Blind Faith: The Hidden Costs of Capacity Overutilization

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In the March/April Cost Management, Dr. CJ McNair-Connolly, an internationally-recognized expert in cost management, and Charles Thomas explore the role played by escalating marginal costs of disruption as capacity utilization moves beyond specified limits.  The example of an airline is used to identify and explore both the more easily measured and less easily measured costs of capacity overutilization, as well as the limiting features of capacity utilization.

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The goal of the article is to overturn the notion suggested by Shank and Govindarajan that more is always better when it comes to executional cost drivers such as capacity utilization.  In fact, overutilization can rob an organization of its flexibility to respond to normal problems of daily business, moving them into crises that can negatively affect the organization’s ability to meet and exceed customer expectations.

Connolly-Thomas_2016_BlindFaith-CostsOfCapacityOverutilization

 

More Forthright Than A Politician: Load ’em up

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at some point in time (where is shirley when i need her?) we moved to a house located two houses from the corner of 25th street and mckenzie on the north side of the street.  i was probably 3 or 4 at the time.  it seems that we only lived there briefly–probably only a few months.  but i remember the black 2-door coupe auto that stayed in the next door driveway close by our porch; it had the look of a late 1930s model and, i thought, how wonderful it was because we had no car.Willys_6_1931_Sport_Coupe.JPG

also remember loud country music coming from the house next door and, i swear i remember this–whether any agrees or not, that i believe our neighbor was hank williams!

i probably shouldn’t tell this, but to be more forthright than a politician, i remember my last “accident” i had in the underwear department.  one summer day i was sitting on the curb watching firemen refill the water tank on their truck–i don’t remember whether there had been a fire close by or not–but i watched with interest too long and “loaded ’em up”.  i was so embarrassed that i went in and changed, but hid the mess in the floor of my closet!  needless to say when mother found it a few days hence she was not happy at all with me!

read on if you are still interested–i don’t think it will get any worse than this.

Childhood Nutritional Supplement–Dirt

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not so very long after i was born- we moved to 2604 summer, but i was too young to be much help with the move–probably 1 year old–for some reason my memory fails me on that.  we lived next door to the harrisons*.  he was the fire chief and a tough looking guy while she was an attractive dark haired lady with flashing black eyes and a kindly personality to go with an attractive smile.

they had two kids-“lee p”, as we called him, and bonnie.  lee was my age and the first playmate i remember.  he was bigger than i was and always went around with the back flap on his drawers open and his rear end shining.  i can remember being embarrassed for him even at that young age.

lee p was bigger than i was and often sent me home crying from childish skirmishes.  finally mother talked to mrs h and she told m that i was going to have to fight back–which i had always been taught not to do.  so, i’m told i “cleaned his plow” one day and that wound up the skirmishes.

i remember the harrisons* had a pony and shirley rode it occasionally.  one day it ran away with her and scraped her off under a low hanging gate.  so much for “annie oakley”!

Annie_Oakley_by_Roland_Bonaparte

lee & i periodically partook in the childhood nutrition supplement–dirt.  the fact that it tasted bad didn’t dawn on us until our parents pointed it out.

*pseudonym

 

Annie Oakley photo courtesy of Roland Bonaparte (Cowan’s Auctions) [Public domain], via Wikimedia Commons

Charley Reminisces: These Were the Good Old Days?

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Charley Thomas (Baylor University, 1955)i was born march 26, 1936, at 2617 summer avenue in waco, texas, at home as was the custom in those days.  daddy was almost 26 at the time and mother was 24.  shirley, my much older sister and constant antagonist during childhood, was 3 1/2 years old at the time and, i believe had been born at home in the same house.  while mother was expectant with shirley she fell down some back steps (5 or 6 of them) and broke her arm.  we will never know whether this was a contributing factor to shirley’s attitudes and personality today, will we?

shirley must have “telepathied” me because she just called and corrected me that she was born at 2310 reuter where mother & daddy lived with the tatums-tom and, gladys, and their children-ardis and don.  shirley also remembered that the bathroom at 2617 was on an enclosed back porch and had a water tank hung high on the wall and a pull chain.  i also, take her word for it that she sat outside on the front porch while mother delivered me in a big bed in the front bedroom.  these were the “good old days?”

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Back Porch Comfort

By Gregorydavid at the English language Wikipedia, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=12355042

Until We Meet Again

Switzerland–a land of visual treats

Joy is Found in the Small Things

Farewell to Switzerland for Now

 Lac Léman Lac Léman

A fabulous expat ride in Switzerland is coming to an end for me and my family. Like many expats know, moving to a foreign country is loaded with waves of opposing emotions. However, after assessing our ride thoroughly it has been completely worth the blood, sweat, and tears of moving to Switzerland. Three things stand out for me: enjoying Switzerland’s unparalleled natural beauty, opportunity for personal growth (even if somewhat painful), and friendships forged in mutual ups/downs of adjusting expatriate life.

Beautiful Switzerland

I think my fellow adventurers would agree that our number one joy of living in Switzerland is the unbounded beauty of this small country. I actually have a Pinterest board named Beautiful Switzerland. Almost everywhere you look, there is a feast for your eyes. Only while in Switzerland, I become a professional photographer! It is an amazing transformation. You don’t…

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The CMA: A Global Passport

…CMAs take pride in knowing they add value to their company, whether they’re in Dallas, Dubai, or Shanghai and regardless of whether they work for a local company or a global brand. They recognize and embrace the credential’s integrity, rigor, and relevance. Earning the credential proves to employers your competency and expertise in management accounting and builds your personal brand….

Moments that Matter

IMA’s CMA® (Certified Management Accountant) certification is in high demand by professionals around the world. More than 3,500 professionals earned the CMA in fiscal year 2015 and more than 15,000 accounting and finance professionals entered

global

the CMA program. It is a globally recognized certification—a passport—that professionals can take with them from job to job and from country to country. It’s a valued, trusted certification that helps professionals progress in their careers and continue their education throughout their career. Earning the CMA means that you have passed a rigorous test, have met the education and experience requirements, and are committed to continuous learning. When I meet CMAs in my travels, I see two common themes: pride and aspiration.

Pride

CMAs take pride in knowing they add value to their company, whether they’re in Dallas, Dubai, or Shanghai and regardless of whether they work for a local company or a global…

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Learning Like Lightning: Lessons From JSF F-35 Sustainment Activities

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Based in Fort Worth, Texas, the JSF F-35 program provides several important lessons about financial management:Projected Costs

  • Begin with the end in mind
  • Measurement inversion happens—manage it
  • Don’t set arbitrary targets and then manage to them
  • Develop adequate information before making decisions
  • Use interval rather than point estimates

The November/December 2015 issue of the Journal of Corporate Accounting & Finance breaks down these lessons and sheds light on the world’s largest project to date, the trillion dollar to develop the F-35 Lightning II family of single-seat, single-engine, multirole fighter aircraft.

Here’s a closer look at the third lesson: Don’t set arbitrary targets and then manage to them

In his 1986 book, “Out of the Crisis”, W. Edwards Deming laid out 14 key principles for managing. Deming’s eleventh point: Eliminate arbitrary numerical targets…Substitute aids and helpful leadership….

Deming based this point on the idea that it is useless to specify a goal without developing a method for achieving it. The U.S. Government Accountability Office has been critical of Department of Defense (DOD) affordability efforts:

When the DOD established affordability targets for the F-35 program in 2012, the methodology…was not informed by actual resource constraints….Specifically, DOD officials stated that targets were determined by arbitrarily lowering…estimated F-35 Cost per Flight Hour by 10 percent….

The JSF F-35 program is massive—unprecedented in size. It has scored many successes.

Along the way, it has offered many lessons for us to consider.  You can read about them in the Journal of Corporate Accounting & Finance, 2015 (November/December) and also here.