Introduction

“Operations management is about developing and managing value-adding processes, and

supporting these through various tools, techniques and methods.”[1] This report focuses on Eastern
Gear Inc. – an American company which manufactures gears however it is time for the company to
revise its current operations management and therefore the aims of this report are to:

Define operations management and describe its application within manufacturing.

Explain the role of operations management strategy in the company’s overall competitive strategy.

Explain why small inventories are preferred by most organisations.

Identify the competitive advantage and value-added contributions that the operations function
makes to the organisation.

Analyse the operations environment for relevant trends, especially major changes in technology.

Issues and Problems

The main problem affecting the current operations at Eastern Gear is its facility layout and logistics.
Presently the factory is laid out in a production or job-shop layout style and as highlighted by current
observation this causes bottlenecks in production as highlighted by the statistics that 90% of each
product’s time is spent waiting for a machine. According to Daft (2000)[2] this type of facility layout
is best suited to an organisation that produces huge volumes of identical products – this would
explain why there seemed to be an apparent failure of the current layout since the company
manufactured customised gears for customers based on the customers’ blueprints. Another problem
to consider, although small, is the availability of warehouse stocks; currently it seems as though the
organisation does not keep any stock of raw materials in inventory. Theoretically and practically
warehousing creates an expense however it is important to always compare benefits and costs and
in this case it seems as though the benefits of keeping an inventory will by far out weigh its costs e.g.
The one to two weeks currently lost waiting on raw materials can be converted into lead time. Last
but not least another major problem is that of wastage; when customers change their order design
in the middle of production it means that a design must be created from scratch. The current
implications of this is lost time and material. Therefore in the following section the researcher will
attempt to provide viable solutions.

Analysis and Action Planning

The issues and their implications facing the organisation have been highlighted above and it is now
necessary to create viable solutions that will lead to; activity-based costing, equipment selection,
and flexible manufacturing systems. This is known as functional thinking since it is a way to practice
innovation which might lead to new insights versus what is known in process analysis, added value
and method study.

The first area under examination was the factory layout therefore process redesign was applied
since it could change not only the actual waiting time but also have significant impact on perceived
waiting time. How process changes affect customer perceptions on waiting and customer
satisfaction was also studied. The following issues were analysed in totality via a comparative
analysis between Toyota and Eastern Gears.

Many companies go out of business because of changes in technology in other words there has been
a discontinuity in technology. Therefore scholars such as Schroeder, teach that it is important to
develop a strategy to follow in the event that there is a discontinuity – as the issue emerges, this is
referred to as the emergent approach rather than the prescriptive approach. In the past companies
such as Toyota have used the emergent approach with resounding success. For instance the Kanban
system which was developed by Toyota; originally started as a system of coloured cards which were
used to prioritise stock replenishment i.e. whether to ,increase stocks or keep it low. Company
layout was also considered, and it was found that a cellular layout versus a linear layout proved to be
more productive as employees were more flexible and operated in teams – it became possible to
operate a number of machines. Finally the Toyota company not only founded the J.I.T. System but it
also mastered it. This method of operations management required an accurate tracking system and
common sense; an inventory of stocks were kept and updated on the company’s computer, and
when essential stock became too low more was reordered just-in-time for production.

Similarly, Eastern Gears Incorporated can adopt Toyota’s strategies such as mentioned above. It is
important to note that they do have their very own emergent strategy in the form of Matt Williams’
variation on the Kanban process. However there are additional techniques that can be applied such
as Lean Thinking production which can pull from customers through the supply chain so that there is
very little wastage, in other words when the cutomer calls for a product to be re-engineered the
manufacturer can apply the order to another customer instead. Basically a TQM (total quality
management) approach is undertaken. TQM is defined as managing the entire organization so that it
excels on all dimensions of products and services that are important to the customer.

According to Lynch (2003)[3] “The operations function has seen itself as using machines to
undertake tasks as efficiently as possible as possible. Professionally, it has an engineering and
science background and has viewed its tasks as essentially oriented towards the same goal.”

According to Schroeder (2003)[4] there are four main driving forces in Operations Management:

The environmental forces;

The contribution of operations to value and sustainable competitive advantage;

Operations strategy and corporate strategy; and

The application of operations concepts to the service industry

The operations value chain

————–Insert Value Chain Here——————–

Research, Reflection and Conclusion

There are some essential criteria to consider when formulating a manufacturing strategy; they are:
(1) the organisation’s objectives – the impact that the manufacturing strategy is likely to have on it
and the importance of the strategy; (2) Added value – does or will this strategy add great value; (3)
Questions – it is important to ask what would happen if things were to change and to consider and
assess the affect this may have on objectives e.g. what if Eastern Gear were able to reduce
production time by 3-4 weeks, would this help to make much of a difference? (4) The key factors for
success – for instance there are four basic factors of production to be considered; land, labour,
capital and machinery. Therefore given that the manufacturing or operations strategy for Eastern
Gear may be to reduce the its delivery and production time then it is necessary that it consider
factors above when designing its operations strategy e.g. the human resource structure may subject
to change as working practices, responsibilities and reporting relationships may change or simply
put, the organisational chart.[5] How companies in the process industries can improve return on
capital employed and cash flow by better managing working capital (inventory, receivables, and
payables).[6]

As stated before in the introduction, “Operations management is about developing and managing
value-adding processes, and supporting these through various tools, techniques and
methods.”[7] This report has focused on Eastern Gear Inc. – an American company which
manufactures gears however the company has had to revise its current operations management and
therefore the aims of this report were to:

Define operations management and describe its application within manufacturing.

Explain the role of operations management strategy in the company’s overall competitive strategy.

Explain why small inventories are preferred by most organisations.

Identify the competitive advantage and value-added contributions that the operations function
makes to the organisation.

Analyse the operations environment for relevant trends, especially major changes in technology.

It is important to note that value added and after sales customer service is an important part of
quality management and the production process. However by aligning operations strategies with
corporate strategies a cohesive operations strategy is more likely to be designed so as not to
adversely affect quality or production.
Eastern Gear1. What are the major problems being faced by Eastern Gear?

The major problem’s Eastern Gear is facing is that they are accepting large orders to help pay their

overhead, also, their sales group is not part of the business, there is no link between them
andmanufacturing. Their order entry is inefficient; the tolerance on products is not firm. The layout
of theirshop is set up to make mistakes and increased lead time has resulted in the need for an
expeditor.Lastly, they are hiring too man

y employees for the company’s needs.

2. What action should Rhodes take to solve his problems?First, Rhodes needs to stop accepting
large orders at discounted prices to help cover overhead, doingthis will not cover overhead and
should only be done if the company is facing bankruptcy. Accepting thelarge orders causes some of
the small orders to wait for processing and in-turn, are late. Also, the salesgroup is not part of
the business, there is no direct link between them and manufacturing. Therefore, noone is paying
attention to the order size. This needs to be corrected by putting a direct line ofcommunication
between sales and manufacturing.Second, the order entry system needs to be more efficient. A
customer is able to request a change indesign after the order has already been placed, it may
be necessary to stop production on these ordersand wait for the new raw materials or for the
new design to be clarified. They do not have a process thatcharges back the variance on these
orders; they need to input a system where if the customer wants a

design change, they have to pay for it. Also, the customer’s prints submitted with the order do not

always contain the tolerances required during machining. This is a discipline issue within
theorganization that needs to be eliminated; the customer must sign off on the tolerances
before the orderbegins processing.Third, Eastern Gear needs to change the layout of the shop. Lead
time has... [continues]Case: Eastern Gear, Inc.Q1. (Major problems)* Gears in most orders are small.
The exact same gear is rarely ordered more than once.* Some deliveries of small orders are too late
because of it took a long time before they were beingproduced.* Production sometimes has to be
stopped because raw materials are not available or the design hasstill have to be clarified. (orders
are not clear enough)* Production time is pretty high and therefore it is difficult to get the orders
out on time. (´´one weekthe bottleneck may be in one machine center, and the next week it is
another´´ every production sectoris not well organized)

Related to this Production time is on average 4 weeks. ) 90% of the time the order is waiting in line
for amachine to become available.* The company is booming while the production structure is
not well organized enough. At this moment20% of the orders have rush tags on them. When the
demand for products is increasing, this willprobably become worse in the future.* Many things are
returned because of the fact that the production process has not been done verywell.* The layout of
the firm is too complicated (there is a ´´jumbled flow of products to the shop´´)So the major
problems are in fact in the production area. Many orders are too late or do not have therequired
quality. This is because the company is not producing every time the same gear. Every singleorder is
different, so there has to be made a different design and other raw materials are needed.Because of
the booming business the case is getting worse.Q2. (Actions to solve the problems)The production
process should obviously be restructured because of the fact that many orders are toolate or not
good enough. We think this can be done by:* Separating the small and the big orders. (In the text is
stated that all orders are produced together.This is however not efficient)* The design of the
product should already been.

AnalysisEastern Gear is experiencing a wide range of problems including:1. Need for objectives in
operations. It is not clear at the present time whether operations shouldemphasize cost, flexibility,
delivery, or quality. The desired emphasis on these objectives needsto be clarified.2. Lack of an order
size policy. Eastern Gear has accepted a wide range of order sizes as shown

in Exhibit 2. Furthermore, Eastern Gear’s President has just decided to accept a few larger

orders. The two types of order sizes are best served by different operations strategies anddifferent
process designs.3. Lack of planning for growth. It does not appear that the company has a strategy
or plan forfuture growth. As a result, the company could experience cash flow problems, capacity
problemsand other problems associated with rapid growth.4. Production and inventory control. At
the present time expediting seems to be the rule ratherthan the exception. Twenty percent of the
orders have rush tags on them. Production processing