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.
Pay according to varying levels of efficiency: Pay for personal performance:
On employee cost containment
|1||0||2006||Many companies, like Wal-Mart, are turning to Health Reimbursement Arrangements to reduce healthcare costs and encourage employees to shop around for healthcare. The accounts work like 401ks with employees given tax incentives to save money. It allows workers to budget health care spending according to individual needs.|
|2||3577||2004||Pitney Bowes Inc. takes a different tack to slashing healthcare costs. Pitney Bowes moved three years ago from a fixed co-payments to co-insurance rates of 10%, 30%, and 50%. The highest tier is reserved mostly for branded drugs that have a cheaper generic alternative. In 2002, Pitney's prescription drug-costs rose 12%, a smaller increase than the national average of 16%. The following year, its drug costs rose nearly 11%, compared with a 15% national average.|
|3||4011||2006||As oil prices soar, some of the nation's biggest energy consumers are revamping their operations to shrink energy bills. Union Pacific is able to pass about 90% of the increase in fuel prices on to customers through surcharges. Still, the nation's largest railroad is buying more fuel-efficient locomotives and installing systems that shut them down if they idle too long. Engineers who meet fuel savings targets get free $50 gasoline cards for their personal use. Last year, that program saved 16 million gallons, worth $30 million.|
|4||4213||1998||Werner is near the top of the industry in pay scale and pays its drivers for extras. In addition bonuses are available for fuel and driving efficiencies. So on average a typical driver earns an extra $.02 to $.03 per mile from additional pay and bonus.|
|5||4213||1998||TL carrier JB Hunt pays driver incentives when drivers achieve fuel economies of more than 6 miles a gallon.|
|6||6324||2005||Some doctors are protesting a United Healthcare program that enables employers to provide financial incentives for workers to choose from a list of physicians selected by the company. Three large companies – General Motors, DaimlerChrysler, and United Parcel Service – have adjusted some of their health benefits so that some employees have incentives, such as lower co-pays, to go to these doctors. The program is part of a broader effort by insurer and employers to curb rising health-care costs by finding the best care at the lowest prices.|
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