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How Manufacturers Can Strengthen Their Company’s Weakest Link

Posted by Concannon Miller on Thu, Oct 6, 2016

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How Manufacturers Can Strengthen Their Company’s Weakest LinkLet's say your manufacturing company has slashed costs to the bone, boosted productivity and taken market share from competitors. But you still want to see some improvement. It's time to find your weakest link and turn it into a strength.

According to the theory of constraint management, you should look system-wide for that weak link.

Examples of production constraints include:

  • Expanding too fast. Some companies start projects before determining capacity or how the new projects will fit into the larger operation.
  • Under-utilizing resources and wasting time.
  • Over-utilizing resources, leading to employee burnout and equipment breakdowns.
  • Multi-tasking, which can lead to competing priorities. In many cases, multi-tasking divides efforts and energy so that no single project gets the focus it needs and all projects take longer than if they were scheduled individually.

When searching for your company's weak link, don't just focus on production. Examine sales, knowledge, facilities, policies, financial issues and suppliers.

The first step in identifying a constraint is to know your goals. Ask questions such as: Do we want to generate more revenue, speed the launch of products or cut the cost of workers' compensation?

Once goals are determined, you need to figure out the "critical success factors" that will help achieve your target. Not all these factors are constraints.

New Call-to-actionThe following five steps are meant to "break" the constraint:

  • Step One: Identify the obstacle: This is a local factor that has global impact. Constraint management assumes that as little as one variable -- rather than many -- may block the achievement of goals.
  • Step Two: Exploit the constraint: Change the way it's handled to get the most benefit without spending a lot of money.
  • Step Three: Subordinate everything else: This involves making major changes in the way things have always been done, so expect resistance.
  • Step Four: Elevate the constraint: Change the environment so that it is no longer a limiting factor. For example, if the constraint is too much work for the available capacity, increase the capacity.
  • Step Five: Go back to the beginning: Constraint management is like painting the Golden Gate Bridge. You simply keep doing it.

Manufacturers report a range of improvements from relying on constraint management. For example, one company:

  • Increased weekly output to 100,000 units from 65,000 units.
  • Cut manufacturing lead time to eight days from several weeks.
  • Improved on-time delivery to 97 percent from 85 percent.
  • Cut overtime and increased net profit.

A principal tool of constraint management is the logical thinking process. Using logic, you: identify what you want to change; identify what you want to change it to and figure out how to make a change occur. Other tools address individual project management and synchronizing workflow in manufacturing operations.

Advocates of constraint management say it's appropriate for companies of all sizes, requires little training and can be used as a stand-alone solution or in conjunction with lean management, Total Quality Management and Six Sigma techniques.

© 2016

Topics: Manufacturing

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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