Bottleneck in Business Operations- 9 Types to Avoid

Bottleneck In Business December 23, 2020

Chloe Henderson

Writer

A business' profitability is heavily dependent on its operational efficiency. Even if an organization has numerous clients, it cannot adequately fulfill orders with lagging internal systems that require extensive time, resources, and labor.

By understanding the impact of a bottleneck in business processes, companies can practice risk management to sustain and optimize operations.

What is a Bottleneck?

A bottleneck in business refers to areas of congestion within a production system that results from increased workloads. Typically, bottlenecks result from inefficiencies and can significantly impact production time, costs, and workflow. Bottlenecks can be found in assembly lines when specific processes lag, creating backorders, delaying sequential operations, and increasing operational costs.

Companies are most at risk for bottlenecks when manufacturing a new product, as they are unaware of potential threats, errors, and inefficiencies. Management must take the time to dissect and study the operation to pinpoint where the bottleneck stems from.

The term bottleneck illustrates the shape of a physical bottle, where the narrowest point is the neck, which receives the most congestion. This congestion slows down the natural flow of the liquid, delaying the output.

Different Types of Bottlenecks

While congestion can result from numerous malfunctions, the most common types include people and process bottlenecks.

People bottlenecks are the result of poor leadership, human error, and improper human intervention. On the other hand, process bottlenecks occur when processes are not optimized.

These types of bottlenecks can be further broken down into more specific subcategories-

The Owner

Owners that are unable to adapt their role as their business grows could eventually cause a bottleneck. Even when an owner contributes to years of the company's success, the inability to be flexible and evolve with expansion can pose a risk.

Sometimes stakeholders can become familiar and comfortable with their responsibilities to the point where it becomes difficult to accept changes. However, just as businesses need to be able to evolve with the fluctuating market, owners must stay ready to do what is necessary to maintain a smooth workflow. This may require them to become more hands-on in internal processes, rather than focusing solely on deskwork.

Leadership

Similarly, leadership is responsible for establishing a healthy work environment to keep operations running smoothly. But more importantly, all management members should have the expertise and skills necessary to continue business development and expansion.

Companies that prioritize growth must have leaders that can simultaneously manage human resources and internal operations. They must also have endurance and perseverance, as expansion efforts often take several years until businesses see results.

Without the right tools, leaders may continue to rely on past methods that gave them success but are no longer applicable.

Growing Sales Team

In the beginning, many bottlenecks stem from the sales team, as it is often comprised of only one or two employees. As the business expands, more sales team members need to be onboarded. However, some companies experience financial restraints, employee turnover, and other elements that restrict their sales departments, creating another bottleneck.

Having sales members with similar skills can also create bottlenecks, as there needs to be employees to fulfill managerial, supervision, and representative roles. Therefore, organizations must ensure they have a good mix of employees with the range of skills necessary to generate more profits.

Training and Development

As a company grows and more employees are hired, training and development become significant tasks. Without a standard procedure, workers may not receive the same instructions, causing miscommunication and confusion.

It is vital for businesses to set clear values, expectations, and responsibilities for the company and individual roles to prevent bottlenecks. Managers should also keep an open line of communication between new employees in case they have any questions or concerns.

By establishing a consistent, informative training process, businesses can improve customer satisfaction and retention to avoid bottlenecks resulting from insufficient staffing.

Operational Processes

Supervisors from each department must actively monitor their processes to ensure that operations are optimized at all times. If they detect an inefficiency, they must immediately resolve the issue so systems can continue operating.

When a system is not optimized, sequential operations could also suffer, which creates a domino effect.

Systems and Technology

A representative from the IT department should be present during all business strategy meetings if any technology can be implemented to prevent bottlenecks.

For example, inventory management software can automate repetitive tasks, such as cycle counts, procurement, and paperwork, to streamline operations. This enables employees to work on more demanding processes that experience congestion.

In-House Capacity

Businesses need to know their limitations, especially regarding capacity. Low capacity can significantly restrict companies, requiring them to turn away clients or elongate lead times. This can put much stress on an organization, affecting quality, profits, and satisfaction levels.

Leaders need to have plans in place in the case of growth and risks to sustain operations throughout any scenario.

Productivity

Technology can also improve productivity by handling basic tasks with machine learning and ensuring systems continue to run efficiently. However, businesses must adequately train employees on how to use each function to optimize its use.

Software tools can also map out processes to allow managers to study operations and implement changes as needed.

New Business Mechanisms

Lastly, companies need to study and test new mechanisms before implementation to ensure they are efficient and do not create new bottlenecks. Although businesses cannot completely avoid technical issues, working with the IT department can provide a more holistic perspective on strategies and potential risks.