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What Happens When Your Production Rate Exceeds Market Demand?

May 26, 2017 by David Crankshaw

The concept of a system in the Theory of Constraints is analogous to a chain with one weakest link. If you pull from both ends of the chain, one link, and one link only, will eventually snap. In the chain, the weakest link that snapped was the constraint.

If you can strengthen the weakest link in a chain, then the chain can accept a greater load. Similarly, if you strengthen the weakest step in a process, then the process as a whole is strengthened and the load it can carry is improved.

What happens when you strengthen one of the links in the chain? Then another link becomes the weakest link. Similarly, if you improve the capacity of the constraint in a process, then the constraint moves to another stage in the process.

Look at the example below of a simple process in a dental laboratory from William Dettmer’s Breaking the Constraints to World-Class Performance. Each stage in the process can produce a certain number of units each day.

Can you see the step in the process that produces the lowest number of units? At 15 units per day, the Porcelain step produces the fewest units. Therefore Step E is the constraint in this simple process. Even though the market demand is 35 units per day, this company can only manufacture 15 units per day. If it accepts more than 15 orders per day, it won’t be able to deliver its orders on time.

What if the dental lab focuses on the constraint and doubles the capacity of Step E to 30 units per day? In that case the constraint would move to Step B which produces 25 units per day. Step B is now the new constraint. The overall production capacity of the process has moved from 15 units per day to 25 units per day.

The market demand remains 35 units per day. At 25 units per day the lab is still producing less than the number of potential orders from customers.

Now what if the lab continues to improve the production capacity at each of the internal constraints to the point where it can produce more than the market demand of 35 units per day? Now where does the constraint lie?

The constraint is no longer in your system; it lies in an external source, the market. About 70% of companies find themselves in the position where they have excess capacity and the market demand is their constraint.

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