Total Capacity Management-Optimizing at the Operational, Tactical, and Strategic Levels

347 Pages·1998·23.42 MB·\347

by  The Ima Foundation Far (Author), C. J. McNair (Author), Richard Vangermeersch (Author)

TOTAL

CAPACITY

MANAGEMENT

Optimizing at the

Operational, Tactical,

and Strategic Levels
Taylor & Francis

Taylor &Francis Group
http://taylorandfrancis.com
TOTAL

CAPACITY

MANAGEMENT

Optimizing at the

Operational, Tactical,

and Strategic Levels

C.J. McNair
Richard Vangermeersch
AR II
F~ The IMA Foundation for Applied IWearch, Inc.
T\.. An a/filUm oftht lnsti,_ ofMIINignnmt kcrnmt4nts
0
CRC Press
Taylor & Francis Group
Boca Raton London New York
CRC Press is an imprint of the
Taylor & Francis Group, an informa business
Library of Congress Cataloging·ln·Publlcatlon Data
McNair, Carol Jean.
Total capacity management : optimizing at the operational,
tactical, and strategic levels I CJ. McNair, Richard Vangermccrsch.
p. em.

Includes bibliographical references and index.

ISBN 1-57444-231-7 (alk. paper)

1. Industrial capacity--Management. I. Vangermecrsch, Richard G.
1. II. Title.
HD69.C3M39 1998
658.5-dc21 98-7180
CIP
This book contains information obtained from authentic and highly regarded sources.
Reprinted material is quoted with permission, and sources arc indicated. A wide variety of
references arc listed. Reasonable efforts have been made to publish reliable data and infor­
mation, but the author and the publisher cannot assume responsibility for the validity of all
materials or for the consequences of their usc.
Neither this book nor any part may be reproduced or transmitted in any form or by any
means, electronic or mechanical, including photocopying, microfilming, and recording, or by
any information storage or retrieval system, without prior permission in writing from the
publisher.
The consent of CRC Press LLC docs not extend to copying for general distribution, for
promotion, for creating new worts, or for resale. Specific permission must be obtained in
writing from CRC Press l.LC for such copying.
Direct all inquiries to CRC Press l.LC, 2000 Corporate Blvd., N.W., Boca Raton, Florida
33431.
Trademark Notice: Product or corporate names may be trademarks or registered trade­
marts, and arc used only for identification and explanation, without intent to infringe.
© 1998 by Taylor & Francis Group, LLC
CRC Press is an imprint ofTaylor & Francis Group, an Informa business
No claim to original U.S. Government worts
International Standard Book Number 1-884015-38-7
Ubrary of Congress Card Number 94-46301
THE IMA FoUNDATION FOR APPLIED REsEARcH, INc.
1997-98

TRUSTEES,
Foundation Officers

President Treasurer
James C. Horsch, CMA John F. Pope, CMA, CFM, CPA
Consumers Energy Company IMA Vice President of Finance
Jackson, Michigan The Quantum Group, Inc.
Marina Del Rey, California
Trustees by Virtue of the Bylaws
Keith Bryant, Jr., CMA Clair M. Raubenstine,
IMA President CMA,CPA
Formerly with University of IMAChair
Alabama at Birmingham Coopers & Lybrand, LLP
Birmingham, Alabama Philadelphia, Pennsylvania
John F. Pope, CMA, CFM, CPA Pamela Prinz Stewart
IMA Vice President of Finance IMA President-elect
The Quantum Group, Inc. Robert Half International
Marina Del Rey, California Orlando, Florida
Appointed Trustees
Donald B. Christensen James C. Horsch, CMA
J. C. Penney Insurance Consumers Energy Company
Group, Inc. Jackson, Michigan
Plano, Texas
Robert C. Miller
Paul P. Danesi, Jr. Formerly with Boeing
Texas Instruments, Inc.
Commercial Airplane Group
Attleboro, Massachusetts Seattle, Washington
Henry J. Davis, CMA,
Michael D. Shields
CPA,CIRM
Michigan State University
Dodge-Rockwell Automation
East Lansing, Michigan
Greenville, South Carolina
Sandra M. Denarski, CMA Gary H. Siegel, CPA
Johnson & Johnson DePaul University
New Brunswick, New Jersey Chicago, Illinois
Taylor & Francis

Taylor &Francis Group
http://taylorandfrancis.com
FOREWORD

Practitioners and academics have struggled for a hundred years
to understand, identify. measure, and report capacity. Today, we
still are seeking models that fit our particular environment. Why
is it so difficult to arrive at an approach that is generally ac­
cepted? Mter all, management accountants, financial managers,
and operational managers have a common goal-to eliminate
waste and reduce costs while creating products and services cus­
tomers want to buy. Yet there is lack of consensus when we talk
about unused, excess, and idle capacity. Some say it is good,
some say it is bad.
Now we have the cost accounting view, presented by two
highly respected management accounting researchers. Dr. McNair
has devoted more than 10 years of research to the subject of
capacity while Dr. Vangermeersch, a noted accounting historian,
has traced the literature from inception. Total Capaci~ Manage­
ment is really two books in one. Chapters 1 to 6 and Chapter 11
are on capacity cost management, including a discussion of 12
capacity models, while Chapters 7 to 10 cover the history of the
accounting treatment of capacity. From an historical perspec­
tive, ideas about capacity have come full circle, from a high point
in the 1920s through the "dark ages" of 1953-1978 to a redis­
covery of the relevance of capacity in our day.
FAR's research has already stimulated lively dialogue among
IMA and APICS (American Production and Inventory Control
Society) leaders. IMXs traditional cost world and APICS's op­
erational throughput world need to be aligned. We can accom­
plish this alignment if we take the time to understand varying
Total Capaci!f Management
perspectives. To this end, we encourage the submission of ar­
ticles and letters to IMXs official magazine, ManagementAccount­
ing, addressing differing viewpoints, such as the operational view­
point espoused by APICS, a throughput accounting and con­
straint management viewpoint, and others.
Total Capaci!J Management is truly comprehensive and ranks
as a major work on the subject. For the most benefit, read it in
conjunction with IMXs Statement on ManagementAccounting
4Y, "Measuring the Cost of Capacity" (SMA4Y/$7.50), and Ca­
paci!J Measurement & Improvement: A Manager's Guide to Evaluat­
ing & Optimizing Capaci!J Productivi!J (C2/$35), from CAM-I
(Consortium for Advanced Manufacturing-International).
McNair and Vangermeersch wrote SMA 4Y and conferred with
CAM-I on its book.
To learn more about throughput accounting, refer to Syn­
chronous Management: Profit-Based Manufacturingfor the 21st Cen­
tury, Volumes 1 and 2 (SPECTRUM 3/$65). The authors of this
book define total capacity at a resource as: total capacity =
throughput capacity + protective capacity + excess capacity.
Wasted capacity is lost throughput when nonsynchronous con­
ditions exist. Readers are encouraged to explore capacity issues
from an operational perspective by reading this work.
Publications referenced in this foreword are available from
IMXs Customer Orders &Information Department, (800) 638­
4427, ext. 278. Visit IMXs website, http://www.imanet.org for a
description of each title.
Guidance in the preparation of this monograph was gener­
ously provided by the IMA Project Committee:
Paul P. Danesi, Jr.
Texas Instruments, Inc.
Henry J. Davis, CMA, CPA, CIRM Lou Jones
Dodge/Rockwell Automation Caterpillar Company
This report reflects the views of the researchers and not necessarily
those of the IMA, the trustees of FAR, or the Project Committee.
Julian M. Freedman, CMA, CPA, CPIM
Director ofResearch
The IMA Foundation for Applied Research, Inc.
ABOUT THE AUTHORS

D C. J. McNair. CMA Ph.D.
C. J. McNair is a professor of management accounting at Babson
College, Wellesley, Massachusetts. Since graduating from Co­
lumbia University in 1986, she has become a noted expert in
the design and development of cost management systems. Dr.
McNair has published numerous books and articles in this area,
including The Profit Potential: Taking High Peiformance to the Bot­
tom Line, World-Class Accounting and Finance, and Benchmarking:
Tool for Continuous lmprwement.
Other recent writing includes several management account­
ing guidelines for the Society of Management Accountants of
Canada: Measuring the Cost of Capaci~, Redesigning the Finance
Function, and Implementing Process Management: A Framework for
Process Thinking. Current work includes development of value­
based accounting models and field work on applications of ca­
pacity cost management in various industries.
D Richard Vangermeersch, CMA CPA Ph.D.
Richard Vangermeersch is a professor of accounting at the Uni­
versity of Rhode Island. He received a Ph.D. in accounting in
1970 from the University of Florida. He was president of The