Your business is composed of numerous processes. Within each process is an opportunity to save costs and increase your profitability. One method to reduce costs is to look for bottlenecks, analyze them, and eliminate them. This week we look at preventing bottlenecks from blocking your upstream or starving your downstream business workflow.
Paul Hernandez-Cuebas
The first step to improving a process (and ultimately your business) is to analyze it and understand the activities, how the activities relate to each other, and how the activities generate value in your business. There are several key points to analyzing a process, generally you will need to do the following:
Clearly define the lines that define the entry points and exit points of the process.- Construct a visual process diagram that illustrates the activities and their relationships. (Look below for a novel way to handle this step.)
- Determine the capacity or throughput limit of each step in the process and any other value calculations.
- Identify the Bottleneck, the activity that has the lowest capacity for throughput.
- Evaluate further process limitations to quantify the effect of the bottleneck
One of the immediate benefits (and potential pitfalls) of this process is to develop a realistic picture of what is happening in your business. You will need to take extra care to make sure your diagram represents the reality of the process, not your (or others) perception of it. If your diagram relies on input from employees, the employees may be reluctant to point out rework, mistakes, and other potentially embarrassing aspects of your business process. You and they may be tempted to portray the process as it should be, not as it actually is. To identify bottlenecks and process problems that are costing you profits it is critical that you record the actual process as they are being performed.
A handy tip from Success Begins Today for quickly turning your list of activities into an interactive visual diagram is to print common flow chart blanks onto business card stock. A few minutes with a marker later and you have an effective business management tool. Those of you who prefer to work virtually might to look at Open Office’s Draw program for a zero cost flow chart solution. Be sure to pick a method you are comfortable manipulating, because the next few steps are all about working your diagram.
Activity Capacity, Value and Performance Measurement is a topic we’re going to explore in more detail next week. In short you may be looking at a number of factors including Capacity, Capacity Utilization, Throughput or Flow Rate, Time measurements about Flow, Cycle, Process, Idle and Setup, Work in Process, Direct Labor and Labor Utilization. Your goal is to identify the throughput rate or cycle time for each activity.
The activity with the slowest throughput rate or the longest cycle time is your bottleneck:
- Saving time in the bottleneck activity saves time for the entire process.
- Saving time in a non-bottleneck activity does not help the process since your overall productivity is limited by the bottleneck.
Another benefit of the visual diagram is you will be able to predict the impact of eliminating your bottleneck, it will be the difference between the bottleneck and the next lowest capacity activity. If there is a large gap you will see a dramatic improvement in your overall capacity, if the gap is small clearing the bottleneck will have a limited impact. The good (and bad) news is after you clear a bottleneck you will see another develop (though at a higher overall capacity.) This allows you to continue the improving your business processes.
In our next issue we will be taking a look at how to break down an activity's performance for measurement, and some real world examples of how this process can save food distributors and processors time and money.
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