Operation management at Eastern Gear MBA6151 unit II case study

Running head: OPERATION MANAGEMENT AT EASTERN GEAR

Operation management at Eastern Gear
Le Viet Anh
Columbia Southern University

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Introduction
Business process analysis is a strategic analysis that identifies and generates a visual
representation of the processes flow of different areas within an organization. This work is varied
and applied in many areas to benefit organizations looking to reduce costs and improve
efficiency. Analyzing and recognizing inefficiencies in business processes is very common
today. Management must quickly identify existing problems and solve them by building the
business process in the most appopriate way. In this article, we conduct a case study of Eastern
Gear, Inc. (EG), a manufacturer of custom-made gears, to find out the problems the company is
facing, then analyze and propose suitable solutions for the sustainable development of the
company (Schroeder, Goldstein, & Rungtusanatham, 2013).
Current and future problems Eastern Gear faces
EG is a company that has traditionally produced custom gear on a small scale, and
recently was given the opportunity to start producing larger quantities for each order. This is a
normal store run by the owner so the increase in sales has caused difficulties in doing business.
Many issues have been presented in this case as it covers the whole range of activities including
goals, capacity, production, inventory control, organization and quality control.
First of all, EG do not have an order priority or order size policy for the orders they
received. This has led to the inconsistency and inefficiency of the information process. The

company receives and processes large and small orders at the same time and this requires a lot of
resources. If EG focuses on orders from small organizations, it will be difficult to execute large
orders on time and vice versa. In terms of organization, these two types of orders are best served
by applying different operating strategies and processes design. So, if they keep processing


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orders in the current way, the company may face more difficulty in allocating resources,
resulting in delivery delays later on. The problem becomes more serious when EG agree
customers to change or add requirements to the order during the production process. This will
pose a great risk to the production process as mechanical components once drilled or cut will be
difficult to redesign. It causes loss of time, raw materials, labor and other resources. Sometimes,
additions or modifications that are not fully met may result in cancellation. The above will
directly affect the production time, delivery time, product quality, and customer relationship.
The second problem is that Easter Gear is not having a clear orientation for the present
and the future. At present, the company has not clearly defined the focus for cost optimization,
flexibility, channel development or quality. This concentration is essential for businesses to
improve their products and services. Along with that, it looks like the company is not having a
strategy or plan for growth and development in the future. As a result, they may experience
problems in cash flow, capacity, ability to serve large orders, and other issues related to rapid
growth.
Thirdly, the company is having many issues related to the production and inventory
management. The fact is that the company is relying on the design from customer without
actually having a design team. This makes the search and preparation of raw materials more time
consuming and the company cannot stockpile large amounts of raw materials. Processing time
has increased from two to four weeks and there seems to be no control system over production
and inventory in place (Schroeder, Goldstein, & Rungtusanatham, 2013). All this makes the

orders delay even more and damage the company financially. More than twenty percent of orders
have been tagged as rush. In addition, certain orders are processed in a separate manner on a rush


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basis and this will disrupt the smooth production flow of other orders. Joe Irvine has also
expressed his concern over these bottlenecks due to the ineffectiveness of production control.
The next issue is that EG's current organizational structure does not have a clear
functional separation. More specifically, the Engineer, Sam Bartholomew, involved in the
supervision, the Controller, Sam Smith, is responsible purchasing materials while this is a
function of production, and Matt William’s job is too limited as the Expediter.
Furthermore, the current shop layout leads to abnormal flow of material and excessive
travel. In fact, this forces workers to move more and the efficiency of work is reduced
significantly. As mentioned in the description of this case study, regular orders spend 90 percent
of the time waiting in line; only 10 percent of the time is actually spent processing (Schroeder,
Goldstein, & Rungtusanatham, 2013).
Finally, a major problem that seriously affects the company's profitability is quality
control. Percentage up to 6 percent is a major financial blow to the company. But more serious is
the reason for the order being returned, it is due to a lack of one or several activities, or, in other
words, manufacturing defects. If the company does not make improvements in this matter, they
may even have to compensate customers for damages or delay.
Modification in process and technology affect Eastern Gear
EG has adopted procedures to apply batch production, whereby products are produced in
separate batches. Depending on the type of product, different stages will be carried out
throughout the production process. At present, the application of this model will have many
advantages over the number of small orders. According to the 2012 sales report in Appendix 2,
the Company received a total of 578 orders in March, with the largest number of 1000 products.

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In order to meet large-volume orders, the company can apply the production chain with better
production efficiency and higher sales.
In the manufacturing process, the business needs to focus more on the human resources.
Training courses on order processing, inventory management, quality management should be
done by people, so those who work at these stages must be skilled workers to ensure the
effectiveness of work. Besides, there are many steps that can apply machinery as well as science
in management methods. The application of information technology can be accomplished by
using customer, supplier and order management software to improve management quality. They
can also use warehouse management applications to know the inventory and raw materials
available to meet the customers’ requirements. This will help shorten the preparation and
production time and should certainly increase the profit for the company.
A process flow analysis on Eastern Gear
The production process starts from input to output, in other words from raw materials to
finished products. To get the finished product, the material will be processed by stages with the
support of various resources including human beings. In the case of the EG company, the layout
of the operation process is depicted as illustrated below:
The Factory Layout


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The Flow Process Chart of Eastern Gear

Operations are usually clarified by description through the flow process chart. It is known
as a symbolic depiction to illustrate the activities that are carried out throughout the process
(Daft, 2012). Each section will be linked by arrows to display instructions. Below is the flow
chart of the EG company:


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The Factory Layout (Recommended)
Through the interpretation of this case, we can estimate that up to 90% of the waiting
time is a big waste. Managers should carefully review the current layout and make changes to
achieve greater efficiency in the production process. Proper layout will help save travel time as
well as make use of resources. The recommended layout is as follows:


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More specifically, the layout needs to be improved by streamlining the material flow.
The most economical and fastest way to do this is to switch between the heat treatment and the
drilling center. If this is done then the flow will be a lot smoother, it is shown as below:

Action recommendation for Eastern Gear
To improve efficiency, EG needs to re-evaluate its production system. The important
goals that the company should aim for are flexibility, delivery, quality and cost (Chatterjee,
2011). The bigger the order, the more emphasis should be on quality and cost. If this is done
well, output quality will improve and costs will decrease. The company needs to sort orders in

different sizes so that different production methods can be applied. Significant orders and
quantities need special care. The company must have policies on order processing. Customers
should be promptly advised on the design, model, product composition, schedule and production
schedule. All the above information should be included in the contract including terms related to


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refund and change of order information. Express orders should be handled through delivery
planning rather than by Fred Dirkson alone. These orders will cause troubles to the production
process and delaying other orders. A premium can be charged to these orders to compensate for
the damage the company may incur.
Besides, the lack of growth plan can be solved by developing six-month, one-year and
two-year plans. These plans should include market objectives, financial forecasts, performance
reports, and performance indicators. Fundamental issues should be addressed and goals should
be clearly defined.
The third action involves the production control and inventory management. This can be
improved in many ways. First, the company needs to develop and continually update the
products and production schedule. When an order is confirmed, management must rely on the
information in the contract, as mentioned in the previous section, to control the schedule,
delivery date and the amount of material needed, and then consider the capacity and load
capacity of the plant. With larger order sizes, production schedules should be stored on the
computer to ensure the security and storage capacity.
Moreover, the company should be reorganized so that the functions are more clearly
distinguished. Engineer should be separated from Manufacturing to reduce the load on engineers
because they are spending a lot of time on production. Expediting should be removed and
replaced by the production and inventory control. A materials management position should be
placed under the supervision Manufacturing and be responsible for scheduling, inventory and

purchasing. This person must always ensure the availability of materials in stock, especially the
common materials, used in many products. Information about the amount of inventory should


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also be kept on personal computers or cloud computing. Perhaps a finance department should be
established to monitor the cash flow and marketing function should be added sales department.
The organizational chart of the EG company is as follows:

Finally, it is the application of quality management processes to increase product quality,
reduce defects thereby reducing risks in the production process. The poor quality and returned
products must be stopped immediately. Quality controllers should prepare a production
information sheet for each order, which will include the time and operations required to complete
the product and be attached to the product throughout the manufacturing process. An inspector
should be assigned to inspect each order before it is shipped. This person will check the
production information sheet mentioned to make sure that all the operations have been properly
executed.


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References
Chatterjee, B. (2011). Organization Development: Developing the processes and resources for
high-tech businesses. Bloomington, IN: iUniverse, Inc.
Daft, R. L. (2012). Organization Theory and Design, 11th ed. Mason, OH: Cengage Learning.
Schroeder, R. G., Goldstein, S. M., & Rungtusanatham, M. J. (2013). Operations Management
in the Supply Chain: Decisions and Cases, 6th ed. New York, NY: McGraw-Hill.

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