During an economic downturn, who isn’t tempted to downsize? The problem is that when you downsize aggressively, you are very likely to create new and unforeseen bottlenecks. When you have to reduce your production capacity, you really need to be careful—and diligent. Start by looking very thoughtfully at all of your processes. Also, if possible, create a flow analysis. Small companies often lack the luxury of resources to perform such evaluations; however, going through such an exercise could just make the difference in your company’s survival.
A well-constructed business process always has at least one bottleneck on its rate of production. Here is an example from the world of hiking: a group of hikers decides on the goal of reaching the next campsite as a whole unit—without any stragglers. However, the line of hikers on the trail can move towards the goal only as fast as the slowest hiker among them can walk.
Thus, the slowest hiker is the bottleneck. Without someone changing things, the line could easily fragment into slower and faster groups. Scoutmasters are all too familiar with this scenario. To keep the line of hikers together you lighten the load of the slower hikers, giving the heavy packs to stronger hikers to carry. Then you determine who is the slowest hiker in the group.
Remember, shifting the heavy packs to the stronger hikers can really slow down a fast hiker. Now place the new slowest hiker at the front of the line. This keeps the group together and increases the pace of the entire group. Moving the bottleneck to the stronger hiker can increase the efficiency of the entire group. It is impossible to eliminate all constraints or bottlenecks; there’s always going to be a slowest hiker.
Once you have identified your key bottleneck in your business process (your slowest hiker), you should do everything possible to maximize the rate of flow through that bottleneck, and you should not let any other portion of the system run at a faster rate. The latter is necessary to make sure you do not have an ever-growing backlog of work preceding the bottleneck.
This means that in a well-optimized system, only one part of the process is running at full capacity while the remaining parts are running at only partial capacities. Left unchecked, backlogs often translate into excess inventory between departments and inventory starvation for others.
Continual diligence and oversight are required when implementing continuous improvement and cost cutting programs because they can potentially move, shift, or create new bottlenecks. The process of reducing bottlenecks often resembles the “Whack-a-Mole” arcade game and requires the same attention and intensity. As soon as one bottleneck is eliminated, the next one pops up immediately. The “game” of de-bottlenecking is never done.
In some industries, small companies receive a great deal of pressure from either their large suppliers or larger customers to participate in cost-control programs. The larger firms often control the agenda for such cost-cutting programs. The large companies see opportunities to move production bottlenecks either upstream or downstream along the entire industry to other links in the production chain. Small companies, on the other hand, don’t have that luxury. They are often squeezed into accepting the extra burden for solving capacity and production problems (the heavier backpacks). Unlike the large firms, small operations can’t control costs by shifting the bottleneck away from themselves altogether.
Performing a new process analysis and process flow diagram will help identify new bottlenecks. When capacity and output are changed, try to determine the new bottleneck by doing the following:
Define entry and exit points in your process:
• Create a process flow diagram
• Determine the capacity and time limits for each production step
• Identify the bottleneck
• Evaluate the impact of the bottleneck
• Use the analysis for future improvement
This analysis will quickly and easily show the capacity and time utilization of equipment or departments for identifying capacity limits. This analysis will reveal
When doing all of this, please be mindful of the following issues involved in collecting data from your company. Be realistic about your work environment. Some employees may see another downsizing program coming over the horizon and thus become reluctant to disclose accurate data or events.
Reworking a process, using excess shimming, or excess maintenance on faulty equipment might be potentially embarrassing to some departments. They may also neglect to reveal activities they see as unimportant. Instead you might receive data about how it ‘should’ be done rather than an accurate picture.
Identifying your bottlenecks through process analysis gives you the opportunity to increase throughput with the least amount of capital investment. De-bottlenecking is an endless job, but always necessary.
James Ellis is an assistant professor in the business department of Central Oregon Community College. He can be reached at 541/383.7718.