Reduce the Rate of Cost for the Input Used to Produce the Output
Use the same type of input and the same activities, but pay less for the unit of input employed in producing the output. A reduction in rate is equivalent to a reduction in the number of inputs for the same ICD. For example, if a person who makes $10 per hour could produce the same amount of output as a person making $20 an hour, the substitution of the $10 person for the $20 person in the process would be equivalent to cutting the number of people required to do the work by 50%.
A. Purchase in Larger Quantities:
Purchase in larger quantities to get lower unit prices. In most markets a customer who purchases in larger quantities gets a lower unit price than one who purchases in smaller quantities. These concepts increase the amount of purchases the company makes at one time.
Coordinate all company purchases from one or a few locations: Publish an approved list of vendors with pre-approved pricing
|Companies today are packing once fragmented purchases of services and supplies into 1 or 2 company wide contracts for each.
|As hotel costs increase and companies cut spending on corporate travel, business travelers who once visited boutique hotels and expensive restaurants are noticing a shift in corporate culture. They find themselves forced to share rooms, prepare their own meals or stay with friends. Software allows companies to ensure that travelers choose the most affordable travel options. Some firms are renting apartments in cities where their employees visit frequently and still others are turning to teleconferencing to eliminate travel all together.
|Pharmacy benefit managers (PBMs) say they are saving employers money while their own profits are rising. A big part of the PBMs' strategy is selling employers on the idea of requiring patients to fill all prescriptions, except in emergencies, through the mail-order pharmacy. General Motors Corp., IBM Corp., and Southwest Airlines have “mandatory mail” programs. About 8 million beneficiaries served by Medco come from employers with such rules. Medco says clients save 8% to 10% with the program because it has a good track record of switching mail-order patients to generics. According to Medco, the current generic substitution rate for chronic medicines through its mail pharmacy is 95.3% while at a retail pharmacy it is 92.6%.
|As health needs surge, medical service providers are helping companies do more with less. Birner Dental Management is a service firm that acquires, develops, and manages dental practice networks in select markets in Colorado, New Mexico, and Arizona. By running a network of 56 offices, Birner is able to cut better deals for advertising and marketing and do collective bargaining with vendors and suppliers.
|Veterans' Hospitals are now national leaders in efficiency and quality because of a large dose of technology. The system bargained hard with drug companies and other medical suppliers, wringing out hundreds of millions in annual costs. The VA's $1 billion-a-year pharmacy was overhauled to be more efficient. A single list of approved medications were created. To free up pharmacists and to reduce errors, each hospital pharmacy installed systems to automatically refill prescriptions.
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