The problem of wandering bottlenecks, and how to settle them down

| Categories: Building Strategy , Business Tips , Finance , Marketing , Operations

Blog by Fuel Accountants

Here’s an interesting fact: Every organization has 3 main functions:

  1. Sales and Marketing to generate opportunities,and close deals.
  2. Operations to produce and deliver the goods/services sold
  3. Finance/Administration for accounting, HR, and other admin functions.

Knowing this allows us to understand how work flows through the company. In fact, it’s linear. It must pass through all 3 functions in that order to generate money/profit.

Are you aware that every business has a bottleneck, or constraint? That is a mathematical certainty. Why? Because if your business does not have a constraint, you’d have infinite profits. And even Apple doesn’t have that (although some think they are close)...

Your company constraint always resides in one of those 3 main functions. As a leader, it’s your job to manage the flow of the company so that each function plays nice in the sandbox with the others. We do that with processes and procedures.

Ah, but then Murphy’s Law comes into play!! Do you know this law? If something can go wrong, it WILL go wrong. Does that resonate at all? Yea, I thought it might.

So when Murphy strikes, your job is to determine in which of the 3 functions it’s occurring. Ok, so then what? You fix it. 

But wait, before you do something too wacky, you need to know this additional fact: Anytime you make a change in any 1 of those 3 functions, it affects the other 2. How do we know that? Let’s say you change the way you sell, or what you sell. Does that impact operations? Of course it does!! And it also impacts Finance/Administration. So the implication is that anytime you make a change in 1 function, it reverberates throughout the company.

In your zeal to improve your company, you might be tempted to say something like, “Everyone needs to improve their throughput by 10%.” But now you know doing this will introduce kaos and mayhem into the entire company. Why? Think about it. If change in one area reverberates to the others, then change in all areas reverberates  and interacts with the entire business system. Congratulations!! In the name of improving your business, you just made it worse…

Hence the title of this article and how this phenomena occurs in your company…

So you MUST BE VERY CAREFUL when you initiate any change. Because if the change involves more than one function, you know it will affect the others. 
So what is the solution? Use a process for ongoing improvement! Oh yea, one really exists!! I refer you to Eliyahu Goldratt’s book “The Goal.” In it, Eli outlines 5 simple (notice I didn’t say easy) steps to throughput improvement.

I will briefly review the 5 steps, and then in the next article, I will drill into them more deeply, and even give some examples of how it’s worked in our business coaching. 

Step 1: ID the Constraint
Step 2: Subordinate to the Constraint: Make sure everything around the constraint is synchronized to its pace
Step 3: Exploit the Constraint: Make certain the constraint is working as effectively as possible
Step 4: Expand the Constraint: Only after doing the first 3 steps, should we consider spending time/money expanding the capacity of the constraint. Sometimes constraints might be very expensive, or logistically difficult to expand.
Step 5: Go back to Step 1: 

So stay tuned…

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