Theory Of Constraints: How to identify bottlenecks in production and projects

These days in both factories and research and development departments, we find that 7 times out of 10, people are wrong about where their bottleneck is. This is our experience based on the last 15 years of our 30 years’ experience of the Theory of Constraints in production and projects.

Many years ago, let’s say prior to 2000, organizations that had accepted the precept of the Theory Of Constraints (ToC) that their system contained a constraint, tended to have correctly identified them. In our experience this is no longer true for the majority of companies.

I think that there are several reasons for this:

• Production systems have more and more operations that are considered as “indirect” and therefore are not managed as an operation with a predefined time per part using an identified resources with a quantified capacity. This is for instance true of quality control or quality documentation operations that are now significant in work load and widespread in contemporary industry (aeronautical, food, pharmacy, steel, etc.). Unfortunately when the constraint concerns indirect labor the overload on the resources and the accumulation of Work In Progress are likely to go unnoticed. The ERP system will not see them. Unfortunately the performance — the “productivity” — of these operations is rarely monitored correctly by management. So the constraint does not receive the appropriate management attention.
• In project environments such as New Product Development (NDP) the data regarding task durations and workloads are necessarily difficult to estimate. In practice they are either very erroneous or simply non-existent; the organization does not even attempt to calculate workloads apart from a very approximate annual budget. This has always been the case but the increasingly significant changes in NPD portfolios are destroying the historical equilibrium. Companies are trying to develop today’s product portfolio with yesterday’s resource pool. Typically in New Product Development we have very regularly found that the new competencies, or the areas in which the amount of work per product has increased very significantly, are understaffed: electronics, regulatory, software development, quality management …
• The environment is changing faster and faster: new technology, new products … Companies will therefore have a tendency to have an obsolete view of the location of their constraints. Their analysis is out of date. The constraint that they believe they have was the constraint 2 or 3 years ago, but it has moved since then.

So, in our experience of over 80 Theory of Constraints implementations in production and projects these past 10 years, what we find is that management often no longer knows where their real constraints are, and therefore will focus on the wrong resources. So they over utilize their non-bottleneck resources thereby increasing WIP and lead times, they under exploit their bottlenecks which results in limited Throughput and they therefore have trouble meeting their promised delivery dates.

In the video below I will review several cases to support this point of view:

• A case in aeronautical OEM production where quality control was the unrecognised bottleneck
• An animal health pharmaceutical company that had not realized the impact of their decision, 3 years previously, to subcontract 50% of their production. As a result all their new product development was blocked just before getting to the market.
• A leading steel manufacturer that had not realized that their manual quality control that was repeatedly used all over their plant was their invisible and elusive bottleneck.
• The case of a leading automotive equipment manufacturer that disrupted an entire division of its organization by implementing a purchasing decision regarding rare earth metals.

This situation can be viewed as regrettable. Some may think that these companies were badly managed, but we think that they are in fact the new normal. As we have said, we think this is the case of 8 companies out of 10 today.

Good news!

I think this means that it is an extraordinary opportunity for most organizations. It implies that the majority of organizations can increase their performance very easily and very quickly in both their production and their new product development. All they have to do is correctly implement the first 3 steps of the Theory of Constraints’ 5 focusing steps: identify the (real) constraint, exploit it and subordinate the system to its real constraints.

If you wish to learn more about this point of view you can watch the video below. This conference was originally given in Cape Town South Africa in September 2015 during the annual congress of the TOCICO (Theory Of Constraints International Certification Organization).

Conference abstract

Philip Marris, explains why you are probably wrong about where your capacity constraints (bottlenecks) are both in production and in projects. This conference takes you through a few examples of false bottlenecks and the lessons learned. Based on a sample of over 30 cases in the past 10 years he points out that in 80% of cases companies are wrong about where there capacity constraint is. Examples are given in: steel production, pharmaceutical product development, aeronautical equipment manufacturer, a ball bearing manufacturer and automotive equipment manufacturer. He then presents his lessons learned: confusing where the constraint should be with where it really is ; he warns that ERP data is not a reliable way to identify constraints ; that people tend to have an outdated / obsolete analysis of the situation ; that new quality requirements often create new capacity constraints ; that regrettable cost cutting decisions create new bad constraints and that in the product development companies are trying to develop tomorrow’s products with yesterday’s resources capabilities.