Causes of supply chain bottlenecks and how to solve them

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Bottlenecks are every operations manager’s mortal enemy but they are also areas of opportunity.

Also sometimes referred to as constraints, they impede the flow of product, services, and even information. Much have been said and done to ease or prevent bottlenecks; these range from simple elimination to complex mathematical solutions. The problem usually lies in the design of operational systems and in the way they are planned.

A bottleneck is a process, system, or infrastructure or a combination of any of these that impedes or prevents an organization from quickly and effectively supplying goods and services to the final consumer. Bottlenecks come in different forms in areas such as the following:

Information Flow

How organizations capture information from the market-place and how they disseminate the data to decision-makers determines how fast they can seize opportunities in customer service and competitive advantage. It’s no surprise, therefore, that companies have employed the latest in mobile technology and communications to ensure precious information are received by the most important people in real time.

But as much as technology is perceived as the most popular means to hurdling communications obstacles, there is also such thing as bottlenecks in the right kind of information that is gathered and propagated.

An appliance manufacturer, for example, continued to produce a certain type of washing machine only to find out that the product they were manufacturing was no longer being bought by consumers. The market feedback that the product is no longer saleable came several months late apparently delayed by a researcher who deemed it not a priority.

The appliance firm wasn’t selling the washing machines consumers were looking for thereby leading to significantly lost revenue opportunities.

Supply Source

Vendors become bottlenecks when their materials are critical to their customers’ operations especially when the vendor fails to deliver critical components essential to their customer’s operations. Fire in a vendor’s factory, errors in scheduling, rejection of deliveries due to quality issues, and bureaucratic problems in importing are some of the reasons. I’ve heard through the years why vendors fail to deliver and in turn cause production shortfalls for customers.

Internal Operations

An internal operation that involves multiple process steps would be constrained by that single activity that is either the slowest or least reliable. Managers naturally would focus on this single activity and label it as the “weakest link” in a supply chain that needs the most attention and improvement. Bottlenecks in internal operations, however, are not necessarily limited to this sort of constraints and can actually be more elusive to identify.

In labor-intensive factories, for example, not only the number of people are assigned to a certain production step but also their level of training and experience would determine the output of that production step. In this case, the approach to improvement should focus on training and setting of worker performance standards as much as on how work methods are defined and planned.

Logistics Infrastructure

One of the biggest challenges in supply chain management is the logistics network outside a firm’s sphere of influence. A firm may have the most efficient facilities and the most complete line-up of transport assets but if the infrastructure is a problem, delivery reliability be a challenge.

The bottlenecks of relief goods that ensued at ferry ports in the aftermath of typhoon Yolanda were a tragic reminder to firms and organizations about the importance of infrastructure, and the planning that goes with it. There is hardly any textbook solution to logistics planning for the Philippine archipelago. The answers lie in how firms and their third party logistics partners set performance measures and plan their day-to-day logistics operations.

It is in this regard that firms should recognize that logistics network planning and design is just as important as the planning and designing of manufacturing operations and systems. Many firms place much emphasis on improving production but less on improving logistics, with some companies opting to simply outsource as the final solution to improving both.

Supply chain management has proven that products follow a flow that requires the responsible oversight of firms that have a high stake in ensuring that deliveries arrive at the customers’ doorsteps on time.

Actions to take to address the bottlenecks can be found here.

Identifying the bottlenecks and addressing them is not only a problem-solving need but also is a potential doorway to competitive advantage. By streamlining supply chain flows with fewer bottlenecks, the firm can reap unimaginable rewards from better customer service and appreciation.

Jovy Jader is a Managing Director and a Supply Chain Management Consultant at Prosults Consulting LLP. Email at jjjader@prosultsconsulting.com.

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