Case 7-2 Five Star Tools
This report provides an analysis and evaluation of constraints in the production process for the Model C210 and the Model D400 of the Five Star Tools product line. The significant growth the company has experienced in recent years has led to a strain on the firm’s production capacity. This report seeks to determine how to loosen constraints on production and identify the most profitable product line given current production limitations. Incremental analysis is used to determine both the benefit of one additional hour of production time in the coating and sharpening process and the incremental yearly profit associated with adding a new inspection station.
Five Star Tools is a small family-owned firm that manufactures diamond coated cutting tools used by jewelers. The production line consists of three major processes: the steel ‘blanks’ are first cut to size and then sent through a chemical bath before the final step in which the prepared tools are diamond-coated and sharpened. The coating and sharpening process requires highly skilled workers, expensive equipment, and utilizes a proprietary process, which simultaneously coats and sharpens the blade of each tool. This stage of production is currently at capacity and causing delays in the completion and delivery of customer orders. Management has identified the final stage of production as the bottleneck, or the binding constraint of production. Delayed orders and eschewed business could be damaging to the firm’s reputation and result in loss of market share to competitors. Either the constraint must be loosened or the firm must turn down business beyond the scope of its current production capacity. Loss of market share and a declining reputation will likely have a negative impact on the firm’s long-term profitability. Analysis of the production process utilizes the Theory of Constraint in determining a feasible solution. The first step of Eli Goldratt’s theory has been completed as...
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