Throughput Accounting: A Guide to Constraint Management PDF
Preview Throughput Accounting: A Guide to Constraint Management
T HROUGHPUT A CCOUNTING A G C M UIDE TO ONSTRAINT ANAGEMENT S M. B TEVEN RAGG JOHNWILEY&SONS,INC. T HROUGHPUT A CCOUNTING A G C M UIDE TO ONSTRAINT ANAGEMENT T HROUGHPUT A CCOUNTING A G C M UIDE TO ONSTRAINT ANAGEMENT S M. B TEVEN RAGG JOHNWILEY&SONS,INC. Thisbookisprintedonacid-freepaper. Copyright2007byJohnWiley&Sons,Inc.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyform orbyanymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,exceptas permittedunderSection107or108ofthe1976UnitedStatesCopyrightAct,withouteithertheprior writtenpermissionofthePublisher,orauthorizationthroughpaymentoftheappropriateper-copyfeeto theCopyrightClearanceCenter,Inc.,222RosewoodDrive,Danvers,MA01923,978-750-8400,fax 978-646-8600,oronthewebatwww.copyright.com.RequeststothePublisherforpermissionshouldbe addressedtothePermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ 07030,(201)748-6011,fax(201)748-6008. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbesteffortsin preparingthisbook,theymakenorepresentationsorwarrantieswithrespecttotheaccuracyor completenessofthecontentsofthisbookandspecificallydisclaimanyimpliedwarrantiesof merchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreatedorextendedbysales representativesorwrittensalesmaterials.Theadviceandstrategiescontainedhereinmaynotbesuitable foryoursituation.Youshouldconsultwithaprofessionalwhereappropriate.Neitherthepublishernor authorshallbeliableforanylossofprofitoranyothercommercialdamages,includingbutnotlimited tospecial,incidental,consequential,orotherdamages. ForgeneralinformationonourotherproductsandservicespleasecontactourCustomerCare DepartmentwithintheU.S.at877-762-2974,outsidetheU.S.at317-572-3993orfax317-572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsinprint, however,maynotbeavailableinelectronicformat. FormoreinformationaboutWileyproducts,visitourWebsiteathttp://www.wiley.com. LibraryofCongressCataloging-in-PublicationData: Bragg,StevenM. Throughputaccounting:aguidetoconstraintmanagement/StevenM.Bragg. p.cm. ISBN-13:978-0-471-25109-5(cloth) 1.Theoryofconstraints(Management) 2.Productivityaccounting. I.Title. HD69.T46B732007 658.5(cid:1)036–dc22 2006032738 PrintedintheUnitedStatesofAmerica. 10987654321 To the production crew at John Wiley, who might know a thing or two about bottlenecks—usually the authors! C ONTENTS About The Author xi Preface xiii 1 Overview of the Theory of Constraints 1 DefinitionsfortheOperationalAspectsoftheTheoryofConstraints 1 TheOperationalAspectsoftheTheoryofConstraints 2 NatureoftheConstraint 5 DefinitionsfortheFinancialAspectsoftheTheoryofConstraints 7 TheFinancialAspectsoftheTheoryofConstraints 9 TheOpportunityCostofOperations 11 Summary 12 2 Constraint Management in the Factory 15 LocatingtheConstraint 15 ManagementoftheConstrainedResource 18 TypesofPolicyConstraints 21 TheConstraintBuffer 25 TheAssemblyAreaBuffer 29 ProductionScheduling 30 BatchSizes 34 MachineSetups—SalesPerspective 36 MachineSetups—ReductionEfforts 37 Summary 38 3 ThroughputandTraditionalCostAccountingConcepts 39 TheEmphasisonCostversusThroughput 39 TheEmphasisonProductCostversusSystemProfitability 41 VariationsintheTreatmentofLow-MarginProducts 42 TheEmphasisonBurdenedversusThroughputPricing 45 VariationsinScrapReporting 48 VariationsinVarianceAnalysis 50 TheTreatmentofDirectLabor 52 InventoryValuation 53 vii viii CONTENTS Activity-BasedCostingversusThroughputAccounting 54 DirectCostingversusThroughputAccounting 55 Summary 56 4 Throughput and Financial Analysis Scenarios 59 TheBasicThroughputAnalysisModel 60 TheLowPrice,HighVolumeDecision 62 TheLowPriceforExportMarketDecision 64 TheOutsourcedProductionDecision 64 TheIncreasedDownstreamCapacityDecision 66 TheIncreasedUpstreamProductProcessingDecision 67 TheIncreasedSprintCapacityDecision 69 TheAdditionalQualityWorkstationDecision 71 TheIncreasedConstraintStaffingDecision 73 TheNewProductAdditionDecision 74 TheProductCancellationDecision 76 TheAlteredProductPriorityDecision 77 TheRawMaterialConstraintDecision 78 TheConstraintintheMarketplaceDecision 81 ThePlantClosingDecision 82 UnderlyingConceptsoftheThroughputAnalysisModel 84 Summary 86 5 Throughput in the Budgeting and Capital Budgeting Process 87 CapitalBudgetingwithThroughputAccounting 87 BudgetingforRevenuewithThroughputAccounting 91 BudgetingforNewProductswithThroughputAccounting 98 BudgetingforOperatingExpenseswithThroughputAccounting 99 BudgetingforProductionLaborExpenseswithThroughput Accounting 101 BudgetingforSalesDepartmentExpenseswithThroughput Accounting 103 Summary 104 6 Throughput and Generally Accepted Accounting Principles 105 TheNatureofGenerallyAcceptedAccountingPrinciples 105 DifferencesBetweenThroughputandGAAPAccounting 106
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