Eliyahu Goldratt, an author and physicist, optimized production techniques by explaining how to identify the bottlenecks and the thinking process to eliminate the system constraints. In 1986 Goldratt published his findings as a fictional story in his book, The Goal.
Performance of any company is dictated by its limitations. Bottlenecks prevent an organization from maximizing its performance. The Theory of Limitation (TOL) is applied to measure company performance from two different perspectives:
1. Is your system performing at its best?
2. Does the system lack resources to reach its best potential?
THE THEORY OF LIMITATIONS
Below are some bullet points to give you an idea about the Theory of Limitation:
• It helps identify the bottlenecks in a business and provides a step-by-step thinking process to remove the limitations. It applies the technique of cause and effect to tackle the issue at hand.
• A limitation is anything that prevents a system from achieving its highest performance possible.
• If a system can produce more, then more should be produced; otherwise, there is a limitation that should be addressed.
• If a company has downtime for lack of demand, that is a limitation.
• Limitation may be caused from supply shortage. This might be the number of customers per hour who come into a business or shortage of parts for an assembly line to complete a product.
• Limitation may be caused by management policies (many times, this is the issue).
• Limitation may be caused by a system in place that cannot keep up with demand.
There are five steps to identify the constraints. But first, write down the goals of the company for the existing operation:
• How many orders do you want to deliver per day?
• What is your goal for your labor dollar per customer?
• What is your labor percentage goal?
• What is your goal on how much time it should take to process each order?
• What is your break-even point?
FIVE STEPS TO ADDRESS LIMITATIONS
Step One: Identify the Limitation
What is your weakest link? What part of the process is a bottleneck and slowing down your overall operation? The weakest link can be easily measured by timing each process or by simply watching your employees or your equipment throughput and the excess number of inventories waiting to be processed. If each procedure takes one minute to accomplish, except for procedure “X” that takes five minutes, then that may be your bottleneck.
Step Two: Control the Limitation
After you identify the limitation, investigate the cause of the bottleneck, and correct it. A bottleneck may be caused by lack of employee training, lack of productivity, lack of capacity, or lack of staff. Just keep in mind that the cause of the limitation may not be tangible. It may be intangible — such as company rules and policies or lack of training and productivity.
Step Three: Prioritize the Limitation
The identified bottleneck should have priority over every step in the process. Increasing the throughput of the bottleneck will increase the overall throughput of the system.
Step Four: Analyze the System Limitation
Review how the system is working after you have corrected the limitation. Evaluate if the correction solved the bottleneck issue or just improved it. If the identified procedure is still causing a system limitation, repeat steps two and three, such as, invest in new equipment, hire more staff, re-train all personnel, etc.
Step Five: Repeat the Process to Identify a New Limitation
Systems can only have one limitation at a time. Once the identified limitation is removed, repeat the process to identify and solve a new bottleneck.
MEASURE YOUR SYSTEM’S PERFORMANCE
The limitation might sometimes be seen with the naked eye and not need any measurements. At other times you may need to time each process from start to end. We will use a full-service car wash as an example and measure the individual time of each process:
Customer’s wait time to get their wash ticket: 2 minutes
Time to vacuum: 4 minutes
Time waiting in loading area to enter the wash conveyor: 2 minutes
Time to prep on the conveyor before the wash: 2 minutes
Time in the wash conveyor tunnel: 2 minutes
Time to clean the car at the finish line: 6 minutes
Time for customer to get in their car and exit the wash: 2 minutes.
Total throughput time: 20 minutes.
APPLY THE THEORY OF LIMITATION
Now that we know the definitions of the Theory of Limitation, let’s put it into practice.
From looking at the chart above we can see two limitations: the vacuum takes four minutes, and the finish area takes six minutes.
With visual inspection of the work process, we find that: the vacuum is not a bottleneck, although each car takes four minutes. There are two vacuum stations; therefore, every two minutes one car is ready and taken to the loading area.
Visual inspection confirms the finish line as the limitation.
Note: 20 minutes in and out of a car wash is adequate time. Most car washes wish they could have a throughput of 20 minutes per car. The challenge comes during very busy hours. The time it takes to wash a car could be delayed because if the parking at the finish line is full of cars, then the whole operation is affected. The conveyor must be stopped. All processes up the line are affected and create their own bottlenecks. The total time to wash a car will increase dramatically and may easily double.
Per the Theory of Limitation, we identify only one bottleneck at a time. Therefore, the limitation is at the finish line. Once the limitation is identified, control it by investigating to determine the cause. The root of the problem may be tangible or intangible.
Intangible causes may be company policies, work procedures, or lack of motivated/properly trained employees. Maybe low-grade chemicals being used in the tunnel are cleaning cars poorly so that staff is spending extra time cleaning manually.
Tangible causes may be that employees must re-clean wheels manually because of lack of adequate equipment in the tunnel to produce a clean wash. Or wheel-cleaning equipment may not be installed in the tunnel, and staff must clean wheels manually. Maybe staff is taking their time on cars, doing extra work to get extra tips, one person is assigned per car instead of two, a shortage of employees, or no manager on site to motivate and speed up the cleaning process.
It may take time to eliminate the cause of the limitation in the finish line cleaning area. Repairing or investing and installing new equipment cannot be done quickly. Therefore, prioritize the limitation over all work processes. Because your throughput is only as fast as your slowest task, a temporary quick solution may be to retrain your staff on the cleaning process, relocate some employees to the finish area from other departments, have your staff members work as a team of two per vehicle, hire new staff, slow down the conveyor speed, or maybe change the sequence of the system by moving the vacuum step to the finish area and combining both processes and both labor forces. Once you correct the problem, analyze the changes to make sure that the limitation has been removed, otherwise, keep on working on the issue until the limitation is removed. Finally repeat the process, check for new limitations in the system.
Note: many times, when a limitation is removed, a new one is born.
Once you repeat the five steps to identify a new limitation, you may determine that the prep time is a bottleneck. Once the prep time is replaced by a piece of equipment, the prep time becomes zero. When the prep limitation is removed, the loading time will automatically disappear too. The loading time existed only because of the prep bottleneck. Loading cars on the conveyor and sending cars through the wash shouldn’t take any time. Looking at the chart on page 42 the vacuum becomes the new limitation. The solution would be to either add more vacuums or relocate the vacuum procedure to the finish area.
Before you decide to invest in new equipment, ask yourself the following questions:
• Would this new piece of equipment help make more money by increasing throughput? If productivity doesn’t increase, the new piece of equipment is an unnecessary expense.
• Would this new piece of equipment increase throughput while simultaneously reducing both inventory and operational expense?
• If you take advantage of all the features and benefits the new piece of equipment offers, what is the return on investment? Please note that return on investment could be tangible or intangible.
• Adding a new piece of equipment that increases productivity is not an expense, it is and investment.
GOOD BUSINESS PRACTICE
To be continually successful in business, one must meet the demand. Although this might seem obvious and simple, it can be quite tricky. At a glance, it may seem good to have long waits for your business because it means you have so much business coming in that you can’t keep up with the demand. Although it may appear that your business is doing well, this is counter-productive to building a long-term successful business. It is possible that these long waits will last for a while but soon the customers will get tired of this situation and disappear.
The long wait may give the misconception that you are making a lot of money and gives other entrepreneurs the opportunity to open up similar operations in your area. People hate to wait! If another store, which sells the same products or services as yours opens across the street from you, many customers will go there because it doesn’t have the long wait. This will take part of your business because you were not innovative enough and couldn’t keep up with demand.
AJ Rassamni, has more than 30 years’ experience in the car wash business. AJ is a speaker, consultant, and author of two books written specifically for the car wash industry, Increase Business 30% in 30 Days and Dirty Cars Filthy Rich. AJ helps car wash owners achieve amazing success by advising how to innovate and automate their operations to significantly increase profit. AJ is the CEO of an innovative technology company, Vimery, whose sole purpose is to create customized apps that automate the marketing strategy of a business to increase referrals, dollar per transaction, and revenue. You can contact AJ via e-mail at email@example.com or text (559) 284-1919.