What is a Bottleneck?
A bottleneck in production is a point where an operation meets or exceeds the capacity of the facility. In other words, the factory or department can’t produce enough units fast enough to keep the rest of the production schedule or other daily operations flowing at the same rate. Similar to how a glass bottle tapers at one end, the production process funnels units from fast moving departments and processes to slower, more time consuming ones that slow down production.
A bottleneck is an operation that is already operating at its maximum capacity, and so cannot accept any additional work beyond its current production level. A bottleneck is the key issue that interferes with the ability of an enterprise to increase its sales and profits. The effects of a bottleneck can be reduced by increasing capacity, outsourcing work, reconfiguring products, and maximizing the efficiency of the bottleneck.
Understanding a Bottleneck
A bottleneck is a point of congestion in a production system (such as an assembly line or a computer network) that occurs when workloads arrive too quickly for the production process to handle. The inefficiencies brought about by the bottleneck often creates delays and higher production costs. The term “bottleneck” refers to the typical shape of a bottle and the fact that the bottle’s neck is the narrowest point, which is the most likely place for congestion to occur, slowing down the flow of liquid from the bottle.
A bottleneck can have a significant impact on the flow of manufacturing and can sharply increase the time and expense of production. Companies are more at risk for bottlenecks when they start the production process for a new product. This is because there may be flaws in the process that the company must identify and correct; this situation requires more scrutiny and fine-tuning. Operations management is concerned with controlling the production process, identifying potential bottlenecks before they occur, and finding efficient solutions.
As an example, assume that a furniture manufacturer moves wood, metal, and other raw materials into production, and then incurs labor and machine costs to produce and assemble furniture. When production is complete, the finished goods are stored in inventory. The inventory cost is transferred to cost of goods sold (COGS) when the furniture is sold to a customer.
If there is a bottleneck at the beginning of production, the furniture maker cannot move enough raw materials into the process, which means that machines sit idle and salaried workers are not working productively, creating a situation of underutilization of resources. This increases the cost of production, as well as presents a potentially large opportunity cost, and may mean that completed goods do not ship to customers on time.
This is a common occurrence for products that require many different stages of manufacturing. Most of the time each stage does not require the same amount of time. For instance, stages 1 and 2 might only take five minutes of manufacturing time while stage 3 takes two hours of machine time. The units will fly through the first two stages and get stuck waiting at the third stage.
The third stage is the bottleneck in this process because the units being produced get stuck in the third stage. Managers must be aware of these production problems in order to make sure the manufacturing process keeps flowing smoothly without any reduction in speed.
To fix the bottleneck in our 3-stage example, management might consider increasing the resources in stage three. For instance, since the third stage takes two hours of machine time, we can’t speed up the machining process. Management can however add extra machines, so two or three times as many units could be machined at the same time. This would cut the per batch machine time in half or a third.
Bottlenecks and Production Capacity
A bottleneck affects the level of production capacity that a firm can achieve each month. Theoretical capacity assumes that a company can produce at maximum capacity at all times. This concept assumes no machine breakdowns, bathroom breaks, or employee vacations.
Because theoretical capacity is not realistic, most businesses use practical capacity to manage production. This level of capacity assumes downtime for machine repairs and employee time off. Practical capacity provides a range for which different processes can operate efficiently without breaking down. Go above the optimum range and the risk increases for a bottleneck due to a breakdown of one or more processes.
If a company finds that its production capacity is inadequate to meet its production goals, it has several options at its disposal. Company management could decide to lower their production goals in order to bring them in line with their production capacity. Or, they could work to find solutions that simultaneously prevent bottlenecks and increase production. Companies often use capacity requirements planning (CRP) tools and methods to determine and meet production goals.