Bottleneck Principle – Definition

Cite this article as:"Bottleneck Principle – Definition," in The Business Professor, updated June 10, 2019, last accessed October 25, 2020, https://thebusinessprofessor.com/lesson/bottleneck-principle-definition/.

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Bottleneck Principle Definition

The bottleneck principle, or a “bottleneck”, occurs when a system of production such as facility, machine, or equipment is overwhelmed by production to the extent that it cannot meet demands for more production.

The bottleneck principle also explains a situation whereby demands or workloads are more than what the production system can handle. When there is congestion, bottleneck has occurred. The term “bottleneck” is derived from the narrow neck of a physical bottle.

A bottleneck situation will slow down production and supply processes. It results in unavailability of goods which result in delays in the supply chain and sometimes the inflation of production costs.

A Little More on What is the Bottleneck Principle

When there is congestion in a production system, it comes with significant downsides. When there is too much workload or demand than what the production department, a facility, an equipment or a machine can handle, a bottleneck situation has occurred. A sudden rise in demand that overwhelms the capacity of production can lead to a bottleneck.

Delays in production, increase in expenses of production, increase in time used for production are traits of bottleneck. Certain situations lead to bottlenecks situations in companies. For instance, a company that launches the production of new products without proper scrutiny of the flaws associated with the production of the new items can experience a bottleneck.

Factoring in the Flow of Manufacturing Costs

Another significant impact of bottlenecks is that they affect the flow of manufacturing costs. Assigning costs during bottlenecks is often challenging and more tasking due to the wastage of time, delays in production and shortage of production that occur.

For instance, a show making industry that already purchased leathers, glues and other materials needed for shoe production and is able to go through normal manufacturing processes in which the finished products are quickly moved into inventory and are assigned costs. This is a normal flow of production. If there is a bottleneck during the production phase, machines are either overwhelmed with production or idle, workers will also not work maximally and this will in turn cause a spike in the cost of products after they are manufactured.

Examples of Production Capacity

Production Capacity is another thing that is often negatively impaired by bottlenecks. Companies are unable to produce goods at high or maximum capacity during bottlenecks.

For instance, if the facility is in good condition, equipment and machines working effective, labor workers on top of production and other factors involved in production adequately functioning, a company will be able to produce at a maximum capacity. This is based on theoretical capacity.

However, in cases of bottlenecks, the reverse is the case because the production system lacks the capacity to meet demands or workload is in excess. The unrealistic nature of theoretical capacity made companies embrace practical capacity.

How Variance Analysis Can Remove Bottlenecks

In order to avoid or overcome bottlenecks certain methods can be used. Using variance analysis in production processes is one of the ways to remove bottlenecks. Variance analysis make room for changes in production processes, it differentiates budgeted results from actual results and is also an effective way to remove bottlenecks.

For instance, if the time and money budgeted for labor costs are higher than the actual labor costs, it might be that bottleneck occurred which delayed production process or made labor workers non-performing. If there is a shortage in inventory needed in a production process or the workload is too much, bottleneck can occur. A variance analysis helps managers effectively manage production processes, detect bottlenecks and remove them.

References for Bottleneck Principle

Academic Research on Bottleneck Principle

The principle of bottleneck structures, Brand, M., & Markowitsch, H. J. (2003). In Principles of learning and memory(pp. 171-184). Birkhäuser, Basel.

Parity pricing and its critics: A necessary condition for efficiency in the provision of bottleneck services to competitors, Baumol, W. J., Ordover, J. A., & Willig, R. D. (1997). Yale J. on Reg., 14, 145.

Breaking through the V and V bottleneck, Croxford, M., & Sutton, J. (1995, October). In International Eurospace-Ada-Europe Symposium (pp. 344-354). Springer, Berlin, Heidelberg.

A Bottleneck Principle for Techno-Metabolic Chains, Mustafin, A. T. (2017).

Bottleneck management in discrete batch production, Denisa, F. (2012). Journal of Competitiveness, 4(2), 161-171.

Research on the Improvement of General Assemble Line Bottleneck for the Car, Gong, J. H., Zhu, Q. Y., & Zhang, L. J. (2014). In Applied Mechanics and Materials (Vol. 678, pp. 705-711). Trans Tech Publications.

Bottleneck Identification of Equipment Manufacturing Industry Chain Upgrading Based on the TOC, Jian, X., Yumei, Z., & Xin, W. (2011, November). In 2011 International Conference on Information Management, Innovation Management and Industrial Engineering (pp. 263-266). IEEE.

A Study on the Bottleneck Identification of Constraint Theory [J], Wenhui, G. A. O. (2008). Journal of Xi’an Shiyou University (Social Science Edition), 1, 012.

Product redesign for improved value recovery via disassembly bottleneck identification and removal, Cong, L., Zhao, F., & Sutherland, J. W. (2017). Procedia CIRP, 61, 81-86.

Principles to Break through the Bottleneck on Selling [J], Guang-ming, C. H. E. N. (2002). Economic Survey, 1, 012.

Bottleneck Control, Lödding, H. (2013). In Handbook of Manufacturing Control (pp. 347-363). Springer, Berlin, Heidelberg.

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