to Control Equipment Usage "Bottlenecks"

Equipment resource arise where demand exceeds a· resource's ability to provide service. Cost allocation systems which control bottlenecks must reconciles three, often incompatible, objectives - Pareto efficiency, incentive compatibility and information efficiency. This research developes such a cost allocation system where there exists a positive cost of waiting for a resource such as a critical piece of equipment, and a positive benefit to using that resource. This costing approach should be useful in determining internal transfer prices for factory machines or departments whose services must be shared by different' operations, and which in the absence of discouragement from a significantly high allocated cost, would tend to be overloaded. This research shows that commonly used cost allocation mechanisms cause resource consumers to underconsume resources, and thus lower efficiency. These problems can compound, themselves by misleading management into suboptimal use of equipment in the short run, as well as incorrect acquisition of equipment in the long run. 1: Motivation and Objectives for this Research Potential for economies of scale in manufacturing can best be realized where expensive equipment is shared to the maximum possible extent. In capital intensive industries, competitive advantages accrue to production facilities with large capital investments, which can achieve an optimal mix of production with long runs, short setup times, level usage and few in usage in costly equipment. The efficient and effective sharing of equipment is often perceived as a scheduling problem. Risk averse management sets as the primary objective in scheduling the avoidance of usage bottlenecks. This research provides an alternative to scheduling algorithms which is informationally efficient, and attains constant usage for expensive, shared equipment. Equipment use scheduling for factory production involves a considerable amount of uncertainty and expediting, much of this arising from uncertainty about timing and quantity of needs of users of the equipment. Often the usage schedule of an expensive, and heavily used piece of equipment cannot be effectively preordained. Individual users of the equipment will find the resource less desirable when bottlenecks are