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Identifying and resolving bottlenecks before they occur can save your operation time, money, and labor. This allows you to focus on providing quality service to your customers and an improved work life for your employees. But before you can resolve a bottleneck, you must be able to identify one. 

What Is a Supply Chain Bottleneck and Why Do Bottlenecks Occur? 

“A supply chain bottleneck occurs when one part of the operation consistently limits the flow of goods or information, constraining performance across the entire network.” 

Supply Chain Bottlenecks: Where They Pop Up and How To Address Them by Eden Shulman for SPS Commerce 

Bottlenecks can occur for a variety of reasons, and why and how bottlenecks occur can vary between organizations. Bottlenecks can be caused by both external and internal issues. For example, the 2020 global COVID-19 pandemic amplified issues with global supply chain systems that had existed before the pandemic. This led to multiple industries experiencing near-crippling bottlenecks, with only 2% of companies being prepared to navigate a pandemic-level event.  

More recent world events, such as the closure of the Strait of Hormuz, showed us how many bottlenecks and related issues can butterfly into a predicament. Many carriers and shippers were unable to reroute shipping vessels right away due to the challenges of navigating changing legal and political landscapes, exploring and establishing new transportation routes, and restructuring company operations to accommodate new schedules and deadlines. Ports nearby reported congestion levels up to 100% in the immediate period after the Strait’s closure as companies debated how to direct their ships. 

While external issues like the COVID-19 pandemic and Strait of Hormuz closure can force businesses into bottlenecks, they can also expose pre-existing bottlenecks that can be otherwise easy to ignore: 

• Outdated software or systems that technically work but that cause employees to take twice as long to complete even simple tasks.  

• The singular employee in a department suddenly gets handed a pile of paperwork to process, when they’re already expected to handle the work of three people.  

• Limited production capacities prevent your company from taking advantage of a sudden increase in customer demand. 

The issues like the ones presented above may be easy to overlook for a while, but these issues eventually build up with time, until they reach a critical point.  

Interesting Insight: Part of what made the bottleneck around the Strait of Hormuz so difficult was the insurance fire storm that arose.  

“By March 5th, protection and indemnity insurance—the essential cover that ship owners need to operate commercially—had been withdrawn for vessels transiting the strait…” 

The Strait of Hormuz Crisis: What It Means for Shipping Routes and Lead Times by Christine Odar for The Africa Logistics 

Once the insurance industry was no longer willing to provide coverage to companies, the Strait effectively became unusable because of the potential costs and risks associated with passage. 

Common Types of Bottlenecks 

In the previous section, we identified the reasons for which supply chain bottlenecks can occur. So, let’s talk about the actual issues, like how these bottlenecks can appear and how they can be resolved or mitigated. We’ll be focusing on three key areas:  

• Bottlenecks that arise when working with business partners 

• Bottlenecks that can occur in physical spaces such as warehouses 

• Bottlenecks that happen when using, reading, or otherwise processing data 

Bottlenecks with Business Partners 

Potential Issue: Poor communication systems 

This may result in missed commitments, accidental misinformation or miscommunication between parties, and frustration with product or service integration. 

Solution: Consider how your operation communicates with your business partners and how the information is stored. Focus on centralizing communication to either one of your team members or to one method (such as email). This centralization of information should also be applied to data, documentation, and files related to your business partner. Having clear channels of communication and information can help alleviate these issues. 

Potential Issue: Continuous struggles with capacity and growth  

 This may show up as issues with providing the original agreed-upon service or product. If you’re using a third-party digital platform like a website, you may have issues with the host company not being able to support increasing amounts of data or certain QoL features. 

Solution: Over time, the needs of your company will change, and your business partners should change to match those needs as well. If you notice your business partner has been struggling to meet those needs, it may be time to reevaluate your business relationship. You might want to consider reviewing additional services they offer or consider switching to a new partner entirely if needed.  

Bottlenecks with Physical Spaces 

Potential Issue: Reduced efficiency and struggles to meet demand fluctuations 

In physical spaces such as warehouses, factories, or processing facilities like docks; bottlenecks resulting in reduced efficiency can often occur. This can be caused by old, outdated, or poorly maintained equipment that breaks down and leaves workers unable to work. Inefficient building layouts can lead to physical bottlenecks that slow down transportation or production of goods. Improper employee training can lead to relatively simple tasks taking longer than expected. 

Solution: Evaluate where issues are appearing in your physical spaces. Retrace the steps that must happen BEFORE the bottleneck occurs and consider if something upstream is impacting where the issue is occurring. 

Potential Issue: Delayed receiving, packaging, and shipping 

As thousands, if not millions, of items are processed every day, even a small a back up or delaying in moving items can cause massive headaches. Long processing times, poor inventory management systems, or less-than-stellar shift planning can cause massive ripples across an entire operation. 

Solution: Reevaluate your current policies and procedures, considering how these can be streamlined while still getting the important information. Review how your inventory system works with the rest of your operation. Reconsider planning shift schedules to accommodate peak work times throughout the day. 

Bottlenecks with Data and Workflows 

Potential Issue: Struggles with data management, storage, and access  

This may affect your team’s ability to use different software products or increase the time it takes to complete different processes. Uncentralized data can be difficult to track down or access, making it harder to reference that information when tracking statistics about your business’ operation over time. 

Solution: Focus on centralizing data into one location and develop a consistent way in which it is stored (like how libraries store books). Examine the processes in which data is needed, accessed, or otherwise used. Consider the way your team works and how you can work together to streamline or automate certain processes. 

Potential Issue: Inadequate forecasting, management, or analytical software 

Software issues can show up in various ways. This can be unreliable software that often crashes, doesn’t work, or presents data incorrectly. Poorly designed software can make procedures harder to navigate and use. 

Solution: Compare the current software products your team is using. If the software doesn’t work, increases process time, or no longer fits your team’s needs, it may be time to consider a change. This could involve switching to a new product or discussing with the provider how the system could be used more effectively. 

Conclusion 

Learning what bottlenecks are is just the first step. Understanding how symptoms caused by bottlenecks appear in your operation allows you to identify the root cause of these issues and resolve them quickly. Adapting and working to manage bottlenecks as they arise is what builds your business’s resilience to handle similar issues in the future. Identify some of your own bottlenecks? Reach out to our warehouse experts to audit your facility and workflows.