a manufacturer of custom-made gears

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Case Study Eastern Gear, Inc,: Job Shop
Eastern Gear, Inc., in Philadelphia, Pennsylvania, is a manufacturer of custom-made gears ranging In weight from a few ounces to over 50 pounds. The gears are made of different metals, depending on the customer’s requirements. Over the past year, 40 different types of steel and brass alloys have been used as raw materials. See Exhibit 1 for details. Eastern Gear sells its products primarily to engineer-ing research and development laboratories or very small manufacturers. As a result, the number of gears In most orders is small: rarely is exactly the same gear ordered more than once, The distribution of order sizes for March 2016 is shown In Exhibit 2. Recently, the president of Eastern Gear decided to accept a few larger orders for 100 gears or more. Although lower prices were accepted on these orders, they helped pay the overhead. It was found that the large orders caused many of the small orders to wait for a long time before being processed. As a result, some deliveries of small orders were late.
ORDER ENTRY When a customer wishes to order a gear, the order is taken by James Lord, sales manager and marketing vice president. The customer specifies the type of gear desired by submitting a blueprint or sketch. The quantity of gears required and the type of material are also spec-ified by the customer, On occasion, the customer’s engi-neer will call up after the order has been placed and request a change in the design. In these cases, it may
EXHIBIT 1 Raw materials.
Type of Material
A 0 C F F G H All Others Total
2015 Usage $(000) $ 36 10 15 43 110 18 32 75 40 60 30 53 $522
be necessary to stop production and wait for new raw materials or for the design to be clarified. The custom-er’s prints submitted with the order do not always con-tain the tolerances or finishes required during machining. As a result, the customer is contacted directly when the information is needed. After the order is received, one copy is sent to the production supervisor, Joe Irvine, and the second copy is sent to Sam Smith, the controller. Upon receipt of the customer’s order, Smith places a purchase order for the raw materials required. These materials often take from one to two weeks to arrive, depending on the supplier and the type of material ordered. After receiving the customer order, the supervisor reviews the order and places it on file until the raw mate-rial arrives. The customer order is then routed through the chnp alnng with the materials. In the past. the pro-duction process for most gears has taken about two weeks after receipt of raw materials. Recently this pro-duction time has increased to four weeks. Irvine expressed concern about the bottlenecks that appear in the production process. One week the bottle-neck may be in one machine center, and the next week it is in another. These bottlenecks make it difficult to get the orders out on time.
EXHIBIT 2 Sales, March 2016. Order Size Number of Orders Total $ Value of Orders 1 80 $ 3,200 2 53 4,250 3 69 8,163 4 32 4,800 5 82 16,392 8 47 15,987 10 64 26,871 15 22 13,172 20 42 31,555 25 27 23,682 30 18 21,600 40 22 32,000 50 10 18,693 100 4 12,500 200 2 14,068 400 1 9,652 700 2 35,600 1,000 1 20;000 578 $312,185
This case was prepared as a basis for class discussion, not to illustrate either effective or Ineffective handling of an administrative situation.

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