Sep 23 2012

Bottleneck Management.

It happens even in the best business relationships: sooner or later, a bottleneck occurs, no matter how long the company has been working with the same supplier, and no matter how closely the relevant departments at the two companies work together. A supply bottleneck can easily trigger hectic troubleshooting. The first thing to do, however, is to examine the situation in greater detail. What was the actual cause of the bottleneck? Was it just an unfortunate coincidence that caused production to break down? Or was there some systemic flaw that could reappear at any time?

In order to prevent future supply bottlenecks, the first step is the most important: namely to conduct a detailed analysis of the circumstances. When this is done, one quite often finds that the bottleneck affects only a few critical parts. The core of the future purchasing strategy should therefore aim at gaining as much freedom of action on the supplier market as possible. Bottleneck management starts with three short-term measures:

  • Establishing targeted program management and focusing resources on problem components.
  • Near-term change of supplier (focusing on development and test resources for short-term approval).
  • Dispatching a number of employees to the supplier; obtaining delivery forecasts from the supplier which can be updated daily; ensuring timely internal communication.

Over the medium term, more incisive measures are possible:

  • Substituting parts or eliminating variants.
  • Further supplier changes in order to achieve greater diversification.
  • New developments and the use of new technologies in order to reduce dependence on old technology.

The three long-term recommendations for avoiding supply bottlenecks are:

  • Building up additional suppliers with capabilities identical to those of current suppliers.
  • Identifying suppliers who are not yet on the necessary level but that can be developed further with measures already in the drawer.
  • Dual sourcing (i.e. using at least two suppliers in parallel for critical components).

 

The theory of Constraints. (Eliyahu M. Goldratt) How to reduce bottlenecks.

 

  1. Identify the System’s Constraints. Once this is accomplished—remember that to identify the constraints also means to prioritize them according to their im-pact on the goal, otherwise many trivialities will sneak in—the next step becomes self-evident. We have just put our fingers on the few things which are in short supply, short to the extent that they limit the entire system. So let’s make sure that we don’t waste the little that we have. In other words, step number two is:
  2. Decide How to Exploit the System’s Constraints. Now that we decided how we are going to manage the con-straints, how should we manage the vast majority of the system’s resources, which are not constraints? Intuitively it’s obvious. We should manage them so that everything that the constraints are going to consume will be supplied by the non-constraints. Is there any point in managing the non-constraints to supply more than that? This of course will not help, since the overall system’s performance is sealed—dictated by the constraints. Thus the third step is:
  3. Subordinate Everything Else to the Above Decision. But let’s not stop here. It’s obvious we still have room for much more improvement. Constraints are not acts of God; there is much that we can do about them. Whatever the constraints are, there must be a way to reduce their limiting impact and thus the next step to concentrate on is quite evident.
  4. Elevate the System’s Constraints. Can we stop here? Yes, your intuition is right. There will be another constraint, but let’s verbalize it a little bit better. If we elevate and continue to elevate a constraint, then there must come a time when we break it. This thing that we have elevated will no longer be limiting the system. Will the system’s perfor-mance now go to infinity? Certainly not. Another constraint will limit its performance and thus the fifth step must be:
  5. If in the Previous Steps a Constraint Has Been Broken, Go Back to Step 1. Unfortunately, we cannot state these five steps without adding a warning to the last one: “But Do Not Allow Inertia to Cause a System Constraint.” We cannot overemphasize this warning. What usually happens is that within our organization, we derive from the existence of the current constraints, many rules. Sometimes formally, many times just intuitively. When a constraint is broken, it appears that we don’t bother to go back and review those rules. As a result, our systems today are limited mainly by policy constraints. We very rarely find a company with a real market constraint, but rather, with devastating marketing policy constraints. We very rarely find a true bottleneck on the shop floor, we usually find production policy constraints.

 

Source: Theory of constraints. The purchasing chessboard.

 

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