Low Overhead Cost Research Articles

Market Dominance as a Precursor of a Firm’s Failure: Emerging Technologies and the Competitive Advantage of New Entrants

New entrants in many industries are able to challenge the business of historically dominant firms. In many markets, dominant players have pursued pricing and service policies that, although once highly effective, now make their markets attractive targets for aggressive new entrants. The entrants' strategies rely on lower overhead costs, new technologies, alternative distribution channels, and the active targeting of profitable customers. Several factors will make it possible for entrants to attack dominant players; simplistic historical pricing mistakes or policies of promising or providing universal service will make it attractive for new entrants to attack. Restrictions on the flexibility of incumbents--both externally and internally imposed--may make it difficult for dominant players to defend themselves effectively against attack by more flexible entrants with cream-skimming strategies and newer technology. We develop a set of alternatives for incumbent firms facing increasing contestability in their markets and the threat of agile entrants.

Design and evaluation of an epoxy three-dimensional multichip module

A low-cost, three-dimensional multichip module (MCM) technology provides greatly improved system density and reduced mass over planar packaging technologies. The technology offers a high degree of testability that negates the need for known good die (KGD) procurement. Testing is achieved with very low cost overheads and with no increase in the volume of the module. The technology allows complete, heterogeneous systems to be packaged and interconnected in a single, ultra-dense module. The electrical characteristics of the technology are comparable to standard chip packages. However, the parasitics due to package-to-package interconnects are eliminated. This removes the dominant cause of parasitics, dramatically improving the electrical characteristics. A programmable integrated camera and image processing system has been developed which incorporates a grayscale camera, analog-to-digital conversion, four programmable processors and memory. Utilizing the three-dimensional multichip module technology, the system, which consists of nine chips and 36 discrete components, has an overall volume of 4.77 ml. This is approximately six times more dense than an advanced PCB implementation. The system forms the first stage in the design and manufacture of a portable video communications device. For such applications, low system volume and mass are key attributes. The system demonstrates the potential of the packaging technique for the integration of complete mixed signal systems incorporating sensors and processing. Further developments to the technology will provide increased module density, improved routing capacity, and electrical performance.

EXPLAINING PLANT‐LEVEL DIFFERENCES IN MANUFACTURING OVERHEAD: STRUCTURAL AND EXECUTIONAL COST DRIVERS IN THE WORLD AUTO INDUSTRY

Using data from 62 automobile assembly plants worldwide, we examine the extent to which various structural cost drivers (plant scale, automation, and product mix complexity) and exe‐cutionalcost drivers (product manufacturability, management policies, and production practices) account for plant‐level differences in manufacturing overhead. Our analysis of structural drivers finds that overhead hours per vehicle are negatively associated with production volumes, consistent with economies of scale in overhead functions. However, automation appears to have little influence on overhead levels. Product mix complexity's effect on overhead requirements varies with the complexity's form and the plant's manufacturing capabilities. Option and parts complexity (measures of peripheral and intermediate product variety) both exhibit adverse effects on overhead, reflecting the considerable logistical, coordination, and supervisory challenges that accompany an increased number of parts and more complex manufacturing tasks. In contrast, model mix complexity (a measure of fundamental variety) appears to have little impact on direct or overhead labor requirements in auto assembly plants. Our analysis of executional drivers provides empirical support for the claim that advanced manufacturing practices such as the reduction of buffers, multiskilled production workers, and the use of teams can lower overhead costs. We also find preliminary evidence that the lower overhead costs in Japanese auto assembly plants are due primarily to the use of multiskilled work teams and the shifting of traditional overhead activities to production workers. Overall, our results indicate that manufacturing overhead is a function not only of the structural cost drivers that have dominated the academic literature but also of executional cost drivers that are harder to duplicate and therefore potentially more valuable for achieving competitive advantage.

The Swedish patient compensation system: Myths and realities

The Swedish compensation system for medical injuries has been suggested as a possible model for medical malpractice reform in the United States and in other countries.2 Patient compensation in Sweden is provided by the Patient Compensation Insurance (PCI), a voluntary, contractual administrative mechanism that provides compensation without proof of provider fault. The discipline of medical providers is handled by a separate Medical Responsibility Board (MRB). The frequency of claims filed per physician is at least 50% higher under the PC1 than under the U.S. medical malpractice system, but the PC1 is widely accepted by the medical profession. The PC1 costs roughly $2.38 per capita, or 0.16% of health care costs in Sweden, whereas U.S. medical malpractice insurance premiums account for l-2% of (higher) health care expenditures, more than a lo-fold difference. Administrative overhead is 18% of total PC1 premiums, compared to roughly 60% in the United States. Recent proposals in the United States for a rule of no-fault (strict) enterprise liability for medical injuries cite the PCI’s low overhead rate as evidence of the potential savings from switching from a negligence rule to a causation-based rule of liability.” In this regard, the PC1 has also been compared to strict enterprise liability under workers’ compensation, which also has a lower overhead percentage than tort liability.4 The purposes of this paper are three. First, it provides a brief description of the structure and experience of the PC1 and the MRB. Second, it explains the PCI’s low overhead, using a simple model of optimal litigation effort. This model challenges the conventional wisdom that the PCI’s low overhead derives from a no-fault rule of liability. More generally, any analogy between no-fault as applied in the PC1 and nofault systems of strict liability-either workers’ compensation or strict enterprise liability for medical injuries-is misplaced. On the contrary, the PC1 experience illustrates that a causation-only test for compensability is neither necessary nor sufftcient for low overhead costs. Rather, the PC1 achieves low overhead costs by foregoing any attempt at deterrence. The MRB, which is totally decoupled from the PCI, is ineffectual. In general, low overhead is a very misleading indicator of the efficiency of any insurance system. A third purpose of this paper is to examine lessons from the PC1 for a proposed contractual alternative for medical injuries. 5 The fact that patients and providers overwhelmingly opt into the PC1 rather than tort suggests that it offers a Paretosuperior alternative. However, contractual options are constrained by transactions

An improved technique for circuit board interconnect test

The author reviews the self-test features of the IBM RISC System/6000 processor circuit board. Based on this, a technique is described to automate the interconnect wiring test, which is performed as part of the power-on self-test (POST) at the manufacturing stage. Essential to the implementation is the idea of response compression using the multiple input signature registers (MISR). Interconnect wiring defects are diagnosed by comparing the content of the MISR with the expected result after a simple test procedure. Formal analysis shows that a high test coverage can be achieved for the most commonly occurring defects. As a result, the proposed technique has the advantages of low overhead cost and easy fault detection.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">&gt;</ETX>

CONTRACT FARMING AND OUTGROWER SCHEMES IN EAST AND SOUTHERN AFRICA

This article examines the experience of seven countries in East and Southern Africa with contract farming and outgrower schemes. In such schemes, farmers sell their crops under contract to private or public enterprises for processing or export in return for various price guarantees, inputs and services. The article identifies some of the key determinants of success or failure, evaluates performance and examines the constraints to replication. In most cases, performance in delivering services and providing income increases to farmers has been quite good, although high management costs limit the extent to which this form of organisation could be more widely applied. Looser control, relying more on price incentives and farmer participation, might lower overhead costs while developing management capability among growers.

Technical Specifications' Effect on Construction

Technical specifications constitute that portion of the contract documents that control the performance of the construction project. The technical specifications impact all parts of the construction project. Clear specifications and a consistent understanding of the intent of the specifications by all parties leads to a project of higher quality. The specifications also protect the right of the contractor to choose methods of construction and provide assurance that the owner will receive the required performance from the finished product. Specifications that fulfill these demands often lead to better relations through consistent decision making and proper delegation of responsibility. The prompt clarification of ambiguities and the fair resolution of discrepancies concerning technical specifications leads to projects with fewer disputes, resulting in a reduced need for arbitration and litigation and thus lower overhead costs for both owners and contractors.

LOCST: A Built-In Self-Test Technique

A built-in self-test technique utilizing on-chip pseudorandom-pattern generation, on-chip signature analysis, a ``boundary scan'' feature, and an on-chip monitor test controller has been implemented on three VLSI chips by the IBM Federal Systems Division. This method (designated LSSD on-chip self-test, or LOCST) uses existing level-sensitive scan design strings to serially scan random test patterns to the chip's combinational logic and to collect test results. On-chip pseudorandom-pattern generation and signature analysis compression are provided via existing latches, which are configured into linear-feedback shift registers during the self-test operation. The LOCST technique is controlled through the on-chip monitor, IBM FSD's standard VLSI test interface/controller. Boundary scan latches are provided on all primary inputs and primary outputs to maximize self-test effectiveness and to facilitate chip I/O testing. Stuck-fault simulation using statistical fault analysis was used to evaluate test coverage effectiveness. Total test coverage values of 81.5, 85.3, and 88.6 percent were achieved for the three chips with less than 5000 random-pattern sequences. Outstanding test coverage (≫97%) was achieved for the interior logic of the chips. The advantages of this technique, namely very low hardware overhead cost (≪2%), design-independent implementation, and effective static testing, make LOCST an attractive and powerful technique.

Substitution Value of Birdsfoot Trefoil for Alfalfa‐Grass in Pasture Systems1

AbstractConventional alfalfa (Medicago sativa L.)‐gass grazing systems do not permit sufficiently high animal intake of energy for high roducing ruminant animals. Provision of pasture swards containing a higher proportion of legume should increase energy intake. Our primary objective was to determine whether lamb daily gains could be increased by increasing the legume percentage in grazing systems via substitution of pure birdsfoot trefoil (Lotus corniculatus L) for alfalfagass as one‐third of the total rotational pasture. We compared four grazing systems for lambs in each of 3 years. The control system had an alfalfa‐smooth bromegrass (Bromus inermis Leyss.)‐orchardgrass (Dactylis glomerata L.) mixture in each of three rotationally grazed paddocks. A second system had orchardgrass in paddock 1, reed canarygrass (Phalaris arundinacea L.) in paddock 2, and smooth bromegrass in paddock 3; each grass was mixed with alfalfa. In the third and fourth systems paddocks 1 and 2 were identical to those in the control; paddock 3 in these systems had pure birdsfoot trefoil either grazed in sequence in late May or stockpiled for initial grazing in late June.Substitution of birdsfoot trefoil for alfalfa‐grass as one‐third of total seasonal pasture resulted in 22 to 24% increases in lamb average daily gains over a 3‐year period. The birdsfoot trefoil‐containing systems provided forage that had significantly higher legume composition, in vitro digestibility, crude protein concentration, and ap parent intake potential (lower concentration of cell walls) than did forage provided by the control (all alfalfa‐grass) system. The sometimes lower carrying capacity of the birdsfoot trefoil containing systems partly offset the greater gains of lambs on these systems. However, they provided a mean 17 to 18% increase in lamb product perha, com ared with all alfalfa‐grass systems. The birdsfoot trefoil containing systems also had lower overhead costs, because fewer animal units were required per unit of gain.The stage of maturation of birdsfoot trefoil at first grazing each year (immature vs. stockpiled) did not significantly influence animal performance or birdsfoot trefoil persistence. Use of a mixture of alfalfa‐smooth bromegrass‐orchardgrass in all paddocks (control), compared to orchardgrass, reed canarygrass, or smooth bromegrass as single species mixed with alfalfa in individual pad. docks, did not influence animal performance.A “pasture‐type,” creeping rooted alfalfa cultivar (‘Rambler’) did not persist as well as two “hay‐type” cultivars (‘Saranac’ and ‘Agate’). Invasion of weeds in the 3rd year proved to be a disadvantage of using pure stands of birdsfoot trefoil in grazing systems.