About the Author xi
Preface xiii
Part I Primary Areas of Cost Reduction 1
Chapter 1 The Cost Reduction Process 3
Introduction 3
Need for Cost Reduction 4
Advantages of Cost Reduction 7
Disadvantages of Cost Reduction 8
Cost Reduction Politics 8
Cost Reduction Priorities 9
Cost Reduction Tools 11
Process Analysis 21
Process Analysis Tools 24
Key Cost Reduction Questions 28
Cost Reduction Reports 29
Metrics 34
Summary 34
Chapter 2 Selling and Marketing Cost Reduction 37
Introduction 37
Customer Mix Analysis 37
Customer Class Analysis 39
Sales Region Analysis 39
Dropped Customer Analysis 42
Price Setting with Throughput Analysis 44
Sales Productivity Analysis 46
Sales Effectiveness Analysis 48
Salesperson Analysis 49
Finding Throughput Problems in Sales 51
Sales Process Flow 53
Sales Deduction Systems 55
Collections by the Sales Staff 56
Marketing Cost Reductions 56
Sales and Marketing Metrics 59
Summary 60
Chapter 3 Product Analysis 61
Introduction 61
Target Costing 61
Targeted Price Increases 72
Eliminate Unprofitable Products 73
Add New Products 81
Outsource Products 83
Product Rework Costs 85
Custom Product Costs 86
Product Metrics 88
Summary 90
Chapter 4 Production Cost Reduction 91
Introduction 91
Throughput Analysis 91
Product Line Complexity 92
Production Flow 92
Cellular Manufacturing 93
Continuous Flow 94
Monument Equipment 94
Quick Changeovers 95
Assembly Line Configuration 96
Assembly Line Length 96
Container Sizes 97
Source Inspection 97
Control Chart Analysis 98
Mistake Proofing 101
Expediting 102
Maintenance Planning 102
Machinery Standardization 103
Machinery Assignment 103
Metrics 103
Summary 104
Chapter 5 Payroll Cost Reduction 107
Introduction 107
Analysis for a Workforce Reduction 107
Cost of a Workforce Reduction 117
Alternatives to a Workforce Reduction 120
Manage Payroll Expenses at the Hiring Stage 123
Combat Institutionalized Pay Increases 125
Restructure Commissions 128
Restructure the Workforce 129
Hire Contractors 131
Other Types of Payroll Cost Reduction 132
Worker Adjustment and Retraining Notification Act 133
Payroll Cost Metrics 133
Summary 134
Chapter 6 Benefits Cost Reduction 137
Introduction 137
Benefits Administration 137
Disability Insurance 139
Life Insurance 140
Medical Insurance 140
Pensions 144
Seasonal Bonuses 147
Sick Time 147
Snacks 148
Training 148
Vacation Time 150
Wellness Programs 151
Workers’ Compensation Insurance 151
Miscellaneous Perquisites 153
Free Benefits 153
Metrics 154
Summary 154
Part II Procurement Cost Reduction 157
Chapter 7 Procurement Cost Reduction 159
Introduction 159
Standard Procurement Process Flow 160
Procurement Cards 161
Evaluated Receipts System 164
Additional Procurement Process Flow Changes 168
Supplier Consolidation 171
Supplier Relations 174
Additional Cost Reduction Considerations 177
Metrics 179
Summary 180
Chapter 8 Spend Analysis 181
Introduction 181
Spend Database 181
Spend Analysis 184
Spend Analysis Reports 190
Spend Analysis Rollout 193
Third-Party Spend Management Systems 194
Low-Cost Spend Management Systems 195
Metrics 196
Summary 197
Chapter 9 Maintenance, Repair, and Operations Analysis 199
Introduction 199
Problems with MRO Cost Reduction 199
MRO Cost Reduction Methodology 200
Distributor’s Viewpoint 208
Metrics 209
Summary 209
Part III Asset Reduction 211
Chapter 10 Inventory Analysis 213
Introduction 213
Inventory Purchasing 213
Inventory Receiving 217
Inventory Storage 217
Bill of Materials 221
Obsolete Inventory 222
Miscellaneous Topics 225
Metrics 227
Summary 228
Chapter 11 Fixed Asset Analysis 229
Introduction 229
Fixed Asset Acquisition Analysis 229
Fixed Asset Installation Reporting 235
Postinstallation Audit 237
Outsourcing Alternative 237
Lease versus Buy Decision 238
Feature Reduction Analysis 239
Asset Commoditization 241
Monument Analysis 241
Facility-Specific Considerations 242
Fixed Asset Retention Analysis 243
Fixed Asset Maintenance Analysis 243
Fixed Asset Location Tracking 244
Fixed Asset Condition Tracking 245
Fixed Asset Metrics 245
Summary 247
Part IV Special Topics 249
Chapter 12 Throughput Analysis 251
Introduction 251
Theory of Constraints 251
Operational Aspects of the Theory of Constraints 252
Nature of the Constraint 254
Definitions for the Financial Aspects of the Theory of Constraints 256
Financial Aspects of the Theory of Constraints 257
Opportunity Cost of Operations 259
Locating the Constraint 260
Management of the Constrained Resource 264
Types of Policy Constraints 268
Constraint Buffer 270
Production Scheduling 273
Batch Sizes 278
Capacity Reduction Analysis 279
Work Center Utilization 280
Metrics 280
Summary 282
Chapter 13 Cost Reduction in Mergers and Acquisitions 283
Introduction 283
Integration Timing 283
Integration Planning 284
Synergy Realization 286
Integration Manager 290
Integration Team 291
Integration Communications—Internal 292
Integration Communications—External 293
Employee Integration—Qualification Assessment 294
Employee Integration—Job Positioning 296
Employee Integration—Relocations 297
Employee Integration—Key Employees 297
Layoffs 300
Compensation Integration 301
Sales Integration 302
Process Integration 303
Technology Integration 304
Metrics 305
Integration Pacing 306
Summary 307
Index 309
