Understanding Bottleneck

A bottleneck is a point of congestion in a production system (such as an assembly line or a computer network) that stops or severely slows the system. The inefficiencies brought about by the bottleneck often create 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.

There are two main types of bottlenecks: short-term and long-term. A short-term bottleneck is temporary and typically caused by temporary conditions such as employees on vacation or on sick leave. Long-term bottlenecks are baked into the production process and include such things as inefficient machinery.

Bottlenecking, the process that creates bottlenecks, 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, then incurs labour and machine costs to produce and assemble furniture. When production is complete, the finished goods are stored in inventory. The inventory cost is often transferred to the 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 don’t work productively, creating a situation of underutilization of resources. This increases the cost of production, presents a potentially large opportunity cost, and may mean that completed goods do not ship to customers on time.

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. Company management could decide to lower their production goals to bring them in line with their production capacity.

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