Article 25. Calculating Approximate Saving from Efficiency Implementations.
The cost of implementing Work Improvement Teams (WIT) is relative small because similar problem solving meetings may be already taking place. The difference lies in that you want the team to meet permanently (weekly) and to focus on developing and documenting the best way of doing their job using flow charts. The savings come from the improved way that they do their job and the elimination of the lower level of supervision. If the structure of the organization is bureaucratic more levels of supervision may also be eliminated. You can usually plan for a 5% to 10% reduction in personnel where the implementation was made. For more information see Article 11. “Adaptation of Manufacturing Quality Improvement Techniques to Achieve Efficient Government“.
Cost and schedule implementations are done by time-study analysts who study the current way of performing a certain function, documents the best way of doing the processes, trains employees to do the improved method and installs a daily performance monitoring system. Due to the cost this type of implementation it is usually made where there is need to monitor daily activities to meet schedules in high budget situations. A one time cost for the analysis is only about 1% of the overall savings which comes from an increased efficiency in meeting schedules and a 5% to 10% reduction in personnel. The annual cost of an employee besides salary includes matching social security, heath care, retirement and facilities costs such as parking and cafeteria. The actual cost of an employee may be more than double his salary. Most employers consider training and travel costs as job related rather than employee related. For more information see Article 12. Which Approach to use in State Government “Cost and Schedule” or “Work Improvement Teams?”.
Savings resulting from statewide centralized purchasing with aggressive price negotiation can yield as much as 15% for supplies over current prices. For Rx drugs negotiated and purchased in volume there can be a yield of as much as 30% due to the volume in statewide purchasing. For more information see Article 21. “Centralized Purchasing- The Best Way to Balance State Budgets” and Reader Question 6. “How do you implement a Statewide Purchasing System?”.
A much greater savings on Rx drug purchases can be realized when an alliance between states is formed. With as few as ten states contracting with a third party firm that aggressively negotiates, purchases and delivers to its local stores it is possible that Rx drug prices can be significantly reduced. With more states involved is possible with aggressive negotiation to lower Rx drug costs to that found in Canadian. This could amount to an overall savings from 50% to 70% or greater. For more information see Reader Question 7. “The Economics of Scale in Volume Purchasing” and Reader Question 8. “How do I Reduce Medicaid costs?”.
