What is Your Constraint

Can a business system have more than one constraint or bottleneck? It is very unlikely for a system to have two (or more) resources with capacities close enough for their to be interaction between them. The majority of businesses (manufacturing, supply chain, information, financial, restaurants…) have just one constraint or bottleneck. Resolving the bottleneck/constraint will not remove it. Some other resource within the system will become the constraint. You have no choice but to live with your constraint. Living with your constraint is to tickle the most possible Throughput from it (him/her).

Here is a constraint:

Good qualified welders are difficult to come by and they are expensive (because of their scarcity and their qualifications they demand a high wage.) Factory management is confronted with price pressures from the market. They must get more from their resources without adding cost (or investment). The question Kevin asked himself was, “Which resource is the constraint?” and “How is constraint capacity being wasted?”

Kevin concluded that management made welders their constraint. Because they are expensive management limits their number and cost. The factory is has 96 welders. The capacity situation is worse because according to the area manager welders are occupied to 94% of their capacity and they are not robots – they do suffer health and injury problems. While he has 96 welders a %age is always off work for health, vacation and absenteeism.

To discover how welder capacity is wasted Kevin watched the area from above. Almost immediately he saw a welder finish a job. That welder went to his neighbour to ask for help. He needs help to carry the heavy finished product to the shipping dock. All the time spent carrying the product to the shipping dock (and walkingf back) is wasted welder capacity.

Kevin asked the plant manager, “Are there some underemployed unskilled people in the factory (and that cost much less than welders)? If these people exist why not transfer 2 to welding. They will carry the finished products to the shipping doc? The welders can focus on their real job and weld significantly more per week.”

The change was made. Capacity jumped 35%! Sales increased too but only 25%. Sales and marketing would have to do something to sell even more. So what is 35% more Throughput worth? Remember only 2 people were added (about 2% in numbers but only 1.5% in wages.

Assuming 50% materials cost (the steel etc.) and a profit margin of 8% what will be the impact?

Sales increased 25%; Materials cost increased by 25%; Fixed cost increased by 1.5% and there for profit increased by 147%. Even if fixed costs increase by 10% the bottom line impact is huge. As long as the company can sell the added production! Ytour bottom line dpends on concerted action from both key parts of the business – sales and operations. Management is there to ensure concerted action.

What we have seen is how a simple change can increase the capacity of the scarce resource – the welders. Before implementation the welders were 94% busy as the area manager claimed. But a lot of their time was doing things that are not welding – their expertise and capacity.

When I tell this story, and others like it what might the reaction be? How did you react? How often can we find similar situations? Why didn’t anyone see the opportunity? It was staring them in the face.

Is it inertia?(This is the way we have always done it and it works.) Is it laziness – Is it that do my job and go home I don’t need the hassle of proposing a change and what might come from that in extra work? Is it because people don’t care? Management doesn’t listen anyway?

I don’t know if the following is true. I know that in similar situations it is true. The welders saw the wasted capacity. They knew and may even have made a suggestion such as above. But they have a big concern. If I suggest the solution we may have quite a few people we don’t need. I might be fired. My friends might be fired. Better to keep my head down.

Of course there is another side to this. A competitor may make the change and eat our lunch. He will be in a position to use his 35% financial ‘bonus’ to be much more price competitive. He may also be more reactive to demand – deliver more quickly and reliably.

Have you found your constraint or bottleneck? Do you know how its time is wasted (the welding area manager believed his organisation was very effective – welders were 94% loaded). Have you figured out how to eliminate this waste for little or no cost? Have you got examples similar to my story? I, and I believe many others, would love to hear them.

?

?

?

?

?