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: Establish internal benchmarks of efficiency:

No. Industry SIC Year Notes
1 3310 1988 At Worthington Industries, all new debt must meet this test: return on an investment must be enough to pay interest expenses.
2 3674 1991 In Cypress's financial division, killer software automatically restores credit to customers put on the credit-risk list if their status isn't reviewed within 6 months.
3 5511 2007 Even a few outstanding bills can have a dramatic influence on a small company's bottom line. As they do not have the resources to hire full-time collections agents, some are turning to alternative resources. KTM Auto extended credit to many customers on an ad-hoc basis but did not have the means to collect. KTM adopted a credit policy outlining borrowing terms and a formal collections process. When a bill is overdue, the customer receives a collections letter. As a result of the system, the shop slashed overdue bills significantly and it saves money in annual bad debt write-offs.
4 6324 2004 Aetna Inc. is taking steps to cut down the costs of healthcare by turning to medical experts. The insurer recently completed an overhaul of its computer systems, which cost $20 million. That system, known as EMIS, helped Aetna identify and dump unprofitable corporate accounts. With a tap of a button, Aetna can see if some members are visiting the emergency rooms too much for nonemergency reasons.

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