Bottlenecks in business don’t occur just in manufacturing shops. There are bottlenecks in every small business. Finding and overcoming yours may be trickier than you think.
A bottleneck is defined as a limitation in a system or process that prevents the system from moving faster. Another way to explain it is that your business can’t go any faster than its slowest-moving part.
Your whole business is a system or groups of systems, so no matter what type of business you have, you need to find your bottleneck(s) to correctly set priorities for growth.
A simple example would be a widget factory whose manufacturing process requires a cutting machine that takes one minute a unit to complete. No matter how many orders you have or how many staff you hire or how much raw material inventory you have in stock, you’ll never produce, and therefore never sell,any faster than one unit a minute. Your growth is permanently limited.
My simple example, of course, brings to mind some simple solutions – assuming the demand – sales – are there, buy a second widget cutting machine and boom, you’re done.
Only, you’re not.
Once that constraint is take care of, something else will become the slowest process and you’ll need to start all over again.
Chasing constraints is a never-ending battle. Not to mention that you need to do a net economic-benefit analysis of adding that widget-cutting machine. If there aren’t enough orders to fully utilize the additional machine, its cost versus extra output may not be worth it.
This is getting a bit tedious, even in a simple factory scenario. But how do you find the bottleneck in your retail store, plumbing operation, consulting practice, auto repair shop or distribution centre? It can be a lot harder than you think.
Start with this: Ask yourself what prevented you from making more sales today. The answer is likely a bunch of things, each one needing to be analyzed carefully.
- Did you get a phone call for a product for which you had no stock? Then inventory was a bottleneck.
- Did voicemails left after hours for an urgent or time-sensitive item or service create a missed sale? Business hours were the bottleneck.
- Did new orders get entered late or not at all? Did shipped orders not get invoiced? Document workflow was the bottleneck.
- Did a full work schedule prevent you from taking on that emergency automotive brake repair? Your bottleneck was staffing.
- Did a customer drive right by because it was raining and there was nowhere to park? Location was the bottleneck.
- Did you have lots of inventory and staff? Do you stay open late and on weekends? Were all your workflow documents up to date? Was it a sunny day with plenty of open parking spaces? Then maybe sales are your bottleneck.
Sales is where your bottleneck should be, and this is probably where you think your bottleneck is, but I doubt it. Most small business owners are so focused on where the next sale or new customer is going to come from that overlook the internal bottlenecks that are constraining their ability to maximize the customer demand they already have.
I routinely see manufacturers attend trade shows to drum up business while existing orders are shipping out late and backorders are building. This is small-business human nature – born from the first day the doors opened and your small business had nothing but capacity and zero customers. But that is likely – hopefully – not your current problem.
I understand that you can’t save marketing investments until the day you run out of orders – it’s a continuous activity. But the priority and investment that marketing requires may not be lining up with what is really holding your company back.
Today’s problem is more likely internal bottlenecks. Cash flow is always the big one, but never the only one.
Sit with your team and ask for insights on what kept them or the business from generating more revenue today. What can you do differently tomorrow?
Without recognition and an outspoken discussion about even minor bottlenecks in your entire business systems, you may be investing efforts in the wrong places – possibly even creating opportunities and possibilities that can’t be fully realized until you free up the slowest moving part of your business.
Make finding and unblocking bottlenecks in your business a daily activity and you’ll discover the true low-hanging fruit in your business, which is sure to get prioritized results at the lowest cost.
Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.
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