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Success often hurts, and even mortally wounds

Think about driving on a crowded highway. Suddenly, the traffic slows to a near stop, then starts again, then slows again, all for no apparent reason. In highway engineering, these are called shock waves. They occur when the traffic load approaches highway capacity. At this point, the highway "changes states," and rapidly loses its effective capacity.

In distribution, managers sometimes encounter "full-warehouse syndrome." When a distribution center approaches capacity, it changes in fundamental ways. After a certain point, it becomes very difficult to find things and to maneuver around the facility. Cushions of time, space, labor, and communication that are critical to smooth operations become too small as activity approaches capacity. Just like the highway, the warehouse's effective capacity plunges rapidly.

Most business processes, and associated costs, have this two-state nature. They behave more or less as expected up to a point; then they explode. In the former state, they are controllable with ordinary business measures; in the latter, they look unmanageable using familiar techniques. Nearly all cost models ignore this fact. Generally, the key management action is to analyze where the state changes, causing costs to explode, and to find ways to keep the throughput below this point, or to figure out a way to manage the new state.