Operations Management of Eastern Gear Inc - Essay Example

Case Study – Eastern Gear Inc. Answer The operations system of an organization is the part that produces the organization’s products. . In fact operations management has its origins in the study of ‘production’ or ‘manufacturing management’. It is concerned with the management of people, processes, technology and other related resources in order to produce quality goods and services. Operations manager has a multifaceted job profile. He’s concerned with providing a strategic direction to the organisation. He is supposed to1; Improve the efficiency of the operation Improve control of service levels and quality Set service level agreements for end-user applications and for services provided Improve relationships with end-user departments Develop staff potential Schroeder’s model indicates that operations objectives aspire for producing a product which meets the market demand through low costs, high flexibility, dependability, and quality. The operations manager is therefore supposed to work towards these objectives. For a company in the business of customs gear business, it is very important to; i. Provide a cost effective solution to the customer, as the gears are required for a pre-defined task for fulfilling the customer’s needs. A custom made product of course costs more than a product available off the shelf. But it certainly doesn’t mean that Eastern Gears Inc starts charging rates high enough for customer to be dissuaded for their second and subsequent dealings with the company. ii. Flexibility in operations according to the market demand or customer preferences is a prerequisite for any business to survive. It is the market force which ultimately decides the demand of the company and its product. Flexibility in a Gear business is of particular importance as it calls for a range of adjustments in the molding, casting and finalizing the product. A T Kearney (2004), a company that formulates strategic plans, states that Flexibility in general calls for extra capacity and inventory, which appears to be unlikely at present in case of Eastern Gear. As the company has already experienced in the past, customers often come out with request for changes many times after placing the order, Eastern Gear Inc will therefore have to be ready for such an eventuality, with as high flexibility as possible, provided it doesn’t become pain in the neck for the company. This becomes all the more crucial for large order business, as they are the one’s who provide more business to the company. iii. Delivery schedules are meant for being adhered to. Customers prefer to have realistic deadlines from the company. Eastern Gear Inc. has been experiencing some difficulties in meeting the delivery schedules owing to some complex procedures. But the company has also been able to meet out the demand of the customer in case of rush order, goes on to say that the company is quite capable of performing well, provided some adjustments are done in operating procedures. iv. Quality is said to have no substitute. A company must consider improvement in quality as a means of bringing in product differentiation. Eastern Gear Inc. has been experiencing about a 6% return rate on completed orders on account of poor quality, what is more worrisome is the fact that 75% of such returns on account of wrong operations. The gear is indeed such an item which will become useless for the customer even if there are minor variations in the specifications, as it is a high precision part of a machine. Answer-2 From the case study it is quite apparent that Eastern Gear Inc. has a lead time of approximately five to six weeks. The company is also able to expedite 20% of the orders as well. But if such a step leaves an adverse impact on the deliver time of the rest of the orders, it almost nullifies the advantages of speeding up some orders. Most of the remaining orders get delayed. This kind of a policy requires an honest introspection. In fact, in a business require custom made production, if the customer is satisfied with the quality of work and the delivery time, he is bound to be a return customer, because the company has by now understood many finer elements of his requirement, and in the next and subsequent orders the company would have taken care of the sensibilities understood during the first interaction. Primary clients of Eastern Gear Inc. are the engineering research and development laboratories or very small manufacturers, which make the size of orders small with lesser chances of repetition of the same order, but the mutual equation set up during one interaction will certainly result customer satisfaction with need for lesser interactions during the next order. As of now, whenever the company expedites some of the orders it results in delay of some other orders. Part of the reason is the improper planning and inefficient shop layout. The fact that, a typical order spends 90% of its time waiting in line for a machine to become available, speaks volumes about the lack of co-ordination amongst different units. Therefore the outright priority for the company should be to reduce this bottleneck. As a first step the company can take the following steps to smoothen the work flow; i. Instead of centralizing the works, the company can plan out couple of different set of machines for completing the orders. Therefore instead of locating all drilling operations together and all milling operations in another corner, the company can make different sets of complete works, and then provide targets to these different sets. ii. These different sets of works can be located within one building or, if possible, at different locations. iii. No doubt, this would entail recruiting some more workers, but in order to expand the business, the company will have to prepare a long term strategy, which remains incomplete without the services of more workforces. iv. The present strategy of processing large and small orders together can be good enough for a small home based unit, but for a company aspiring to establish its own brand and standards of manufacturing, different sets of priorities is to be accorded for large and small orders. v. Company will have to formulate a strategy, so that the delay in completing the orders is minimized. It is worthwhile here to mention that, if rush orders can be completed within 4-6 days then what prevents the company from considering similar strategies for other orders. vi. Most of the business of Eastern Gear is B2B type, therefore, in order to breed confidence amongst its clients the company will have to prepare itself for on-time delivery and product quality standards. vii. There may not be many competitors for the company, but still, Eastern Gear Inc will have to adopt the policy of innovation as a method for product differentiation. Because in today’s environment characterized by shrinking product life cycles, intense price pressure, rapid technological change, and market turbulence, development of a steady stream of new products is the only way to ensure survival and success. Answer 3 In today’s competitive environment, the industry and customers have become very much particular about the delivery schedules, quality and cost. Controlling and managing the procurement in such a way that the manufacturing unit gets the raw material whenever it requires the item. Similar inventory management also involves minimizing the time period the finished product has to wait in the company’s premises, before being handed over to the customer. For consumer items, white goods etc. the inventory management has to depend on the demands from market. But in case of Eastern Gear Inc. since the product (i.e. Gears) is made mainly on order, the company doesn’t need to worry too much about the fate of the finished product, which will be picked up by the customer sooner than later. But the inventory policy on the raw material side needs to be more professional, one of the most important aspects of inventory control is to have the items in stock at the moment they are needed. This includes going into the market to buy the goods early enough to ensure delivery at the proper time. At present the company doesn’t have a raw material inventory. The result is there in the form of delays in producing the gears. In the present setup once the order is placed by the customer, then only Mr. Smith place purchase order for the raw materials. At times there is delay in procuring the raw material, which ultimately translates into a delay in handing over the product. For any business to prosper all aspects of the business strategy must work in tandem with each other. All departments must have a proper coordination amongst them. Inventory management is one such department which helps the business by way of managing the raw materials, the services components, goods or services in process and finished goods. Therefore, Eastern Gear Inc. will have to have a sound procurement policy for raw materials. This would be advantageous for the company, as it would bring in the following benefits; i. The company will not have to wait for starting the work on new orders. Once the work starts on an order, the inventory management department can, in the meantime, initiate steps for procuring more raw materials for processing further lots. ii. Such an approach will help in developing a professional approach amongst the workforce and the floor managers. iii. Having a proper supply chain means establishing ‘a network of facilities’ and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Once this chain takes a firm shape, the company can enjoy the benefits in the form of timeliness, credibility and more returning customers. iv. Having minimum stock of raw materials in inventory, will encourage the company to market its products more aggressively to gain more customers and if possible, the company can also establish its standard size gears in the market, after firmly establishing its brand in the market. v. Handling bigger volumes on a regular basis will give an opportunity to Eastern Gear Inc to negotiate prices of raw materials with the suppliers. vi. Once there’s regular work in the company, the workforce too will be benefited with more hours of work, which will encourage them to perform still better. Answer 4 A layout is the physical placement of different departments, work stations, machinery and the equipment for converting the raw material into finished gears. Within the available space, such an arrangement is made to manufacture the product. In general there are basically four types of layouts; Process oriented layouts: In such an arrangement different departments are arranged according to their functionality or the types of work involved. This type of layout is quite helpful for warehouses, hospitals, universities or for the tasks like welding, heat treating, grinding, painting etc. in a manufacturing unit. Product oriented layouts: This type of layout is appropriate if a standard/ branded item is produced by the company, in large numbers. In such cases each unit requires the same sequence of operations in the entire assembly line or shop floor. In this type of layout, work centres or equipment are ideally arranged in a line to afford a specialized task sequence (Adam et al, 1995). This is the layout which uses standardized processing operations to achieve smooth, rapid, high-volume flow. Fixed position layouts: In this type of layout, the product cannot be moved from one place to another during production because of its size, shape, sensitive nature etc. instead the machinery, equipment and workforce is moved to the product. Such layouts are suitable to big aircrafts, satellites etc. Combination Layout: This type of layout is a combination of product and process layout. In case of Eastern Gears Inc. the existing layout is depicted as in fig-a Fig-a: Existing layout It is to be noted here that the product for Easter Gear Inc. are basically a special order/ custom made product. This product needs to be moved through 9 units, before the final product is ready for delivery. All such movements have costs associated with them. The step-by-step process for the product is; Step-1: Receiving dock receives the order Step-2: Raw materials are procured (as of now from market, but in an improved scenario from its own inventory) Step-3: The raw material, gear blank is sent for milling. The edges are cut into teeth of the gear, as per the customer’s requirement. Step-4: The gear blank (with teeth) sent for drilling the hole. Step-5: Finishing and grinding centre does the finishing act on the gear. Step-6: The gear is sent for heat treatment for increasing its strength. Step-7: The finished product is inspected and prepared for shipping. Step-8: The final product consignment sent to the customer. Therefore the layout could be termed as an efficient one if; It minimizes the distances between two works following each other. It allows better coordination between two related works. One such improved layout can be as follows (fig-b); Fig-b: The improvised layout In the improved layout we’ve placed the working areas according to their need for interaction with each other. Two lunch rooms are provided, so that all the workers don’t have to travel long distances for lunch (thereby wasting more time and wasting their energies in traveling this far). Workers from the adjacent units can take their lunch in either Lunch room-1 or Lunch room-2. This would also help in ensuring that the workers get some rest during the lunch hour, so that they can prove to more energetic and productive in the after-lunch session. References: 1. Schroeder, Roger G.; Bates, Kimberly A. ; Junttila, Mikko A. ‘A Capability-Based View of Manufacturing Strategy and The Relationship to Manufacturing Performance’, available online at http://www.rotman.utoronto.ca/bicpapers/pdf/CapabilitiesWP.doc (Feb 25, 2007) 2. http://publib.boulder.ibm.com/tividd/td/TWS/SC32-1256-00/en_US/HTML/eqqg1mst35.htm#wq76 3. A T Kearney (2004), Executive Agenda: Ideas and insights for business leaders, Volume VII, Number-4, Fourth quarter-2004. 4. Adam, Everett E. and Ebert, Ronald J. (1995), ‘Production and Operations Management’, Prentice-Hall. 5. Armistead, Colin and Machin, Simon (1997), Implications of business process management for operations management. International Journal of Operations & Production Management, Vol. 17 No. 9, 1997. 6. Richard B. Chase and Alex Zhang, (1998), Operations management: internationalization and interdisciplinary integration, International Journal of Operations & Production Management, Vol. 18 No. 7, 1998, MCB University Press. Read More