Where is your Constraint? (Bottleneck?)

Quiz:?Just 16 Questions

A.??????Do you know your company’s constraint[1]?and where it is located??

• YES
• NO
• We have many constraints

B.??????IF?you do know?your company’s key constraint1, where have you found it? (Read the footnote again;?all?the business areas mentioned below have a constraint within that smaller system. Only one of these is constraining your company's throughput more than the others. That is the key constraint!) Choose the most important and key constraint.

• The market (is not buying enough to fill our capacity).
• Product development is not delivering enough new & improved products.
• Suppliers cannot or do not deliver enough key materials and/or components.
• Production cannot produce enough products to satisfy market demand.
• A policy, rule, KPI or employee behaviour is causing one of the above to look like your key constraint.

If you have not yet identified your constraint, please answer the following questions:

C.??????Is the market your constraint? Does market demand not fill your production capacity? Have factory operators visible slowed down the pace of work to not look idle (and risk being made redundant)? Are costs per unit too high? Does something else cause the market not to buy?

• YES
• NO
• We have many constraints

Answering?YES?to these questions identifies the market as your constraint.?How does management plan to exploit the market? How should all business areas respond to the need to get the market to buy more?

D.??????Do you have a decisive competitive advantage?(clients consistently decide on your product because of this advantage)? The decisive advantage can be either your product or the service you provide in terms of things like reliability, speed, terms and more.

• YES
• NO
• We have many constraints

E.??????Is product development your constraint? Do your salespeople complain products are old, and not as good as the competitors? Do they complain that competitors introduce new and improved products more frequently??

• YES
• NO
• We have many constraints

F.??????Are new and improved products often late? Do you salespeople and customers complain that new products often come (well) after those of the competition? Must you lower prices to place your new products into the market?

• YES
• NO
• We have many constraints

G.?????Is a supplier or are suppliers your constraint? Does a lack of materials and components cause you to delay customer deliveries? Do you lose customers as a result? Do you sometimes (often?) limit or refuse customer orders because you cannot supply (because of suppliers)?

• YES
• NO
• We have many constraints

H.?????Do suppliers give their other customers preferential treatment?(vs. you)? Do they deliver more reliably to their clients that pay a higher price? Are your suppliers all operating at or near their capacity?

• YES
• NO
• We have many constraints

I.????????Is the factory your constraint? Does your factory have a constrained resource? Does your factory have a constraint that constantly wanders from one place to the next? Does your factory have many constraints?

• YES, we have 1 distinct constraint.
• NO
• Our constraint wanders all over
• We have many constraining resources

J.???????What is the ratio of “touch time” to production lead time for an item?(1 unit of production)? Touch time is the shortest time it takes to produce 1 item – imagine the time it would take if that item were launched into an empty factory. How long would it take to be completed? Or what is the shortest time possible if you must expedite an item? Or simply: the touch time is the time during which materials and components are transformed.

• Touch time is less than 1% of production lead time
• Touch time is between 1 and 5% of production lead time
• Touch time is between 5 and10% of production lead time
• Touch time is more than 10% of production lead time.

K.??????Does a policy, rule, KPI or employee behaviour cost capability and create an apparent constraint?

• YES
• NO
• We have many constraints

L.???????Is every business area?(sales, product development, production etc.) charged with improving efficiency?

• YES
• NO
• We have many constraints

M.????Is cost, efficiency and/or productivity?the key target governing personnel performance ratings and bonuses?

• YES
• NO
• We have many constraints

N.?????Is due date reliability (delivery promises are kept)?the key target governing personnel performance ratings and bonuses?

• YES
• NO
• We have many constraints

O.?????Is lead time?the key target governing personnel performance ratings and bonuses?

• YES
• NO
• We have many constraints

P.??????On which KPI do employees focus?

• Efficiency, productivity, and cost
• Reliability – on-time delivery to promise
• Lead time
• Whatever will satisfy their boss best

The questionnaire is less important than you think about your answers and the conclusions you make. The conclusions might be changes to implement. A key decision will be the order of implementation. You need to think deeply about which change will have the greatest impact first. Start with that and carry on in the same vein. If you use the questionnaire in this way, you have a much greater chance that your team will not lose interest and that improvement will be continuous.

IF you find your constraint and then you exploit its capacity to a higher level what will that be worth to your bottom line?

If you get more from your constraint you are not adding cost. You are just using it more effectively. You get the X% (10, 20, 30, 40%) for 'free'. What is 10% more throughput from your constraint worth to your bottom line? (Assumesales can sell more or production can make more ...) What can the increase to your profit be?

• 10% more profit?
• 25%?
• 50%?
• 100%?

The answer (for a company with 50% totally variable cost and with the ability to make/sell the additional volume) is about 100%.

DO the math!

I hope there is a lot of food for thought in this quiz.

Contact me if you want to discuss it or challenge me! This a dare!

Rudolf Burkhard +41 79 413 5709

[1]?Constraint = that thing blocking your financial Throughput, blocking the rate at which you make money, blocking more gross margin (Sales less totally variable cost).

1?Constraint = that thing blocking your financial Throughput, blocking the rate at which you make money, blocking more gross margin (Sales less totally variable cost).