MY INSIGHT OF THE WEEK – Exponential growth
When Demand exceeds Supply, the first thing to do normally, is to look for the supply bottleneck. But is that always the case?
Firstly, what do I mean by a “bottleneck?” A bottleneck is simply any resource where the demand that the system is placing on that resource, exceeds the available capacity of that resource.
Bottleneck: Where the demand exceeds the available capacity
When you have a Supply bottleneck, there are a number of simple strategies to increase the capacity of the bottleneck.
1. Stop “over-production” and working on low-priority work.
Ensure you are not wasting limited capacity producing something, or working on something (or someone) that is not needed, or at least not needed now.
What other strategies you use to try to better exploit the available capacity will depend on:
A) What else is causing most of the avoidable capacity losses and
B) What can be done quickly and with relatively low cost.
This can include making sure the bottleneck resource is never starved or blocked, improving yield so it is not producing scrap, and reducing unplanned or planned downtime. There is almost always a way to speed up work without sacrificing quality.
But what if the sum of the above is not enough to ensure the resource can now meet the demand? Then it is time to increase your bottleneck resource.
2. Elevate your capacity
There are two special cases that require different elevation strategies.
A) Multiple Bottlenecks
One such case, is where there is more than one resource that has less capacity than required to meet the demand the system is placing on it. Such systems can, and often do, result in chaos conditions.
Due to internal de-bottlenecking methods, this has become much more common than it should be. I’ll share more about these type of systems and supply chains in a future post.
B) Exponential Demand
The second case is where the demand not only exceeds the supply, but where the demand is growing exponentially.
The most relevant case of this right now is the COVID-19 pandemic. Health Care systems are facing exponentially increasing demand that is surpassing their available capacity.
COVID-19: An exponential bottleneck for Health Care Systems
So, what should you do in such a case? You should not only look for the bottleneck and apply all the strategies described above to buy more time, but you really should start looking for more bottles!
In 2013, I was asked to present a keynote at an EU sponsored conference on Public Sector Effectiveness in Lithuania on this second case. In this short video clip from my keynote I shared:
A) what happens when demand starts exceeding the supply capacity of the health system,
B) why true prosperity and resilience does not come from economic growth, but rather from building surplus and
C) a parable that shows why, when you face exponential growth in demand….you better start looking for more bottles!
So when you’re facing a bottleneck and situations like COVID-19, start by first making sure you’re not wasting your scarcest resource on unnecessary tasks. If that’s not enough, look for ways to improve your capacity. In cases where the demand is increasing exponentially don’t forget the advice I shared in my video!
If you want to watch my full keynote speech or are interested in similar content, check out my Youtube channel!