Bottleneck management
All the logistics processes can be viewed as a network of interlinked activities that
can only be optimised as a whole by focusing on total throughput time. Any attempt
to manage by optimising individual elements or activities in the process will lead
to a less-than-optimal result overall. A significant contribution to the way we view
logistics processes has been made by Goldratt,2 who developed the theory of constraints
more usually known as optimised production technology (OPT).
The essence of OPT is that all activities in a logistics chain can be categorised
as either ‘bottlenecks’ or ‘non-bottlenecks’. A bottleneck is the slowest activity in a
chain and whilst it may often be a machine, it could also be a part of the information
flow such as order processing. The throughput time of the entire system is
determined by bottleneck activities. It follows therefore that to speed up total system
throughput time it is important to focus on the bottlenecks, to add capacity where
possible and to reduce set-ups and set-up times if applicable.
Equally important, however, is the realisation that non-bottlenecks should not
be treated in the same way. It is unnecessary to improve throughput at non-bottlenecks
as this will only lead to the build-up of unwanted inventory at the bottleneck.
However, Sugden recognised that this opportunity also brought with it a major
challenge. As a result of the reduction in the total capacity of the industry and the
disappearance of many of the specialist process providers (e.g. finishing) there
was a lack of capability to cope with large increases in demand. The problem was
particularly acute when dealing with large international brands such as Chanel –
an order from such a company, whilst welcome, could place great strains on the
capacity of a single business such as Johnstons.
Whereas in the past the focus had been on reducing capacity to take costs out
of the business now there was a need either to find better ways to use existing
capacity or possibly to access capacity elsewhere.
The problem with capacity was not so much the number of machine hours available
but rather the availability of skilled people. As the workforce was gradually
ageing the pool of experienced workers was diminishing – this was particularly the
case with those tasks involving hand-sewing.
To overcome these problems Johnstons instituted a major review of all their
critical supply chain processes. Using process mapping they were quickly able to
identify the opportunities for reducing non-value-adding time and removing bottlenecks.
They also recognised that in their new, more fashion-oriented marketplace
they needed to introduce more cross-functional approaches to decision making.
Significant improvements were made in reducing the time from receipt of order to
final delivery – partly through the installation of an enterprise planning system but
also through a continuing focus on process improvement. As a result the company
has managed to improve profitability even against a backdrop of challenging
market conditions.
Source: EUROPEAN CASE CLEARING HOUSE, 2010
140 LOGISTICS & SUPPLY CHAIN MANAGEMENT
Consequently, the output of non-bottlenecks that feed bottlenecks must be governed
by the requirements of the bottlenecks they serve.
These ideas have profound implications for the re-engineering of logistics
systems where the objective is to improve throughput time overall, whilst simultaneously
reducing total inventory in the system. The aim is to manage the bottlenecks
for throughput efficiency, which implies larger batch quantities and fewer set-ups at
those crucial points, whereas non-bottlenecks should minimise batch quantities even
though more set-ups will be involved. This has the effect of speeding up the flow of
work-in-progress and these ‘transfer batches’ merge into larger ‘process batches’
at the bottlenecks, enabling a faster flow through the bottleneck. It follows that idle
time at a non-bottleneck need not be a concern, indeed it should be welcomed if the
effect is to reduce the amount of work-in-progress waiting at a bottleneck.
Emerging from the theory of constraints is the idea of ‘drum-buffer-rope’. The
drum is beating the pace at which the system as a whole should work. The buffer
is placed before the bottleneck to ensure that this limiting factor in the system
is always working to its full capacity. The rope is drawn from an analogy with a
column of marching soldiers where the slowest man sets the pace. The rope
attaches the leader of the column to the slowest man – in a supply chain the rope
is the means by which replenishment quantities of materials, components, etc., are
communicated to suppliers.