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The (Largely Forgotten) “Bottleneck Law”: Or How to Improve the Efficiency of Your Business

The (Largely Forgotten) “Bottleneck Law”: Or How to Improve the Efficiency of Your Business

  • João Gomes • Partner @BlueBiz

This article comes in connection with three intercontinental journeys I made, which had an absolutely unsatisfactory ending in terms of lost luggage, time, increased costs and major hassles. According to a recent study by McKinsey & Company, bottlenecks can lead to significant losses for companies. It is estimated that the additional costs (1) associated with bottlenecks can range from 10% to 30% of total operating costs.

Research carried out by the Institute of Industrial Engineers found that identifying and eliminating bottlenecks can lead to average productivity increases of up to 40 per cent.

In this article, I invite my reader to answer the question: What is the “Bottleneck Law” and what strategies can companies use to minimise its effects and, consequently, improve the efficiency of their business?

Let’s look at it in turn:

  • Definition and functioning of the “Bottleneck Law”.
  • Strategies to minimise its negative effects.
  • Concrete actions to deal with the “Bottleneck Law” and associated problems.
  • Conclusion.
  1. Definition and operation of the Bottleneck Law (LG)?

In the sphere of economics, LG is also referred to as the “Law of the Weakest Link”.

From the start of the Industrial Revolution in the 19th century, mass production began to reveal the importance of identifying bottlenecks in production processes.

Eliyahu Goldratt, author (2) of the book “The Goal” (1984), which I highly recommend reading, introduced the concept of the bottleneck as a critical point in a process that limits productivity.

In this context, a bottleneck is the link with the lowest response capacity that determines the flow/speed/efficiency of delivery of a product or service.

  1. What strategies can be employed to minimise the negative effects of the “Bottleneck Law”?

Let’s look at three examples.

a) In the information technology sector: bottlenecks in software implementation.

Situation: LG is often evident in software implementation. Imagine a company that wants to update its business management system. The implementation process may face a bottleneck in the data migration sub-process.

Consequences: While other parts of the process may be ready, inefficiency in the data migration sub-process can delay the entire project.

Solution strategies: By i) re-engineering processes, ii) training employees, iii) and automating the data migration sub-process to reduce time and the risk of human error, the company can ensure that the software implementation is completed efficiently, minimising disruption to operations.

b) In the air transport sector: bottlenecks in aircraft maintenance.

Situation: LG can affect aircraft maintenance. An airline can face significant delays due to the lack of availability of spare parts for repairs.

Consequences: This bottleneck can cause flight cancellations, passenger dissatisfaction and additional costs.

Solution strategies: By i) carrying out a detailed bottleneck analysis, ii) investing in an effective spare parts management system, iii) and partnering with reliable suppliers, the airline can optimise parts availability and minimise the impact of maintenance bottlenecks.

c) In the international trade sector: bottlenecks in the supply chain.

According to McKinsey & Company, operational and logistical bottlenecks can result in significant losses, ranging from 10% to 30% of total operating costs

Situation: LG can arise in the supply chain. For example, a company involved in importing products can face significant delays at customs due to lengthy bureaucratic procedures.

Consequences: This can result in delays in delivery to customers and increased storage costs.

Solution strategies: By i) implementing tracking and compliance technologies, as well as ii) strategies to streamline the customs process, the company can minimise bottlenecks in the supply chain and improve the efficiency of international trade.

  1. Concrete actions to deal with the “Bottleneck Law” and some associated problems

Based on my experience in modelling and optimising business processes at my clients, I suggest ten practical steps that can be followed to implement LG efficiently and effectively.

Step 1: Identify the bottlenecks. Analyse and closely examine operational processes to identify where delays, bottlenecks or limitations in flow occur.

Associated problem: But when carrying out this step, pay attention to the “Complexity of Identification”. Identifying the real bottlenecks requires detailed analyses and can be challenging in complex systems.

Step 2: Impact Analysis and Consequence Assessment. Understand how each bottleneck affects production times, costs, stock levels and the ability to respond to demand.

Step 3: Prioritisation of bottlenecks. Rank by importance and prioritise the bottlenecks based on their financial and operational impact, focusing on those with the greatest potential for return.

Associated problem: Watch out for “Excessive Cost”. Investing in eliminating bottlenecks can be costly and, in some cases, may not result in significant gains.

Step 4: Develop solutions. Formulate mitigation strategies and develop approaches to solve or reduce bottlenecks, considering technologies, process adjustments and reallocation of resources (see the text above for some examples of solutions).

Associated problem: Watch out for the “Risk of Waste”. Over-allocating resources to overcome temporary bottlenecks can result in idle capacity once the problem has been resolved.

Step 5: Gradual implementation. Test and validate. Implement solutions gradually and flexibly, monitoring the results and making adjustments as necessary.

See Also

Step 6: Continuous Monitoring. Follow up regularly and maintain a monitoring system to ensure that resolved bottlenecks remain under control.

Step 7: Feedback and Improvement. Constantly evaluate and request feedback from employees on the effectiveness of the solutions implemented, always looking for opportunities to improve.

Step 8: Team involvement. Form a multidisciplinary team with varied skills to collaborate in identifying and solving bottlenecks.

Step 9: Innovation and Adaptation. Be prepared to innovate and adapt solutions as the company evolves and circumstances change.

Step 10: Culture of Continuous Improvement. Establish a culture of continuous improvement, encouraging all levels of the organisation to proactively seek out and resolve bottlenecks.

Associated problem: Attention to “Excessive Focus”. Obsession with eliminating bottlenecks can divert attention from other important aspects of management and strategy.

  1. Conclusion

The topic of the “Bottleneck Law (LG)” is often overlooked, but it turns out to be crucial for improving business efficiency. According to McKinsey & Company, operational and logistical bottlenecks can result in significant losses, ranging from 10% to 30% of total operating costs. Furthermore, a study by the Institute of Industrial Engineers reveals that eliminating bottlenecks can lead to productivity increases of up to 40 per cent.

To minimise the effects of LG, it is important to implement appropriate strategies. For example, in the IT sector, software implementation can be hampered by inefficient data migration. Through process re-engineering, employee training and automation, efficient implementation can be guaranteed.

In this article, and as a result of my experience, I suggest ten practical steps for dealing with LG, including identification, impact analysis, prioritisation and solution development. However, it is important to avoid excesses and maintain a balance between eliminating bottlenecks and other areas of management.

Ultimately, creating a culture of continuous improvement is key to meeting the challenges posed by the “Bottleneck Law” and constantly improving operational efficiency.

1) According to Deloitte, the manufacturing industry faces bottlenecks in areas such as supply chain, production and distribution. The research points out that, on average, companies spend around 20 per cent of their time dealing with bottlenecks and interruptions in production.

2) Other relevant authors and books on this subject: John D. Little – “Little’s Law and the Management of Inventory” (1961). Donald J. Wheeler – “Understanding Variation: The Key to Managing Chaos” (1993). Paul Harmon – “Business Process Change: A Business Process Management Guide for Managers and Process Professionals” (2007). Michael H. Hugos – “Essentials of Supply Chain Management” (2006).


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