Location of the constraint
/How to Locate a Constraint in a Business
The location of the constraint is a central concept in optimizing company resources. Optimization is centered around the idea that there must be a constrained resource, or bottleneck. Before engaging in any optimization, we must first locate the constrained resource. In a large facility that contains many employees and processes, it can be quite difficult to locate. Consider the following ways to find the constraint:
Backlogs. Every constrained resource has a backlog of work in front of it, since the resource does not have sufficient capacity to keep up with demand.
Incremental throughput modeling. If capacity is added to a resource, will the result be an increase in throughput (revenues minus all variable expenses)? If not, the resource is almost certainly not constrained.
Problems. A constrained resource is overworked, and therefore likely to fail. Consequently, any resource that seems to constantly require ongoing management attention is more likely to be a constraint.
Scheduling. There is usually an ongoing battle over which jobs are scheduled to go through a constrained resource next. Consequently, look for areas in the production schedule where the schedule is constantly being revised.
Utilization levels. A constrained resource is in use constantly, so it probably has the highest utilization level in the company, and may involve people working multiple shifts.
If management incorrectly decides that a certain resource is the constrained resource, its error will shortly be revealed, for the backlog of work in front of the designated constraint will disappear, while the backlog in front of the real constrained resource will remain. The size of this backlog could even increase if the real constrained resource is downstream from the incorrectly-designated resource, since the capacity of the incorrect resource will have been increased by management, resulting in even more work arriving in front of the real constrained resource.
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Other Constraint Locations
There are other areas than the production department in which a constrained resource may be located. Consider the following variations:
Engineering. Any product that is customized will require design work, so a work backlog in the engineering department could indicate that the real constraint is the design staff.
Procurement. When there is a high level of industry demand for a specific raw material, the sources of supply may not have caught up with demand, so a business may be allocated a raw material apportionment. This issue can be dealt with by redesigning products to avoid using the constrained raw material.
Sales. In a complex selling environment where there are sales demonstrations, sales proposals, and contract negotiations, a backlog anywhere in this process could be the real constraint. The problem is most evident when lots of new sales prospects are being added, while the same number of sales are being generated from these prospects.
It is also possible to designate a resource as the official constrained resource. This is usually a capital-intensive function that the company does not want to invest additional funds in, or an area requiring a large number of highly-paid staff. In this case, management can focus its attention on proper management of the designated area, with the intent of balancing throughput levels and the cost of the resource.
Example of a Constraint Location
Freddie Corporation is a manufacturer of high-grade widgets. The firm’s assembly line contains a number of work centers, each of which completes a specific task in the production of the firm’s world-famous widgets. Given the high demand for these widgets, the senior management team wants to increase the production line’s capacity to meet demand. However, the firm does not have enough money to build another production line, so you will need to increase the capacity of the current line by identifying any constraints in the line and mitigating them. This involves the following steps:
Step 1. Examine the production line. You identify every step in the production line, noting the tasks completed by each work center. This gives you a better understanding of how work flows through the various work centers.
Step 2. Spot constraints. By reviewing the flow of work into and out of each work center, you realize that the second work center (where widgets are machined down to a very fine tolerance) routinely has a substantial backlog of work piled up in front of it. Further, you notice that the third work center, which takes production from the second work center, is routinely starved of work, with its operator sitting idle about half of the time.
Step 3. Verify processing time. By reviewing the processing times of each work center, you note that the second work center is routinely taking longer to process widgets than any other work center. This clarifies that the second work center is indeed the constraint in the widget production line. You also note that the fourth and fifth work centers have the next longest processing times, so they will likely become constraints if you can fix the second work center.
Step 4. Prioritize the order in which constraints will be dealt with. The second work center is the obvious choice for constraint mitigation, after which you note that the fourth and fifth work centers will also need to be dealt with.
Step 5. Mitigate the constraint. You can now work on enhancing the second work center in order to drive down its impact as a constraint. This may involve adding another employee, adding equipment, replacing the existing equipment with faster equipment, or perhaps adding automation to reduce or eliminate manual labor, among other options.
The end result of this analysis should be a production line that produces more widgets than had previously been the case, allowing the business to generate more throughput.