Bottleneck

AAA

DEFINITION of 'Bottleneck'

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. End To End

    A term used in many business arenas referring to the beginning ...
  2. Logistics

    The overall management of the way resources are obtained, stored ...
  3. Just In Time - JIT

    An inventory strategy companies employ to increase efficiency ...
  4. Supply Chain Management - SCM

    Supply chain management is the streamlining of a business' supply-side ...
  5. Supply Chain

    The network created amongst different companies producing, handling ...
  6. Channel

    1. The system of intermediaries between the producers, suppliers, ...
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Markets

    Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.
  3. Investing Basics

    Breaking Down Optimal Capital Structure

    An optimal capital structure shows the best balance of debt to equity a company can have in order to minimize its cost of capital.
  4. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  5. Investing Basics

    What's a Price-Taker?

    Price-taker is an economic term describing a market participant who has no effect on overall market activity.
  6. Economics

    Explaining Replacement Cost

    The replacement cost is the cost you’d have to pay to replace an asset with a similar asset at the present time and value.
  7. Term

    What are Articles of Association?

    Articles of association are a document that specifies the regulations for a company’s operations.
  8. Investing Basics

    What Does Window Dressing Mean?

    Window dressing is the actions taken close to the end of a reporting period by managers to try and make their financial numbers look better.
  9. Economics

    What Does Business-to-Business Mean?

    The term business-to-business refers to transactions or communication that takes place between two or more businesses.
  10. Economics

    What are Barriers to Entry?

    A barrier to entry is any obstacle that restricts or impedes a company’s efforts to enter an industry.
RELATED FAQS
  1. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  2. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  3. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  4. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  5. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>
  6. At what levels are core competencies required for businesses operating in the primary ...

    Core competencies help businesses understand their best abilities to perform in the market. Primary sector businesses mine ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!