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:
Create internal markets with transfer prices for cost functions
|1||3452||1988||National Acme is experimenting with a "company-in-a-company" concept that pushes profit-and-loss responsibility down to the lowest level possible. Customers talk to the factory floor directly; fewer people are needed.|
|2||3571||2005||In response to upstarts overseas, IBM is taking a new approach by betting that giveaways of precious technology will expand the market and boost its products sales to meet that new demand. IBM is looking for ways to cut the cost of delivering services, even high-value ones, by tightening the "services supply chain" – mostly meaning people. IBM has created a project called Professional Marketplace, a data base of IBM talent. So far it only contains profiles of 35,000 employees, but IBM plans for it to show the skills, location and availability of about 250,000 – all of IBM's services, software, sales, and distribution folks. It should help IBM ensure that it doesn't send an overqualified employee to a job that could be filled by someone who costs less.|
|3||3825||2000||Teradyne started Integra as an internal startup, with its head reporting not to a boss but to a board of directors.|
|4||5812||1997||McDonalds is replacing its "Zone Managers" with presidents of divisions or similar business units to spread bottom-line responsibility.|
|5||6211||1986||Hellman and Friedman are taking pieces of an investment banking firm and setting them up as separate profit centers, thus freeing themselves of administrative details.|
<<Return to Reduce Input Not Producing Output