Reduce Units of Input Not Producing ICDs

Reduce units of Input (I) available but not producing Intermediate Cost Drivers (ICDs) or Output. This action makes Input levels more directly variable with the quantity of the ICD by reducing the amount of the available Input that is wasted or idle. For example, an employee (I) might produce one subassembly (ICD) per day. During that day, the employee spends a total of one hour waiting for parts for the subassembly. If the Company could eliminate that one lost hour of the employee's work day by providing parts in a more timely manner, the Company could reduce the number of employees (I) needed to produce the same subassembly (ICD) by 1/8th.

Advisories: These examples contain warnings and advice that should be considered as you are using the approach to cost improvement described below.

Examples: These are brief write-ups for each cost management concept, describing a situation where the concept is used or implied. Use these supporting examples in order to expand your range of ideas. These examples are neither mutually exclusive nor collectively exhaustive. There may be other illustrations of the concept in the outline.

We offer you both a short version and a long version of some of these cost management concepts. We have enough examples of some of these concepts to expand the concept into more specific concepts with their examples. Use the short version to complete your innovation in less time. Use the long version for more in-depth innovation.

A. Assist Input in increasing ICDs.

1. Recognize efficiency. When people understand that the company is measuring efficiency they pay more attention to what is measured. Short Examples>> Long Examples>>

2. Train employees in efficiency. The company may incur costs to train employees in the expectation that these expenses will result in even greater cost savings through better efficiency. Short Examples>> Long Examples>>

3. Eliminate unexpected downtime. The company may know that it will have occasions of unplanned downtime and may take steps to reduce or eliminate this loss of efficiency. Short Examples>> Long Examples>>

4. Place decision making responsibility at a lower level. The employees with responsibility make faster decisions. Examples>>

5. Other Examples>>

B. Shift demand to use unproductive resources or reduce the unproductive resources.

The company may shift demand from one location, or time period, to another in order to take advantage of idle capacity. Alternatively, the company may reduce excess resources either with layoffs or shortened work weeks

1. Warnings and Advice Advisories>>

2. Location: Centralize activities Short Examples>> Long Examples>>

3. Time: Shift demand for ICDs to reduce peaks Short Examples>> Long Examples>>

4. Excess resources: Reduce resources that are not needed for the current level of demand Examples>>

5. Other Examples>>

C. Improve the accuracy of the demand forecast.

A more accurate forecast of demand would enable the company to plan its capacity more precisely to meet that demand, creating the opportunity to eliminate some unused capacity.

1. Use more recent experience in the forecast Examples>>

2. Add new information to the forecast Examples>>

D. Use short term sources of Input to meet peak demand.

The company would intentionally plan less capacity than it would need to meet its peak demand. It would supply the peak with other sources of capacity.

1. Warnings and Advice Advisories>>

2. Stretch for short periods Examples>>

3. Use third party resources Examples>>

4. Use temporary help Examples>>

5. Other Examples>>

E. Use other underemployed Input.

These changes put idle, or wasted, Purchases and Capital to work. These examples complement the ideas above, which deal primarily with improving the efficiency of People.

1. Purchases Short Examples>> Long Examples>>

2. Capital Short Examples>> Long Examples>>

F. Speed the Process

1. Warnings and advice Advisories>>

2. Perform previously sequential tasks concurrently Examples>>

3. Increase the pace Examples>>

4. Specialize teams for the task Examples>>

5. Centralize planning for product to reduce communication delays Examples>>

6. Relieve bottlenecks Examples>>

7. Other Examples>>

<<Return to Improve/Costs Innovation Ideas


For a greater overall perspective on this subject, we recommend the following related items:
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