How Do I Identify the Bottleneck in Production?

Bottlenecks move

Today is about bottlenecks. For us, bottlenecks stand for the ability to focus on what is most critical for business success right now. And bottlenecks move: once you have fixed one, the next one appears. The goal is to reduce them step by step and ultimately eliminate them.

I was often asked for an example based on the product portfolio. Many companies have a product portfolio that has grown strongly over time and basically works well. At some point, though, there are so many variants that you no longer know where you make money and where you lose it. Even in a growing industry it makes sense to roughly understand why a product works well or not. It doesn't have to be to the last cent. The same applies to orders.

The difficulty with complex business questions is not getting lost in your own complexity before you've even started. Remember the product portfolio video: am I interested in the warehouse right now or not? Am I interested in the colours of the variants, or do I actually want to compare product groups? Our tool is always the same question: why?

Case A: the special machine

The example of machine capacity shows it well. For one customer, the bottleneck was a special machine that exists only once and through which all specific orders have to run. For another customer, the machines were far underutilized; the bottleneck was the person: the electrician, or the person at the CNC milling machine. Once you know that for one you don't need to focus on staff qualification and for the other you don't need to focus on machine capacity, you have found the right scope.

We get there with our familiar list. Before we artificially restrict anyone at the table, from the product portfolio manager to the COO to the colleague in production who has known the whole industry for 30 years, we take down all points. Then we make the cutoff and focus on the essential drivers. And we split them: what can we change, what not?

Then we ask along the dependencies: why is an order or a production step delayed? Because it's waiting for the machine. Why is it waiting for the machine? Because all orders have to run through this machine. Why do all orders have to run through this machine? Because all orders include this special manufacturing process. And why do they always have to wait? Because we only have one machine. At the end of the funnel we know: the machine is the bottleneck.

Case B: the electrician as bottleneck

For the other customer, the starting question was: sales calls, squeeze in an order, yes or no? Sick leave is fairly high, which isn't specific to this customer but happens everywhere depending on weather and season. Why do orders pile up when they are reprioritized? Because the specialist is missing. Which specialist? The electrician we need for one work step. Why do you need him? Because all orders contain an electronic part that is later built into a larger system. And what happens then? Either we skip the step and have to bring the assembly back later, which causes extremely high process costs. Or the order stands still until the specialist is back.

So for the question of which order is worthwhile and how we reach the optimal state for products and orders, we know: in case A we need to look at the machine in the model, meaning the machine building block with occupancy time, capacity and production volume per hour. In case B the physical workstations are not the bottleneck, the person is. Then planning shouldn't be optimized for occupancy of the work steps but for managing the utilization of this person and the dependence on them as well as possible in daily operations.

From operational bottleneck to strategy

Now I'll jump from the operational to the strategic level. We always think from the strategy and the value companies aim for, and we find the solutions in operations. A strategy on a PowerPoint is useless if it isn't broken down with its drivers into operational KPIs.

With the product portfolio, the question can be raised to a higher level. Suppose nine out of ten products always need an electrician, and we see that the number of apprenticeships in this field keeps declining. That's an example off the top of my head, not a verified statistic. Then in the medium term the question would be whether we align the product portfolio so that only six out of ten orders depend on the electrician and two of them can be produced with automation or prefabricated semi-finished products. That reduces our dependence when it comes to skilled workers.

We love this way of thinking: in operations something changes every day, but the questions about orders and products are strategic. In times when something happens every day and dependencies keep growing, we can only steer companies well if we build the connection between the strategy slide and machine control. That benefits everyone in the company, because we understand how to achieve operational trade-offs and the company goals we measure every month, quarter and year together.

We started with the question of how to break down a complex problem: what will my company still make money with in the future? The question could hardly be harder, with all the influences from the market to employees, resources and prices. We start small and look at today's operational bottleneck. Then we ask at the strategic level: will it still be like this in the future? In this ping-pong between operations and strategy we gradually approach the optimal state without getting lost in complexity. That's why we love building simply: to get going and see by the hour how everything fits together, instead of wondering after years why everything turned out differently.