Reduce the Units of Input Not Producing Output
Reduce units of Input (I) available but not producing Intermediate Cost Drivers (ICDs). 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.
A. Assist Input in increasing ICDs.
Recognize efficiency. When people understand that the company is measuring efficiency, they pay more attention to what is measured.
Add evaluation of levels of efficiency: Compare efficiency to outside benchmarks:
|1||2860||1994||Union Carbide discovered that its accounting operations were much more expensive than its competitors'. It cut 200 positions from finance, saving more than $20 million.|
|2||3711||2002||Harbour & Associates visits 60 auto plants every year to produce the annual "Harbour Report" which chronicles auto manufacturing efficiency. The report measures the number of hours of labor in assembly, stamping, and engine and transmission work it takes a company to build a vehicle.|
|3||4813||2004||According to Lehman Brothers, SBC Communications Inc. may cut as many as 20,000 jobs to reduce costs in its declining wireline business. SBC has too many employees for the number of local-access lines it has. SBC has about 29 employees per 10,000 local lines, more than the industry average of 25. The Texas company could save $600 million to $1.2 billion a year by reducing its workforce by 10,000 to 20,000.|
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