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Identifying & Managing Business Process Bottlenecks

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  • 0:00 Business Process Bottlenecks
  • 1:34 Balancing Overproduction
  • 2:30 Increasing Process Capacity
  • 3:41 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

This lesson reviews how to manage a bottleneck, which limits output to the point that it hinders productivity and profitability. We evaluate methods to identify and manage bottlenecks, including balancing overproduction and increasing process capacity.

Business Process Bottlenecks

Most of us chew a piece of gum now and then. Do you ever think about how it was produced? Well, chewing gum is created on a production line. It's melted, mixed, rolled, scored, conditioned, wrapped, and packaged. What if scoring takes longer than the processes that come before it? Well, much like the narrow top of a wine bottle, this is called a bottleneck.

Business process bottlenecks occur when demand outweighs production capacity. Bottlenecks exist at a place where the process is slowed due to an impediment. This could be from out-of-date equipment, inefficient labor, or scarce resources. Maximum capacity is limited to the capacity of the bottleneck.

To find and eliminate a bottleneck, we use process analysis. Process analysis looks at the entire business process. Most often, this analysis begins with an identification of all of the business process steps. Then, a flow chart is developed to show these steps. Once we have the steps, we can determine the capacity of each step. Then, when we find the step with the lowest capacity in the process, we have located the bottleneck.

Reducing or even eliminating bottlenecks is important to increasing profitability. Boosting efficiency of the business process will improve productivity and expand profitability. After identifying a bottleneck, we can find ways to effectively manage it. Two pivotal ways of doing this are balancing overproduction and increasing process capacity.

Balancing Overproduction

Overproduction occurs when production is maximized at every step of a business process and a bottleneck exists at one of the steps. Inventory accumulates and sits because this part of the process takes much longer to complete than the steps that come before it.

Let's look at our chewing gum process. If melting, mixing, and rolling are maximized at 5,000 pieces per minute, scoring would need to match this for the process to be efficient. However, if scoring can only complete 4,000 pieces per minute, inventory will continue to amass at this step.

Because of overproduction, inventory can sit around and become old. It can pile up and be a hazard. Or, the overproduction can be addressed in one of two ways. The first way to address overproduction is to slow down the faster processes to match the capacity of the bottleneck. The second way is to correct the bottleneck, which is usually cost or time prohibitive.

Increasing Process Capacity

Managing a bottleneck increasing process capacity can be an effective option. This means we are looking for ways to force more production through the bottleneck. It's not as simple as always playing catch up or reducing waste. Let's look at some options.

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