The theory of constraints is a methodology for identifying key obstacles to achieving a designated goal. It involves systematically enhancing and resolving a constraint until it no longer hinders progress. By removing bottlenecks in the supply chain, companies can reduce inventory and operating expense, while enhancing throughput and overall effectiveness.

Following are four steps to addressing and managing bottlenecks and constraints in your supply chain network.

Identify the pitch and pace of a system. “Pitch” refers to delivery of the product at the right time. Say that you’re going to produce 10,000 units a year, and that your operation runs 250 days a year. You need to produce an average of 40 units a day to meet the goal of the system. 

The “pace” is the speed of the system. If you’re unable to produce 40 units a day, that’s a limiting factor. Your pace won’t meet your pitch.

Experienced employees and management often rely on a gut feeling about constraints. They’re right about 70% percent of the time, but data always overrides instincts. People sometimes are surprised to learn that once other issues are stripped away, pace is the problem for that operation.

The beauty of this exercise is that it removes many other factors from the equation and provides raw data. And while other elements have a very real impact on your operation — and may indeed be bottlenecks — they tend to hide or distract from the true constraint. 

Determine the takt time. Takt time refers to the rate at which a manufacturer has to produce enough goods to meet system demand. Takt is a German word with the literal translation of time, rhythm, and cadence. It’s a tool that has been around for almost 100 years, and is used to ensure goods flow through each build station in the most efficient manner. You can calculate your takt time by taking the available time (hours, days, weeks, etc.) divided by the demand of the system. Note that takt time is the time between starting to work on one unit and starting on the next. It’s distinct from cycle time, which is the average time it takes to finish one unit.

When looking at the bottleneck or constraint, you’ll want to apply the takt time to your supply chain network. First do a network diagram, mapping the process as far as you can. An original equipment manufacturer (OEM) may have tier 3, 4 or even 5 suppliers. Once you map the network, you’ll be looking for any part of the system that can’t meet your takt time. If you must produce 40 units per day, your takt time rate is 36 minutes per unit. If a supplier can’t do its part to ensure you can meet the production target, that’s a constraint.

Implement a strategy to overcome the constraint. Your short-term strategy is to stop the bleeding from the constraint, and get the system back on pace for production. At this point, it’s all about buffering the system. If the constraint is with a supplier who is unable to meet your demand, you’ll be working with the supplier to overcome its internal issues. This may include working overtime, increasing inventory or adding people or equipment. You may also have to increase your inventory to create more of a buffer.

An intermediate approach often includes Lean strategies. Look to eliminate waste, optimize flow and reduce variation.

A long-term strategy involves more significant changes. For internal constraints, you may need to restructure your business, such as adding more people and machinery. For external constraints, you may need to diversify your supplier mix. In some cases, you may need to abandon your strategy of single sourcing. You might consider adding a second supplier with an 80%-20% mix. You may have to opt for an alternative supplier for your primary needs. 

Adding or changing suppliers is a lot of work, but it’s foundational for improving or growing your business. It involves scouting, vetting and qualifying, and developing relationships. But it’s also an opportunity to find more proactive partners as opposed to transactional vendors. 

Ensure that upstream and downstream suppliers can support the constraint. Upstream suppliers have responsibilities; they have to ensure that they never starve or stall the constraint. You’re counting on them never to run short of materials or experience shipping issues. If you’re two days behind on your master production schedule and don’t get material on time, now you might be four days behind.

 Likewise, downstream partners should never block your operation. If your customer can’t take your delivery today because they don’t have space, or the people to unload the shipment, they have become a constraint.

It’s your responsibility to build a communication plan so that you minimize potential starving or blocking in your system. Do your partners communicate with you when they are facing difficult circumstances? Do they let you know if a major weather disruption is impacting their operations or delivery?

Of course, you should be a good partner and abide by these principles as well. One way to do this, and protect your business, is to follow the general guideline that you should have a safety stock of 28% to 32% of your pitch.

Let the theory of constraints guide your solutions. The theory of constraints is a great reminder that you want to make sure your business model is aligned with your limitations; the pace of the production shouldn’t be based on your most expensive step. Your slowest process will always be your limiting factor.

You might be able to solve a constraint inexpensively by adding another person to that step, or investing in lower-cost technology. On the other hand, it makes little sense to add automation upstream from a bottleneck. For example, an HVAC manufacturer added a collaborative robot early in its process to speed the material handling process. But it was upstream from a constraint, which created unintended consequences and actually slowed production as parts piled up on the production line. They could only handle 10 units a day, and the cobot produced 200 a day. So they only needed to use the cobot for a couple of hours per shift.

Manage constraints with data and discipline. This process is simple in concept but isn’t easy to execute. Gathering the data can be difficult, and it requires a lot of discipline to plan and implement significant changes. Finding a new supplier can be a lot of work. Managing bottlenecks and constraints also requires discipline to maintain your new tactics and systematic changes.

It can feel foreign to drill down so deep into one aspect of your operation. But it brings focus in new ways and on new areas. It quiets the white noise. It can help you see how so many other things don’t matter until you get this one issue under control. And once your most limiting factor has been addressed, you may find that other adjustments will have greater impact. 

Brandon Phoenix is a supply chain expert for TMAC, part of the Manufacturing Extension Partnership National Network.