Bottlenecks in enterprise - a problem or opportunity? [P.1]

In the pursuit of efficiency - cost accounting.

Imagine a situation in which you are the director of a production company. You have the offer to increase the production capacity of your most expensive, worth 1 million zlotys machine (let's call it A). The offer is really good, for only PLN 100 thousand, its capacity will increase by 30%! In another situation, your most expensive machine produces components for several products and you have a choice - long batches of 500 pieces with a low unit cost per lot or a short series of 100 pieces, with a much higher unit cost and longer implementation time resulting from the retooling of the machine.
 

According to cost accounting, these activities are economically justified - we produce more, we produce cheaper. The company is inevitably heading for success, and the sales department is doubling up to keep up with the sale of the new batch of products. Is it for sure?
Looking at these two examples from a different perspective, we can conclude that the first investment was missing and the second decision caused that the recipients are waiting for the ordered goods a few weeks longer. The world of costs has seduced us by the nose and led us astray. What we were supposed to pay off resulted in a decrease in our productivity despite an increase in efficiency. What a paradox.
The question remains - why? I'm in a hurry with the answer! In the case of No. 1, the offer should be accepted only on one condition - the machine is our bottleneck.
In the case of No. 2, the aim to reduce the unit cost leads to:
- machine attachment with one order, which causes delay in the remaining ones,
- aggregation of materials - it may turn out that the production of 500 pieces of a given component will cause material shortages to carry out other orders,
- freezing capital in stocks- good money is fast money,
- increase in storage costs;
One of the reasons for this is silo thinking. This means that the organization is not perceived as a system, but rather as separate cells. Each of them wants to achieve the best result, which is simply a bad approach. What about the fact that we will increase the production capacity of the A machine at very low costs, if the next station will not be able to remake what goes down from its tape. The company will then struggle with the above-mentioned problems and the negative consequences of such action.

 

 

The Theory of Constraints and what is the bottleneck.

Theory of Constraints is also referred to as TOC. According to the dictionary definition, it is a "management method geared towards achieving long-term profits by adequately managing constraints existing in the company, i.e." bottlenecks "that exist in management systems, manufacturing processes or distribution processes."
Sounds enigmatic? Simply put, the weakest link should be found and revised. The system's capacity should be increased by following the principle "the chain is as strong as its weakest link". Therefore, increasing the strength of already strong links will not help us anything, since the chain will still crack at the same point. It will cause that the expenditures incurred by us did not bring any results.

The bottleneck in the system for any time is the process that limits system bandwidth at this time.

 

 

How to find a bottleneck in an enterprise.

Here are some tips that will allow you to identify the bottleneck in your company. As you can see, I am leaving here from mathematical calculations and focusing on observation - it is much more intuitive and simpler. We use possible calculations to check the truth of our thesis.


-> Accumulation

The production process that collects the longest queue is usually a bottleneck. This method of identifying bottlenecks is particularly useful in production lines that process single items. You can easily see where your stocks accumulate and identify a machine that does not have enough capacity, often breaks down, or has an operator who needs training. When queues appear at several stages of the process, the situation associated with the bottleneck is more complex and additional ways to identify the most critical bottleneck must be applied.


-> Full performance

Most production lines track the percentage of use of each production unit. The unit or machine has a constant capacity (eg it can release 100 items per day), and the production process uses every machine with a percentage of full efficiency (eg 100%). The machine that uses the largest percentage of its capacity is a bottleneck. Usually, this machine operates at full capacity when it acts as a bottleneck and limits other production units to a lower degree of utilization of computing power (that is one of the machines operates at 100%, others at 80%, 70%). If you increase the efficiency of the bottleneck, the efficiency of the entire production line will increase, thanks to which you will release the production capacity at other stages of production.

-> Waiting time

Sometimes several units of production lines work at high speed and you need another method to find a bottleneck. The production process usually also tracks downtime or waiting time for machines. When a bottleneck occurs, the bottleneck machine has high waiting times because the bottleneck stops production and the machine processing its performance does not receive enough material for continuous operation. When you find a machine with a long wait time, the step before the machine that is waiting is a bottleneck.
 

Bottlenecks define the capacity of the supply chain. Recognizing this fact and making improvements will increase cash flow. Remember that the hour of time lost on the bottleneck = the time lost in the entire enterprise.

 

5 steps to increase the system's ability.

 

 

START. Define your goal - the first and most difficult step is to establish (and agree on) the goal of the "System". <What is our goal?>


1. Identification of constraints - the basic insight into the theory of constraints is as follows: "the performance of each system is determined by one bottleneck". The chain is as strong as its weakest link. If we want to strengthen the chain, we must work on the weakest link. <What is the bottleneck?>


2. Limitation of operation - if the output of the system is limited by the exit of the bottleneck, we must first try to increase the performance of the bottleneck. Any bottleneck downtime reduces system performance. <What can we do to make the most of it?> Machine work without interruption; removing activities with no added value; high quality tools and materials.


3. Make any other decision bottleneck - when we make full use of the bottleneck, we must submit any other decision of our decision to use the bottleneck. All resources that are not bottlenecks, by definition, have some slack. Use this slack to support the bottleneck. In addition, remember that production factors should work according to the rhythm thrown by the bottleneck, and not based on their capabilities. <What decisions should be subordinated to the bottleneck?> Other departments can take over part of the work that does not have to be done at this position; providing a bottleneck buffer in the event of failure of the previous upstream machine; due to the excess of time, the previous departments should provide high quality semi-finished products (you can do quality tests before the bottleneck)


4. Maximum use of the restriction - this is a step that most people intuitively use first: add more people, more machines, more training, more tools, more everything. Change the technology, shorten the operation cycle. We only do this when all "free" improvements have been made.


5. Repeat the action! - when we applied one improvement and saw a positive effect, we go back to the beginning!

Summary

Bottlenecks are an inseparable part of not only manufacturing enterprises, but also find application in our everyday life - on projects, in startups, in managing our own time or even in personal development. If you would like to talk about how to relate the theory of restrictions or bottlenecks to business management or other non-productive aspects (eg the above) - I invite you to open discussion. I am happy to exchange insights and views on this subject.
In the next part of the article I will focus on three other threads regarding TOC and bottlenecks:

 

  •      Can bottlenecks be eliminated?
  •      What can go wrong - finding a bottleneck is not the end.
  •      Managing a company around a bottleneck, or what to produce, would pay off.
  •      Big Data and bottlenecks - support from new technologies.

 

 

Write comment