time is actually spent processing the order. Hiring more staff doesn’t necessarily solve the bottlenecks, since they will more than likely spend their time waiting to do the actual processing work. Hiring more staff will, on the other hand, increase production costs. Constraints to the Problem
* There may not be enough equipment or staff available to implement any major changes. * The layout of the facility is not streamlined. Materials must travel to opposite ends of the facility for different processes. One of the reasons might be because the facility is not large enough to incorporate any major changes. Alternatives
Treat all orders as special orders
Similar to how rush orders are handled, one team of employees could be in charge of one order at a time and hand carry one order through all of the processes. Pros: This will reduce the number of orders that get returned due to failing to undergo a process. This might also reduce the total product processing time. Cons: Employees would have to be trained in all areas of the production process. If the company doesn’t have enough equipment, this could cause bottlenecks to occur more frequently. Lack of a standard operating procedure will decrease the ability to grow above the current capacity. Constraints: Not enough...