In my previous blog on Theory of Constraints, I defined the constraint (aka, the bottleneck) as the weak link in the chain. Every system has one. If there is a choice, where is the best constraint location?
The Ugly. By far the worst place to have the constraint is in the marketplace. When the constraint is outside the four walls of a company’s operations, management’s control over it is very limited. Operational and financial performance is completely exposed to market turbulence: product and pricing actions by competitors, shifts in aggregate demand, changes in consumer tastes, and so on.
In a perfect world, annual demand will exceed capacity by one unit per year. Why? Operational and financial performance can be optimized by managing the internal constraint while having only one unhappy customer.
The Bad. An internal constraint should not be in a process that is unreliable, uncertain, or inflexible. The constraint is the “drum” that establishes the rhythm for the enterprise. If the constraint does not have a steady beat, then wastes of all types (especially inventory and waiting) will be incurred at non-constraints as they struggle to keep in step with the constraint.
Processes with low availability and/or low process capability are also bad places for the constraint. The opportunity costs of production losses and scrap at the constraint are huge.
An inflexible constraint is another bad idea. The entire organization will suffer if its constraint cannot quickly respond to shifts in consumer tastes or aggregate demand. Adding cost at the constraint (e.g., overtime, outsourcing, etc) to capture incremental profits is good business. Watching a more nimble competitor grab those dollars is not.
Best Constraint Location
The Good. A good constraint is inside the four walls of your operations and is reliable, certain, and flexible. Easy to say, harder to do.
Choose a familiar technology…the constraint is no place for a steep learning curve. Minimize planned maintenance during shift hours. Cross-train employees for “instant” capacity at the constraint. Design the constraint to be flexible across a broad range of mix and sequence scenarios. Adequately buffer the constraint upstream and downstream to minimize block and starve waiting losses.
At the constraint, all the little details matter.