Management And Accounting Web

Rezaee, Z. and R. C. Elmore. 1997. Synchronous manufacturing: Putting the goal to work. Journal of Cost Management (March/April): 6-15.

Summary by Jennifer Jenkins
Master of Accountancy Program
University of South Florida, Fall 2004

JIT Main Page | TOC Main Page

This article examines synchronous manufacturing and its implementation. Synchronous manufacturing (SM) is a type of lean manufacturing that has similar traits as JIT. SM is a “time-based competitive strategy that reduces manufacturing lead times and inventory while accelerating the flow of materials” (p. 6). SM sets out to maximize throughput (i.e., the money coming into the company), reduce inventory (i.e., the money tied up in the company), and control operating expenses (i.e., the money flowing out of the company).

Similar to JIT, SM tries to get material through the manufacturing process as quickly as possible, while at the same time meeting customers’ requirements and expectations. For SM to work, managers have to be aware of constraints that could slow down the process, instead of focusing on production costs. Examples of possible constraints are: Market, Material, Capacity, Logistical, Managerial, or behavioral, Cultural, and Political.

SM uses efficiency and effectiveness to meet market demand instead of mass production of products (increasing production). The key to SM is continuous improvement.

Resources are classified as either bottleneck or nonbottleneck. Bottleneck resources are the resources that have no excess capacity and are the “slowest relative to processing-line requirements for different products in the chain of resources used to manufacture a product (ex: the entire output of a product may be held back by a single machine)” (p. 8). Nonbottleneck resources are the opposite; they have excess capacity.

The authors compare SM to traditional managerial accounting. They note that traditional managerial accounting does not give management the proper information in a timely manner in order to make decisions. As a result, traditional managerial accounting does not meet the rapid information demands in a global competitive business world. Major differences between traditional managerial accounting and SM are summarized below (p. 9):

Material is the only variable cost in SM.

Traditional management control systems focus on internal and local efficiencies.

SM cannot allocate overhead in a meaningful way to provide an accurate cost of a product.

SM considers inventory as a liability until it is sold.

SM places more emphasis on constraints in making capital budgeting decisions.

Material is the only variable cost in SM because direct labor is seen as fixed during the short run and should be accounted for as overhead. Thus, these “fixed” costs are not relevant in making manufacturing decisions under SM. This thought conflicts with the traditional use of ABC where all costs can be traced to products.

Performance measurements change from Net income, ROI and Cash flow in traditional systems, to throughput, inventory, and operating expense in SM. (These terms are not defined here because they are defined in many other sections and summaries on the MAAW web site. It is worth noting however, that inventory includes all assets in the theory of constraints, not just materials.

Considering constraints in the determination of product production is another difference between SM and traditional managerial accounting. Exhibit 1 illustrates how SM would be used to better identify which products to sell (pp. 10-11).

Exhibit 1: Product Costing Approaches Compared
Traditional Accounting
Products A B
Materials cost $100 $100
Labor: 1 hour @ $10/hour 10 10
Factory overhead: $50/direct labor hour 50 50
Total cost 160 160
Selling Price 200 150
Gross Profit (Loss) $40 ($10)
Synchronous Manufacturing
Products A B
Material cost $100 $100
Labor 1 hour @ $10/hour 10 10
Factory overhead: $50/direct labor hour 50 50
Total cost 160 160
Selling Price 200 150
Hours of constraint required 1 0.5
Units per month based on bottleneck constraint 1,000 2,000
Revenue per month $200,000 $300,000
Less material 100,000 200,000
Less operating expenses 60,000 60,000
Net Profit $40,000 $40,000

The traditional accounting approach, hints that product B should not be produced since it results in a net loss. However, when constraints are considered as indicated in the Synchronous Manufacturing Approach, product B requires less of the constraint than product A. As a result, more of product B can be produced with the available time. Therefore product B will provide the same profit as product A. More specifically, product A = 1,000 units x $100 throughput per unit = $100,000, and product B = 2,000 units x $50 throughput per unit = $100,000. Note that labor and overhead are not considered since SM treats them as irrelevant costs.

Other relatively short sections in this article include: 1) capital budgeting decisions based on the SM approach where the emphasis is on the constraints rather than local efficiencies, 2) the conflicting relationship between SM and ABC, 3) a list of companies that use the SM approach, 4) a list of advantages of SM, and 5) six steps required to implement SM including: defining goals, establishing the implementation team, identifying performance measures, evaluating and improving the system, managing the flow, and undertaking the proper actions.


The main purpose of synchronous manufacturing is to trim down excess costs in order to decrease the time it takes to get products out to the customers with the quality demanded. This can be done by using resources effectively and efficiently and increasing throughput time. SM follows the JIT process of keeping low inventories and focusing on customer satisfaction.


Related summaries:

Atwater, B. and M. L. Gagne. 1997. The theory of constraints versus contribution margin analysis for product mix decisions. Journal of Cost Management (January/February): 6-15. (Summary).

Goldratt, E. M. 1990. What is this thing called Theory of Constraints. New York: North River Press. (Summary). (In Chapter 4 Goldratt says that the word "cost" is a dangerous and confusing multi-meaning word and that the word "product cost" is "an artificial, mathematical phantom" p. 49).

Goldratt, E. M. 1990. The Haystack Syndrome: Sifting Information Out of the Data Ocean. New York: North River Press. (Summary). (In Chapter 7 Goldratt tells us that the business world today has changed and cost accounting has been slow to react. They have not reexamined the fundamentals, the financial statement logic, to create new solutions. Instead, they have formulated ineffective answers like “cost drivers” and “activity-based costing.” We can no longer allocate based on direct labor. So allocating expenses at the unit level, batch level, group level, and company level is meaningless. These cannot be aggregated at their respective levels nor at the top. So why do it?).

Goldratt, E. M. 1992. From Cost world to throughput world. Advances In Management Accounting (1): 35-53. (Summary).

Goldratt, E. M. and J. Cox. 1986. The Goal: A Process of Ongoing Improvement. New York: North River Press. (Summary).

Hall, R., N. P. Galambos, and M. Karlsson. 1997. Constraint-based profitability analysis: Stepping beyond the Theory of Constraints. Journal of Cost Management (July/August): 6-10. (Summary).

Louderback, J. And J. W. Patterson. 1996. Theory of constraints versus traditional management accounting. Accounting Education 1(2): 189-196. (Summary).

Luther, R. and B. O’Donovan. 1998. Cost-volume-profit analysis and the theory of constraints. Journal of Cost Management (September/October): 16-21. (Summary).

Martin, J. R. Not dated. Chapter 8: Just-In-Time, Theory of Constraints, and Activity Based Management Concepts and Techniques. Management Accounting: Concepts, Techniques & Controversial Issues. Management And Accounting Web.

Martin, J. R. Not dated. Comparing Dupont's ROI with Goldratt's ROI. Management And Accounting Web.

Martin, J. R. Not dated. Comparing Traditional Costing, ABC, JIT, and TOC.  Management And Accounting Web.

Martin, J. R. Not dated. Drum-Buffer-Rope System. Management And Accounting Web.

Martin, J. R. Not dated. Global measurements of the theory of constraints. Management And Accounting Web.

Martin, J. R. Not dated. Goldratt's dice game or match bowl experiment. Management And Accounting Web.

Martin, J. R. Not dated. TOC problems and introduction to linear programming. Management And Accounting Web.

Ruhl, J. M. 1996. An introduction to the theory of constraints. Journal of Cost Management (Summer): 43-48. (Summary).

Ruhl, J. M. 1997. The Theory of Constraints within a cost management framework. Journal of Cost Management (November/December): 16-24. (TOC Illustration).

Westra, D., M. L. Srikanth and M. Kane. 1996. Measuring operational performance in a throughput world. Management Accounting (April): 41-47. (Summary).

Yahya-Zadeh, M. 1999. Integrating long-run strategic decisions into the theory of constraints. Journal of Cost Management (January/February): 11-19. (Summary).