Well, today I was thinking of touching upon a topic that has been done to death by the book "The Goal". Written by Eliyahu M. Goldratt, who is known for his work on the Theory of Constraints, a cool management idea.
Of course, like most cool management ideas, this one is rather simple, and would be called common sense...but strangely enough, common sense is not really that common. Ok...enough digression, back to the topic itself.
How is a product made?
A product is made by subjecting it to a series of processes, from raw material to finished goods. For example, You take some mud from a mine in Jharkhand, subject it to a series of processes, and a few hours/days/years later, out comes a sheet of rolled stainless steel.
The example that I gave was very limited indeed, where there was only one raw material, and one finished product. But a more realistic example would be a car industry, where the inputs would be numerous, from steel and plastic to rubber for the tyres. And there would be several types of cars being produced, from small cars right up to 18 wheeler trucks. Now then it becomes a bit tougher to document the processes.
In essence however, a product can be thought of as a series of inputs, which go through a process, which hopefully adds value at each step, so that you have a final product that can be sold.
What is a bottleneck?
A bottleneck is a process whose speed determines the rate at which your final product can be manufactured. hmm...now this is not as clear as I wanted it to be. So lets try that again with a simple example. I think we have talked about our potato farm. Now the farm sells its produce to the local factory which makes crackling chips out of it (with cheese and lime flavouring). Now, my potatoes now go through a process. First they are cleaned and peeled(by hand) and then there is this awesome set of machines that cut it, then an automatic weigher, then a drier, followed by a brief quality check instrument, the flavour mixer, and finally, the frier. Once the chips are fried, there is a secondary weigher, followed by a packager.
Now you can see how the process goes...raw potatoes go in one end, and chips that I can eat come out at the other.
So let us take a situation where I want to increase my plants capacity...so I buy a whole new set of funky machines expecting to double output. Two months later, nothing of that sort has happened. I wander down to the factory, and all is clear. The machines are idle, because there are only 2 people peeling the potatoes. Only if I increase the number of peelers, can I increase my output. Now, this shows that my peelers are my bottleneck process.
So, what should I do?
The answer is surprisingly easy, is it not? All you have to do is eliminate that bottleneck, and hire more peelers. This is all the theory of constraints advices, and has what made Mr. Goldratt so famous. Of course, an observant reader will ask, so then what, "Are all my problems solved?" Not really, because once you clear one bootleneck, another will appear, and you will then have to sort the new bottleneck out. And so on and so forth, ad infinitum.
So where does the customer come in all this?
After all, that was in the title of my blog, was it not? Well, I think Mr. Goldratt, or someone else has already thought of this, but in case they have not, here is my take on this. Even if you can solve all your bottlenecks, its really easy to see that it does not mean you can produce all that you want. At the end of the day, you can only produce as many chips as can be eaten. So the final bottleneck in this whole process is your customer. And this is the part that is most uncertain. We have all seen companies with good processes fail. They have finally failed because in spite of all their optimization, they never optimized for their bottleneck constraint, which was customer demand. Thus, any production guy should be given a clear picture of what his product mix demand is likely to be, or he/she is going to be making the wrong moves.
Well, that is it for now...any ideas, as always, comment away.
Of course, like most cool management ideas, this one is rather simple, and would be called common sense...but strangely enough, common sense is not really that common. Ok...enough digression, back to the topic itself.
How is a product made?
A product is made by subjecting it to a series of processes, from raw material to finished goods. For example, You take some mud from a mine in Jharkhand, subject it to a series of processes, and a few hours/days/years later, out comes a sheet of rolled stainless steel.
The example that I gave was very limited indeed, where there was only one raw material, and one finished product. But a more realistic example would be a car industry, where the inputs would be numerous, from steel and plastic to rubber for the tyres. And there would be several types of cars being produced, from small cars right up to 18 wheeler trucks. Now then it becomes a bit tougher to document the processes.
In essence however, a product can be thought of as a series of inputs, which go through a process, which hopefully adds value at each step, so that you have a final product that can be sold.
What is a bottleneck?
A bottleneck is a process whose speed determines the rate at which your final product can be manufactured. hmm...now this is not as clear as I wanted it to be. So lets try that again with a simple example. I think we have talked about our potato farm. Now the farm sells its produce to the local factory which makes crackling chips out of it (with cheese and lime flavouring). Now, my potatoes now go through a process. First they are cleaned and peeled(by hand) and then there is this awesome set of machines that cut it, then an automatic weigher, then a drier, followed by a brief quality check instrument, the flavour mixer, and finally, the frier. Once the chips are fried, there is a secondary weigher, followed by a packager.
Now you can see how the process goes...raw potatoes go in one end, and chips that I can eat come out at the other.
So let us take a situation where I want to increase my plants capacity...so I buy a whole new set of funky machines expecting to double output. Two months later, nothing of that sort has happened. I wander down to the factory, and all is clear. The machines are idle, because there are only 2 people peeling the potatoes. Only if I increase the number of peelers, can I increase my output. Now, this shows that my peelers are my bottleneck process.
So, what should I do?
The answer is surprisingly easy, is it not? All you have to do is eliminate that bottleneck, and hire more peelers. This is all the theory of constraints advices, and has what made Mr. Goldratt so famous. Of course, an observant reader will ask, so then what, "Are all my problems solved?" Not really, because once you clear one bootleneck, another will appear, and you will then have to sort the new bottleneck out. And so on and so forth, ad infinitum.
So where does the customer come in all this?
After all, that was in the title of my blog, was it not? Well, I think Mr. Goldratt, or someone else has already thought of this, but in case they have not, here is my take on this. Even if you can solve all your bottlenecks, its really easy to see that it does not mean you can produce all that you want. At the end of the day, you can only produce as many chips as can be eaten. So the final bottleneck in this whole process is your customer. And this is the part that is most uncertain. We have all seen companies with good processes fail. They have finally failed because in spite of all their optimization, they never optimized for their bottleneck constraint, which was customer demand. Thus, any production guy should be given a clear picture of what his product mix demand is likely to be, or he/she is going to be making the wrong moves.
Well, that is it for now...any ideas, as always, comment away.
1 comment:
This is the point at which you move from Mr. Eliyahu and his Production Process stuff to marketing and economics. Heard of Demand Models?
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