The Bottleneck Decision
A workshop makes a single product on three stations in series: cutting (capacity 120 units/day), assembly (capacity 90 units/day) and finishing (capacity 100 units/day). Demand is 95 units/day. Assembly currently runs two shifts and is the constraint. The manager proposes buying a second finishing booth for $60,000 to raise finishing capacity to 160 units/day, arguing that finishing is 'close to the limit'. Each unit sells for $40 with a material cost of $15. The workshop operates 250 days a year. Changeover between product variants on assembly takes 2 hours and happens twice a day, during which assembly produces nothing.
1. Calculate the current throughput and evaluate whether the finishing booth investment will increase output.
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Current capacity is set by the bottleneck, assembly: 90 units/day. Cutting (120) and finishing (100) both exceed it, so neither is limiting.
Effect of the booth. Raising finishing from 100 to 160 changes nothing, because assembly still caps output at 90 units/day. Throughput stays at 90, below the 95 demand. The $60,000 buys capacity that cannot be used.
Throughput economics. Contribution per unit = $40 − $15 = $25. Current output 90 × 250 days = 22,500 units/year, contribution $562,500. If assembly could reach 95/day, output would be 23,750 units, contribution $593,750 - an extra $31,250/year. The booth's $60,000 would take about two years to repay even if it worked, and it does not work.
Changeover loss. Two changeovers of 2 hours each remove 4 hours/day from assembly. If assembly runs, say, 16 hours across two shifts, that is 25% of assembly time lost - a major hidden constraint. Recovering even part of this is worth more than the booth.
Conclusion: reject the booth as proposed; the constraint is assembly and its changeover time.
2. Recommend how to raise output toward the 95-unit demand, with reasoning about the constraint.
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Apply constraint-focused thinking: improve the bottleneck before adding capacity elsewhere.
1. Reduce assembly changeover loss. Two 2-hour changeovers per day cost 4 hours. Actions: sequence variants to minimise cleaning, use quick-release fixtures, prepare kits and tooling before the line stops, and move external setup tasks off the machine. Cutting changeover from 2 hours to 1 hour each recovers 2 hours/day of assembly time - potentially several units per day at no capital cost.
2. Protect the bottleneck from starvation. Ensure cutting (120/day) always feeds assembly; buffer WIP ahead of assembly so a cutting delay does not idle the constraint. Never let assembly wait for parts.
3. Offload work from assembly. Move simple pre-assembly tasks to cutting or finishing operators if skills allow, so assembly only does what it must.
4. Only then add assembly capacity. If demand of 95/day still cannot be met after changeover reduction, add a third shift or a second assembly cell - that is where capital belongs.
5. Re-check finishing after the gain. If assembly rises above 100/day, finishing becomes the new constraint; only then consider the booth. At 95/day demand, finishing at 100 is adequate.
3. The manager argues the booth provides 'insurance' against finishing breakdowns. How would you respond?
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Insurance has value, but it should be proportionate and aimed at the real risk.
Quantify the risk. Finishing has 100 units/day capacity against 90 units/day throughput - a 10-unit buffer, about 11% headroom. A breakdown shorter than the buffer can be absorbed by working slightly ahead. The exposure is only the downtime beyond that buffer.
Compare costs. A $60,000 booth is a large fixed cost to cover occasional downtime. Cheaper mitigations: preventive maintenance on the existing booth, a spare critical component (heater, conveyor motor), cross-training an operator, or a small buffer stock of finished units. These address breakdown risk at a fraction of the cost.
Check the logic. If finishing breaks down, the line stops anyway once the buffer is used - a second booth only helps if it is staffed and maintained, which adds running cost. And because assembly is the constraint, finishing breakdowns rarely limit annual output unless they are frequent and long.
Response. I would agree to protect finishing with maintenance and a spare-parts kit, and revisit a second booth only if data show finishing downtime actually reduces output below 90/day. The decision should follow evidence, not a general feeling of being 'close to the limit'.