Bottlenecks Theory vs. Theory of Constraints: Are They the Same Thing?

If you’ve spent any time around operations or supply chain teams, you’ve probably heard someone say, “We need to fix the bottleneck.”

And they’re not wrong.

But here’s where things get interesting: fixing a bottleneck isn’t the same thing as applying the Theory of Constraints (TOC) even though the two ideas are closely related.

We have already spoken about Theory of Constraints in this blog:

- Addressing bottlenecks

- Drum-buffer-rope

- The Goal

But it is worth explaining in detail the differences between Bottlenecks Theory and Theory of Constraints, but first: What’s a Bottleneck?

A bottleneck is simply the slowest step in a process, the part that limits how much your system can produce.

Imagine this:

• Production can make 1,000 units per day

• Packaging can only handle 600 units per day

Packaging is the bottleneck. It doesn’t matter how fast production runs, your total output is capped at 600 units.

Bottleneck theory focuses on identifying that slow step and improving it.

You might add labor, reduce downtime, upgrade equipment etc. The goal is to increase flow by fixing the slowest point.

Now: What Is Theory of Constraints (TOC)?

The Theory of Constraints, developed by Eliyahu M. Goldratt, takes this idea much further.

TOC says: Every system has one constraint that determines its overall performance, and here’s the key that constraint isn’t always a machine, it could be a policy, a forecasting method, a batch size rule etc.

TOC isn’t just about finding the slow step. It’s about managing the entire organization around whatever is currently limiting throughput and profit.

For example, imagine you increase manufacturing capacity, but sales can’t sell more product. The constraint was never production. It was demand.

Optimizing production in that case just creates more inventory.

TOC forces you to look at the whole system before investing time and money.
 
Fixing bottlenecks is good operations management, managing constraints is smart business strategy. One improves a step. The other improves the system, and in today’s volatile supply chain environment, systems thinking wins.

 

Antifragility: The Next Evolution of Supply Chain Design

For decades, supply chains have been optimized around efficiency.

After repeated shocks, from natural disasters to trade wars, to COVID-19, the focus shifted to resilience. Today, organizations are exploring a more radical idea: antifragility.

Coined by Nassim Nicholas Taleb, antifragility describes systems that benefit from disorder. While fragile systems break under stress and resilient systems merely survive it, antifragile systems improve because of volatility. Applied to supply chains, this concept challenges many long-standing assumptions about cost, control, and risk.

A resilient supply chain is designed to absorb shocks and return to its original state. It relies on buffers, backup suppliers, safety stock, and recovery plans. These are necessary and valuable but they still assume that disruption is an exception.

Antifragile supply chains start from different premises: disruption is normal.

Rather than asking, “How do we recover faster?”, antifragile systems ask: “How do we learn faster and become stronger each time disruption occurs?”

This subtle shift has profound implications.

Antifragility does not mean chaos, nor does it mean abandoning efficiency altogether. Instead, it involves intentional design choices that allow learning, adaptation, and optionality.

Key characteristics include:

1. Redundancy with purpose

Traditional supply chains view redundancy as waste. Antifragile networks treat redundancy as a strategic asset, multiple suppliers, routes, and production options that can be tested under stress to reveal which perform best.

2. Small, frequent stressors

Rather than avoiding failure at all costs, antifragile organizations allow small failures, missed forecasts, supplier switches, pilot disruptions, to surface weaknesses early, before catastrophic breakdowns occur.

3. Optionality over optimization

Instead of committing fully to the lowest-cost supplier or single global network, companies maintain options: regional sourcing, flexible contracts, modular production, and postponement strategies.

Despite its appeal, antifragility remains uncommon in supply chain design.

One reason is measurement. Traditional KPIs; cost, service level, asset utilization etc reward stability and penalize redundancy. Antifragility delivers value over time, often invisibly, until a major shock reveals its advantage.

Another barrier is culture. Antifragility requires leaders to tolerate controlled inefficiency, empower local decision-making, and accept that not all failures should be eliminated only the catastrophic ones.

Finally, antifragility challenges the legacy of lean thinking. While lean principles remain powerful, applying them without regard for volatility can unintentionally increase fragility at the network level.

Global supply chains are unlikely to become calmer. Climate risk, geopolitical fragmentation, regulatory divergence, and technological disruption are increasing variability, not reducing it.

In this environment, the question is no longer whether supply chains should be resilient but whether they should be designed to evolve through stress.

The most competitive supply chains of the future may not be the most efficient ones but the ones that grow stronger every time the world changes.

The New Geography of Supply Chains: Nearshoring, Friendshoring & Resilience

For decades, global supply chains were optimized for one primary goal: cost efficiency.

Companies chased low-cost labor, consolidated suppliers, and stretched production networks across continents. That model delivered scale and savings but it also created fragility.

Recent years have fundamentally changed how organizations think about supply chain geography. Trade tensions, geopolitical conflicts, climate disruptions, pandemics, and transportation bottlenecks have exposed the risks of overly long and concentrated supply chains. As a result, businesses are rewriting the global supply chain map, prioritizing nearshoring, friendshoring, and resilience over pure cost optimization.

From Globalization to Regionalization

The shift we are witnessing is not the end of globalization, but a move toward regionalized supply chains. Instead of relying on a single distant manufacturing hub, companies are spreading operations across multiple regions closer to end markets.

This new approach reduces dependency on any one country or trade lane and allows companies to respond faster to demand changes. Shorter supply lines mean lower transportation risk, reduced lead times, and greater flexibility critical advantages in an era of constant disruption.

Nearshoring: Bringing Production Closer to Home

Nearshoring involves relocating manufacturing or sourcing closer to a company’s primary markets. For North American firms, this often means moving production from Asia to Mexico or other parts of Latin America. In Europe, nearshoring may involve Eastern Europe, Turkey, or North Africa.

The appeal of nearshoring goes beyond geography. Companies benefit from:

• Faster replenishment cycles

• Reduced transportation costs and emissions

• Improved collaboration and quality control

• Lower exposure to port congestion and global shipping volatility

While labor costs may be higher than offshore alternatives, many organizations find that the total cost of ownership including risk, inventory, and responsiveness favors nearshoring in the long run.

Friendshoring: Trust as a Strategic Asset

Friendshoring takes the idea a step further by prioritizing sourcing from countries with strong political, economic, and regulatory alignment. The goal is not just proximity, but trust.

In a world of export controls, sanctions, and sudden policy shifts, companies want suppliers located in jurisdictions where trade relationships are stable and predictable. Friendshoring reduces the risk of supply disruptions caused by geopolitical tensions and helps organizations stay compliant with evolving regulations.

This approach is especially relevant for critical industries such as semiconductors, pharmaceuticals, energy, and defense, where supply continuity and security are essential.

The Cost vs. Resilience Trade-Off

One of the biggest misconceptions is that resilience and cost efficiency are mutually exclusive. In reality, disruptions are expensive. Factory shutdowns, stockouts, expedited freight, and lost customers often cost far more than incremental increases in production expenses.

By redesigning supply networks with resilience in mind, companies can stabilize operations, protect revenue, and improve customer trust even if unit costs rise slightly. Over time, many organizations find that resilience delivers a strong return on investment.

Modern supply chain technology is a key enabler of this shift. Digital twins, scenario modeling, AI-driven risk analytics, and real-time visibility platforms allow companies to test different geographic configurations before making large investments.

These tools help leaders answer questions such as:

• What happens if a key supplier goes offline?

• Which regions offer the best balance of cost, risk, and speed?

• How should inventory be positioned across a multi-regional network?

Data-driven insights make it possible to design smarter, more adaptive supply chains without relying on guesswork.

Looking Ahead, the geography of supply chains is being permanently reshaped. Nearshoring and friendshoring are not short-term reactions they are long-term strategic responses to a more volatile world.

Companies that embrace this shift will be better positioned to navigate uncertainty, meet customer expectations, and compete in the years ahead. Those that cling to overly centralized, cost-only models may find themselves increasingly exposed to disruption.

Digital twin: Conecting the digital and real world

The term “digital twin” might sound futuristic, but it’s quickly becoming a practical tool reshaping how operations and supply chains work today.

In simple terms, a digital twin is a virtual replica of a real-world object, system, or process; anything from a single machine to an entire manufacturing network.

Imagine your factory, warehouse, or supply chain recreated in a digital space. This virtual version mirrors what’s happening in real time, thanks to data flowing in from sensors, IoT devices, and business systems. Every movement, transaction, and temperature change can be captured and reflected in the digital twin.

So, what’s the point? The value lies in simulation and insight. A digital twin allows you to experiment and test scenarios without affecting actual operations. You can explore what might happen if a supplier goes offline, if demand spikes unexpectedly, or if a new route could shorten delivery times. Instead of reacting to problems after they occur, you can anticipate and plan for them.

This technology helps organizations make smarter, faster decisions. Maintenance can become predictive instead of reactive. Inventory planning can adjust automatically to real-time demand. Logistics teams can visualize the entire flow of goods and identify inefficiencies before they cause delays.

Ultimately, a digital twin acts as your operation’s virtual brain, continuously learning, adapting, and optimizing. It bridges the gap between the physical and digital worlds, giving supply chain leaders greater visibility, control, and confidence in every decision.

The future of operations isn’t just physical anymore. It’s mirrored, modeled, and improved through digital twins.

 

Balancing OEE with Other Supply Chain KPIs: Navigating the Tradeoffs

In the world of operations, few metrics get as much attention as Overall Equipment Effectiveness (OEE). OEE measures how effectively a manufacturing asset is utilized by combining three factors: availability (uptime), performance (speed vs. ideal cycle time), and quality (good units produced vs. total units).

In simple terms, it’s a snapshot of how close a machine or line is to running at its theoretical maximum potential. Improving OEE is often seen as a direct path to better productivity and lower costs, but like many metrics, focusing on it in isolation can create conflicts with other critical supply chain goals.

For instance, pushing OEE higher often means striving for longer production runs and fewer changeovers. That’s good for machine efficiency, but it can hurt inventory turns and customer responsiveness. A plant that maximizes OEE by producing large batches of a single SKU may end up tying up working capital in excess stock and reducing the ability to adapt to shifting demand. Similarly, prioritizing OEE can clash with on-time delivery if equipment schedules are optimized for efficiency rather than customer requirements.

Another tradeoff emerges with flexibility and innovation. To keep OEE high, operations teams may resist frequent product launches or engineering changes, both of which introduce downtime, lower yields, and slower cycle times. Yet in today’s market, agility and product variety often matter just as much as asset utilization.

So how do you balance these competing priorities? The key is to treat OEE not as an end in itself, but as one piece of a broader performance puzzle. A mature operations strategy aligns OEE with business objectives by:

• Defining the right horizon: Short-term dips in OEE may be acceptable if they support long-term goals like faster customer response or product diversification.
• Using tiered KPIs: Pair OEE with customer-facing measures such as fill rate, lead time, and service level, ensuring that equipment efficiency doesn’t come at the expense of market performance.
• Driving continuous improvement, not perfection: The pursuit of 100% OEE is unrealistic. Instead, focus on targeted improvements that also strengthen supply chain resilience.

In the end, OEE is a powerful tool for uncovering hidden losses and improving operations, but it should never overshadow the broader mission: delivering the right product, at the right time, at the right cost.

Balancing OEE with other KPIs ensures that efficiency gains translate into true supply chain value.

Logistionary: Genchi Genbutsu

Genchi Genbutsu is a core principle of the Toyota Production System that translates to "go and see for yourself."

It emphasizes firsthand observation to understand situations deeply, solve problems accurately, and make informed decisions.

Instead of relying on second hand reports or data alone, leaders and team members are encouraged to go to the actual place where value is created, such as the factory floor, the customer site, or the development environment.

The Genchi Genbutsu approach involves:

• Visiting the gemba: Physically going to the site of the issue or process.

• Observing without assumptions: Understanding the facts directly through observation.

• Engaging with people: Talking to employees, operators, or customers involved.

• Asking “Why?” and using the “5 Whys” technique to get to the root cause.

 
Genchi Genbutsu promotes situational awareness, empathy, and fact-based leadership. It bridges the gap between strategy and execution, ensuring leaders stay grounded in operational realities.

Finally, a word to clarify the difference between Genchi Genbutsu and Gemba; Gemba means "the real place" where work happens and value is created (like a factory floor) Genchi Genbutsu means "go and see for yourself" and emphasizes firsthand observation to understand problems deeply.

Gemba is the location, Genchi Genbutsu is the mindset and method of investigation.

The Largest Courier Companies in the World

Interesting infographic showing by market capitalization the largest courier companies in the world.

It´s no surpirse that the “big three” global couriers, United Parcel Service (UPS), FedEx, and DHL continue to dominate transport services with closer to 70% of market cap.

Having said that, other carriers that operate more regionally have still attained a lot of value, including Japan Post Holdings and China’s S.F. Express and ZTO Express.

The Insane Logistics of Formula 1

If you think Formula 1 races are amazing and the pinnacle of technology applied to sport, you are probably right.

There is no other sport where machinery and components are as crucial to the team success as in Formula 1.

But with twenty-one races across five continents every year, the ten teams that take part on the competition face an astronomical challenge to ensure all what they need to be competitive during the weekend is ready.

Hundreds of pellets and containers travelling around the globe moving enough equipment to ensure the comfort of thousands of workers and the capabilities to assemble and disassemble a racing car every weekend.

We already talked about what happens behind the scenes in the Red Bull air racing competition here, now is time to go even further and watch the logistics miracle that happens in Formula 1!

Enjoy!

Gartner 2023 top 25 Supply Chain companies

Gartner has once more released the results from its annual Global Supply Chain Top 25, identifying leading supply chain organizations, highlighting trends and sharing best practices.

Schneider Electric claimed the top position in the list this year, followed in second place by Cisco Systems, which capped a run of three consecutive years in the top position last year. Colgate-Palmolive, Johnson & Johnson and PepsiCo rounded out the top five positions. Tesla, AB Inbev, GlaxoSmithKline and Dow were the new entrants on the list.

Some interesting moved over the years with companies joining the list and some others being relegated; in these links you can check how the ranking has evolved over the last few years:

2016

2018

2021

Gartner continues to recognize sustained supply chain performance via the “Masters” category, introduced in 2015. To be considered Masters, companies must have attained top-five composite scores for at least seven out of the last 10 years. Amazon, Apple, P&G and Unilever all qualified for the category this year.

Gemba walk

Another term coined in Japan, Gemba means "the actual place", and in operations specifically Gemba usually refers to the shop floor or where the service provider interacts directly with the customer.

This concept was popularised thank to the lean manufacturing methodology, with the idea that problems are mostly visible when going to the “Gemba”, and the best improvement ideas will come from spending time where the actual issue is.

In practical terms it means that whenever there is a problem, senior management and they key decision makers must go to where the problem is to understand its full impact, gathering data from all sources.

Only when the problem has been studied “in situ” the team can go away and start working on a solution.

This concept that may seem trivial and common sense is most times undervalued and decisions to problems are being drafted and executed from the head office and regardless of the specific constraints affecting the shop floor.

You cannot expect different results by sitting in your corner office and only attending KPI meetings., instead, you need to see where the real work happens. You need to do Gemba walks.

The Gemba walk, denote the action of going to see the actual process, understand the work, ask questions, and learn, and is an activity that takes staff to the front lines to look for opportunities and practical shop floor improvement.

There are 3 important elements of this lean manufacturing tool:

1.  Go and see. Take regular walks around the shop floor and be involved in finding wasteful activities.

     2. Ask why. The main objective of a Gemba walk is to explore the value stream in detail and locate its problematic parts through active communication.

     3. Respect people. Keep in mind that a Gemba walk is not a “boss walk” or a pointing fingers exercise. You are not there to judge you are there to collaborate with the team and find problems together.

There are 7 suggested steps to follow when you go to a Gemba walk:

1. Pick a theme. This will help you focus all your efforts and be effective. There are different themes you may want to explore, such as productivity, cost efficiency, safety and etc. In order to be as precise as possible, you will also need to prepare a list of questions you are going to ask.

2. Prepare your team. The team that will be observed should be prepared for what is going to happen and have a clear understanding that the Gemba walk is a common process where the final destination is continuous improvement and not an opportunity to excrutinise their job competencies.

3. Linked to the above, focus on the process, not on people. You need to remember that the main purpose is to observe, understand, and improve the process not to evaluate your teams performance.

4. Be where the value stream is. Following the value chain will give you the best opportunities to identify areas with a high potential for waste activities.

5. Record your observations. Write down everything that grabs your attention. In some cases, you will probably be tempted to offer a solution immediately, but this would be wrong. Leave the analysis for later. You will be much more precise after you have all the facts available.

6. An extra pair of eyes. It may be a good idea to invite a colleague from another department. Someone with totally different daily tasks. People who are less familiar with the processes usually have a fresh perspective and ask different questions that you may never ask.

7. Follow-up. Even if you don’t find anything significant during your Gemba walk, you need to share with the team what you have learned or seen. Otherwise, the team will only have the feeling of being watched. If you are going to take action after the walk, inform the team about the upcoming changes and why they are necessary.

As important as the Gemba walk itself it the post-walk analysis to close the loop. Before you take any actions based on your observations, you will need some time to organize your thoughts and notes.

Conduct a meeting after each Gemba walk that may include participants from different departments. The main purpose is to have as many different points of view as possible to make the best decision.

 

 

Has COVID-19 slowed down our quest for making packaging more sustainable?

2020 was supposed to be the ‘year of sustainability’, building on the momentum of last year where climate action and reducing plastics pollution were at the forefront of discussions.

However, since the outbreak of COVID-19 focus has quite rightly shifted towards overcoming the pandemic.

Most companies have been focussing on ensuring the safety of their staff and customers, managing elevated demand for essential items, and supporting their local communities.

This has mean that the packaging supply chain has had to become more flexible as demand has proven to be unpredictable.

With this in mind, it is not surprising that we have already seen signs that many consumers have rethought their preference for ‘packaging free’ consumption. With hygiene and safety being more prominent in consumers’ minds, some food retailers have gone back to increasing packaging and individually wrapping fruits and vegetables.

Some foodservice chains have also halted use of personal cups because of the risk of contamination, bringing back up the use of disposable paper cups and single use alternatives.

There is a risk that the low oil price may lead to an increase in the use of virgin plastic materials and in some places, single use plastic bags have become widespread rather than reusable ones.

It’s hard to anticipate what the impact of COVID-19 will be on sustainable packaging, but one thing we can say for sure is that in the short term, our behaviours and habits have been transported to the ones we had 10 years ago.

Slow moving inventory...your worst nightmare!

Mid-year review, and slow moving and obsolete stock start coming up in every single meeting…it´s pretty much inevitable; inaccurate forecasts, undersells, overstocks, there can be hundreds of reasons why a sku become a slow moving, and we might explore in deep some of them in future posts, but whatever the reason is, when inventory doesn’t move, the business will incur in associated carrying costs and lose of valuable resources that could be used to invest in your business.

Defining what is “slow moving” is not easy as the criteria will vary from company to company, and what is considered slow moving from some retailers might not be for others, but there is a general rule that can be applied to most companies to define if a reference is slow moving or not; Having stock worth 6 or more months of demand for any given item will indicate that this particular sku is a slow moving.

Now we know what slow moving is, we can focus on the impact that slow moving stock has in our business. From an outside perspective, you can think that slow moving stock shouldn´t be the focus of an organization as “it only has a negative effect on our inventory”, but if we dig a little bit further, we will realize that the impact of slow moving stock affects a business in ways that we never thought about before.

• Interest paid on borrowed money. When inventory doesn't sell, you are incurring more interest charges. 
• Insurance costs derived of inventory on hand. 
• Obsolescence provisions; financial reserve to cover losses, write-offs, etc 
• Storage space of course. 
• Costs incurred when your warehouse is full of slow moving inventory; outside storage costs, build of new facilities, movement of stock from one picking location to other etc.
• Cost of destruction of obsolete stock. 
• Depreciation of the inventory month after month. 
• Time and personnel, including managers, stock keepers, material handlers, cycle counters, planners and controllers.

These are only some of the aspects in which slow moving stock has an impact, therefore the sooner you tackle the “slow movers” the more profitable your business will be.

In future posts I will try to extend this topic and underline the causes and also possible solutions to slow moving inventory.