6.4 Case Study
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Industrial Engineering
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Jan 9, 2024
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Uploaded by JusticeLyrebird3352
Sierra Henderson 6.4 Case Study
1
Five Star Tools
Five Star Tools is a family-owned business owned by Maxfield Turner, son of the original founder
Fredrick Turner. The company produces diamond coated chisels and saws that are used by jewelers to
cut jewelry, like diamonds. There are three major processes that are needed in order to produce these
tools. The first step involves cutting the steel blanks into the correct sizing of the tool. Then, the steel
blanks will be sent to a chemical bath to prepare the steel to be coated with the diamond chips. An
inspection is done before the coating of the tools to check for any blemishes or rough edges. After
inspection the steel is gets coated with the diamond chips and sharpened at the same time. The process
of the diamond coating and sharpening is a very extensive process that requires expensive equipment
and skilled workers and although these tools have brought in a huge profit for the company, it has also
delayed some of the deadlines that the company is supposed to meet.
Betty Spence, the VP of marketing, recommended to Maxfield that if the deadlines cannot be
met, then the company should “turn down” the business to avoid being looked at as unreliable. Maxfield
agrees that the situation is something to investigate but is wanting to take another approach to the
situation instead of turning down business. Maxfield then decided to reach out to the accounting team
to put together a product profitability analysis to figure out whether they should focus only on the most
profitable tools and drop the least profitable ones. Another idea he had was figuring out a way to run
more products through their coating process with the help of the production team. Maxfield is wanting
to know: What steps can be taken to loosen the constraint in coating and sharpening? If they loosen the
constraint would it help improve the productivity and efficiency of the coating of the tools? If the
constraint can’t be loosened, which product should be the main emphasis?
Would there be a benefit if
the company gained one more hour of production time? And since the tools are also inspected before
the coating for any blemishes, would it be beneficial to have a separate inspection station instead of the
operator who does the coating to buff out the blemishes?
After careful analysis, the production team came up with a few ways that could assist in
loosening the constraints in the coating and sharpening process. The first idea would be adding the
inspection station before the sharpening and coating of the product to help save some time so valuable
time doing the actual “coating” of the tool won’t be loss. Another idea would be to outsource the work
that is being performed internally by sharpening and coating. With defective parts being inspected by
another provider it could increase the productivity to complete the finished products. In the scenario
that the constraints cannot be loosened then Maxfield needs to start thinking in terms of profitability
between the Model C210 and Model D400. The Model C210 should be more heavily emphasized since it
generates a higher contribution margin per unit of the constraint.
Model C210
Model D400
Contribution margin per unit
$250.00
$430.00
Time in coating and sharpening
.2 hours
.8 hours
Contribution margin per hour
$1,250.00
$537.50
If emphasis was focused on the C210, not only is the contribution margin per unit higher, but it also gives
the benefit of gaining an additional $1250 of profit, since more production time will be spent in coating
and sharpening this specific model. Lastly, if an inspection station was implemented into the production
process there is a possibility that it could be beneficial to the company. The average contribution margin
Sierra Henderson 6.4 Case Study
2
per hour spent in coating and sharpening is $850. The inspection station could save about 240 hours
which means that the company could generate and additional $204,000 of profit.
Based on the analyses, it is recommended that Maxfield either implements an inspection station
to keep both products and improve productivity time to meet the deadlines of their customers. Doing
this will also generate more profit for the company versus putting emphasis on only one product.
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