Bottleneck

Loading the player...

What is a 'Bottleneck'

A bottleneck is a point of congestion in a system that occurs when workloads arrive at a given point more quickly than that point can handle them. The inefficiencies brought about by the bottleneck often create a queue and a longer overall cycle time.

BREAKING DOWN 'Bottleneck'

The term bottleneck refers to the shape of a bottle and the fact that the bottle's neck is the narrowest point, and thus the most likely place for congestion to occur, slowing down the flow of liquid from the bottle. The term is used to describe points of congestion in everything from computer networks to a factory assembly line.

For example, a company whose product is in high demand may see its shipping department receive purchase orders more quickly than the products can be shipped out, thus causing a bottleneck.

RELATED TERMS
  1. Congestion Pricing

    A method used to reduce traffic by charging a fee to road users ...
  2. Peak Pricing

    A form of congestion pricing where customers pay an additional ...
  3. Marginal Utility

    The additional satisfaction a consumer gains from consuming one ...
  4. Inefficient Portfolio

    An inefficient portfolio is an investment portfolio that delivers ...
  5. Capital Budgeting

    The process in which a business determines whether projects such ...
  6. Basing Point

    A specific location used in the basing point pricing system. ...
Related Articles
  1. Markets

    What is a Bottleneck?

    A bottleneck occurs in business when workloads reach a certain point faster than that point can handle them.
  2. Personal Finance

    7 Tips For Avoiding Shipping Costs When Shopping Online

    Before clicking on that purchase, make sure you're getting the best deal possible.
  3. Personal Finance

    Is Free Shipping Worth It?

    Should you buy more just so you can save on shipping?
  4. Markets

    How Does Coca-Cola Actually Make Money? (KO)

    Learn how Coca-Cola makes money with a unique business model that includes company owned and franchised bottlers around the globe.
  5. Markets

    Major Companies That Lose Money On Shipping (AMZN)

    We look at some of the big companies in the home delivery business that have high shipping costs and how they mitigate this.
  6. Markets

    For Coke, Going Small Is Good For Business (KO)

    Coca-Cola's small format bottles and cans have led to an increase in volume sold, despite their much higher price.
  7. Markets

    5 Economic Concepts Consumers Need To Know

    A solid understanding of economics helps build a strong foundation in almost every area of life.
  8. Markets

    Bulk Shipping Companies Struggle As Markets Soften

    The "soft" dry bulk shipping market that confronts shipping companies is a result of lower demand from China, and an excessive amount of bulk ships.
  9. ETFs & Mutual Funds

    Are Shipping Stocks Due For A Rally?

    Several bullish catalysts are lining up in favor of shipping companies. Their current cheapness may not last for long, though, so the time to buy is now.
  10. Markets

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.
RELATED FAQS
  1. Which accounting cycle is best for my business?

    Read about the different types and interpretations of accounting cycles, and why all businesses should modify the generic ... Read Answer >>
  2. How can Economic Order Quantity be used to lower inventory costs?

    Learn what economic order quantity is, how it is calculated and how to find the optimal economic order quantity to minimize ... Read Answer >>
  3. How do economists and psychologists calculate diminishing marginal utility differently?

    Find out why disagreements about the validity of the law of diminishing marginal utility usually boil down to arguments about ... Read Answer >>
  4. What kinds of costs are included in Free on Board (FOB) shipping?

    Find out about free on board shipping, the obligations of parties involved and the costs parties must assume in free on board ... Read Answer >>
  5. Why is an accounting cycle necessary?

    Find out why it is important for a company to identify and follow an accounting cycle, and how proper accounting helps the ... Read Answer >>
  6. What does the law of diminishing marginal utility explain?

    Learn about some of the important economic insights that can be derived from applications of the law of diminishing marginal ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center