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.
B. Shift demand to use unproductive resources.
The company may shift demand from one location, or time period, to another in order to take advantage of idle capacity.
Location: centralize activities
Place multiple functions in fewer locations:
Regionalize businesses and functions
|1||2320||1991||Cluett, Peabody closed 9 of its 14 warehouses and plants, laying off more than 2,000 workers in a year. To absorb surplus merchandise, Phillips opened scores of his own stores in outlet malls across the country.|
|2||2834||1996||To shore up the company's operations, Ivax is considering consolidating its seven US manufacturing plants and four distribution facilities.|
|3||3571||2006||IBM is pioneering what it calls globally integrated operations. IBM aims to lower its costs and at the same time provide superior service so it can be more competitive, win more deals, and drive revenue and profit growth. The company plans to bunch employees in competency centers that are distributed around the world. That way it can take advantage of the low costs in some places, and in others have highly skilled employees in close proximity to customers. Rather than each country's business unit having its own workforce entirely, many people are drawn from the competency centers.|
|4||3674||2004||In 1968, Robert N. Noyce, co-inventor of the integrated circuit, Gordon E. Moore and chemical engineer, and Andrew S. Grove left Fairchild Semiconductor International Inc. and founded Intel, short for integrated electronics. They set a pace of technological innovation, with the development of a chip that can be packed with 1.5 billion transistors each. More than 80% of the world's 1 billion-plus PCs run on Intel chips. They centralized manufacturing in giant chip fabrication plants, helping them undercut competitors, encouraged their engineers to constantly think of new ways of doing things faster, cheaper and more reliably. Massive Japanese investment in the chip industry nearly bankrupted the company in the 1980's, forcing Intel to sell 12% of the company to IBM and dump the memory business and focus on microprocessors.|
|5||3845||1993||Baxter announced it would shave 7%, or 4,500 jobs, from its work force over next 5 years. Will also reorganize sales efforts into more centralized regional groups.|
|6||3851||1989||To achieve economies of scale, many chains set up so-called "superopticals", huge stores with as many as 15,000 frames on display and manufacturing equipment in the back.|
|7||4213||1997||Roadway reports a slight deterioration in pickup and delivery efficiency; however, this is more than offset by a reduction in terminals, which is part of the company's plan to rationalize its network and cut costs.|
|8||5331||2001||Most of the stores Family Dollar will open this year will be in existing markets. Clustering stores in those areas lets Family Dollar leverage distribution and management costs. There's no need to hire more district managers.|
|9||5600||2005||From 2001-2005, Polo RL has cut the number of European distribution centers from 14 to one. It has integrated its multiple accounting and operating systems and reduced its inventory turns from weeks to one day. Polo has almost a billion dollars of additional sales in 2005 on a lower inventory level than several years past. Polo is seeing better returns on invested assets and equity. Streamlined inventory has lessened the need for clearance sales, which tarnish the brand's image. Full-price sales are also better for margins.|
|10||6300||2005||Carriers continue to move clerical and underwriting support activities from dispersed field offices into more centralized processing centers. Some other commodity transactions, such as processing changes and renewals, are also moving to centralized locations. In order to control quality for these centralized operations, carriers set up service level agreements for these centralized functions. As of today, however, few of these functions are being sent offshore.|
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