Platt Perspective on Business and Technology

Building a business for resilience 4 – building management for better identifying and resolving bottlenecks 3

Posted in strategy and planning by Timothy Platt on September 11, 2015

This is my fourth installment to a series on building flexibility and resiliency into a business in its routine day-to-day decisions and follow-through, so it can more adaptively anticipate and respond to an ongoing low-level but with time, significant flow of ongoing change and its cumulative consequences, that every business faces in its normal course of operation (see Business Strategy and Operations – 3, postings 542 and loosely following for Parts 1-3.)

I conceptually divided all business bottlenecks in Part 3, as falling into two general categories:

• Outcomes-defined bottlenecks, which are identified in terms of adverse outcomes and consequences realized, and
• Process-defined bottlenecks, which are identified in terms of business processes that hold potential for creating adverse outcomes and consequences.

Outcomes-defined bottlenecks are, as noted in Part 3, almost always immediate-need challenges that come into focus as issues when they arise as problems and even as crises. They are almost always addressed reactively and usually on more of an ad hoc basis as they arise. And they can be turned into learning curve opportunities.

• Process-defined bottlenecks are proactively addressed challenges, and by their very nature are more systematically managed. These are bottleneck possibilities that are prepared for and both to make these particular challenges less likely, and to help ensure that they will be less severe in impact and of shorter duration if they do occur.

An outcomes-defined bottleneck can, as just noted be learned from in which case review of what has just happened can lead to process review, reconsideration and improvements. What begins as an outcomes-defined bottleneck can be turned into a process defined one. In this case, both the bottleneck itself that had just occurred, and whatever more ad hoc approach had been arrived at for addressing it, would be thought through, and with a goal of both identifying warning signs that this particular challenge might arise again, and for better, more systematically addressing it if it does.

And I concluded Part 3, noting that I would continue its discussion here with a focus on:

• Process-defined bottlenecks and business strategy and planning, and on making ongoing normative business operations and strategy implementation more effective.
• And as a part of that, I stated that I would discuss bottlenecks in terms of where they arise: inside of or outside of an impacted-upon business, or both.

I begin that with this second bullet point and by noting that my retail store working example from Part 2 arose entirely within the store in question. This arose entirely from that store management’s decisions as to how many hands-on clerks and cashiers to have available and working at any given time, and on how they allocated their personnel in meeting business, and I add customer needs. Let’s consider a more externally arising bottleneck here, and for that, let’s consider that retail store’s supply chain partners, and their inventory suppliers in particular.

As one consideration of my Part 2 example, I posited a possible bottleneck arising where the store has inventory on hand in the back, but has difficulty moving it into the storefront to stock its shelves. I turn here to consider what at least causally is a very different scenario, but that has the same basic outcome in not being able to effectively keep the shelves stocked: delays in delivery of requested and purchased inventory to the store itself.

Essentially all of the inventory needed is already available to the store in my Part 2 variation on this problem. As a result, this problem and its resolution, and efforts made to prevent its recurrence are all essentially entirely controllable, at least in principle, by that store’s management in place. If this business is in a competitive bind and there is an overriding need to keep personnel costs to a minimum, in order for the store to remain profitable, then the types of staffing allocation challenges cited in Part 2 might be all but impossible to entirely avoid. And key staff members can suddenly and unexpectedly call in sick or otherwise become unavailable, requiring a less than ideal reallocation of staff that is available to meet all immediate task completion needs. But in that basic scenario, and I add for most internally arising bottlenecks in general, the business itself and its managers and leaders are in a stronger position to resolve them or to prevent these bottlenecks from arising, and even long term as resolvable process-defined bottlenecks.

• The situation here can be very different when bottlenecks arise outside of the business. And the more outside of a business a bottleneck arises, the more outside of control it can be for any affected business.

This calls for a very different type of due diligence and it calls for a wider range of proactive flexibility if a business is to avoid or limit impact realized. Let’s consider some of the possibilities here, for a more externally arising bottleneck in inventory delivery as a working example:

• How reliable is an inventory suppler, as a basic rule?
• Are they seasonally or otherwise predictably going to be challenged in meeting their business-to-business customer needs?
• Would it make sense to, or even be possible to purchase more of the stock keeping unit (SKU) items in advance of immediate need that they provide, that could be held in in-store stock to buffer any delays or inconsistencies in their delivery of new inventory?

Unexpected challenges can always arise. I just cited as a variation on this as an internally arising problem, a situation where one or possibly more key employees call in sick and at the last minute. A manufacturer can find itself facing a critical shortage of a raw material or preassembled part that they purchase, and need in order to complete production of the items that their business customers would purchase from them, and with all of the ripple effects that can cause. A delivery truck can crash and with delays in delivery of its in-transit inventory or even with complete loss of those goods.

This is where contractual agreements with protective terms of cost and delivery can play a key buffering role, and this is also a place where business insurance policies can play a role, and at least for select types of possible business interruption. And turning back to Part 1 of this series, this is where it becomes necessary to build the flexibility into a business, required to support its processes breaking down gracefully, with fallback options and alternatives when problems do arise.

As a final thought for this installment, I cited bottlenecks that arise inside of or outside of an impacted-upon business, “or both”, above. But I have taken a more either/or approach to discussing these challenges up to here.

• The “both” of that, in fact usually arises whenever a bottleneck does, and even when that event at least initially appears to be fully of outside origin and cause. This is because after the fact analysis usually reveals at least one process or process step in all involved actors: an outside impacted upon business included, that could be improved upon to reduce vulnerability of a recurrence, or at the very least reduce severity of impact.
• I cited as a working example, above, failure of a supplying business to deliver agreed to inventory on time. A receiving business that is hit with that challenge needs to reconsider precisely how just-in-time it can be in its inventory management as a means of reducing capital held in the form of unsold goods.
• So bottlenecks can be primarily internal or external to a business in source, but I emphasize the word “primarily” there. Both types as general categories are at least in principle always subject to remediative change on the part of businesses experiencing them. And this means they always have a role to play in causing them, causing their severity, or both. And their process and decision points where this holds, are points in those businesses where they can profitably make improvements and even when potential bottlenecks do arise that at least functionally initiate outside of themselves.

I am going to turn in my next installment to consider business growth and how this can lead to the emergence of new types of challenge, bottlenecks included. Meanwhile, you can find this and related postings at Business Strategy and Operations – 3 and also at Page 1 and Page 2 of that directory.

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