Transactional Efficiency

The only data used to make decisions is internal. Trading partner relationships are transactional. The parties share order-to-cash and pro-cure-to-pay information, but little else. The focus is on transactional efficiency and cost mitigation. Processes are governed by inflexible rules. The organization responds, but it does not sense. 

As these commodity councils are formed, one of the first places to start is on transactional efficiency. Even today, after 20 years of investment in sourcing technologies, this is still a target-rich environment. These processes are fraught with issues leading to payment and matching issues. 

A related phenomenon in the area of procurement and supplier relationships has been industry wide consortia where multiple buyers and suppliers within an industry join and conduct business. Better transactional efficiency has been highlighted as the key benefit of these consortia such as Covisint (automotive) and Converge (hi-tech). The dynamics of these entities are not very well understood and pose several important questions. For example, one could expect that having multiple suppliers on the same platform is likely to reduce prices for the buyer, but it is likely to benefit other buyers in the consortium as well. Thus, it is not clear if one should join the consortium in the first place. In fact, one of the reasons for Dell deciding not to join either of the high tech consortia, Converge or e2open, could be that they do not want to open up their supply chain processes to competitors. 

External focus The perception of performance is what and when delivered to customer and not how efficiently the product is made. Customers are demanding order fulfilment (not just on-line transaction efficiency) with end-to-end visibility of demand and supply. 

It is common when adopting the TQM philosophy to regard all human interfaces as customer-supplier interfaces. When executed wisely this can have a beneficial effect on internal efficiency and effectiveness, but there are pitfalls to avoid. In a customer-supplier chain, the expectations of the external customer can be modified with each transaction, as illustrated in Figure 1.2. 

The initial rejection of the efficient heat pump by many consumers may be well founded or not. In addition to the sound economic rationales for rejection, there may be market-impediment explanations. Consumers may have imperfect information and be unaware of the energy savings of new, efficient technologies. The transaction cost of accjuiring information and making an efficient choice may be just too high. Because of these impediments, households often fail to make investments that would actually save them money over time. 

Briesch, M. S. Bannister, R. L. Diakuncliak, I. S. and Huber, D. J. (1995). A Combined Cycle Designed to Achieve Greater Than 60 Percent Efficiency. Transactions of the ASME, JotiriisI of Engineering for Gas Turbine 3nd Power 117 734-741. 

Monteith, J.L. (1977). Climate and the efficiency of crop production in Britain. Philosophical Transactions of the Royal Society of London B, 281, 277-94. 

The form and the process of regulation offer a whole range of possibilities, from hierarchy to the market, via various hybrid situations. The efficient regulator will be that which succeeds in developing an intervention that provides a better response to the characteristics of the transaction. For their part, lobbies are characterized by their nationality, size, reputation and experience. The empirical application considers a sample of active ingredients in three therapeutic groups for which the author identifies the regulatory forms adopted in each of the two countries. 

Surveys and interviews show that the attention paid to energy-efficiency investments in companies, public administrations and private households is often very low and heavily influenced by the priorities of those responsible for decision making (Ramesohl, 2000 Schmid, 2004 Stern, 1992). In other cases, project-based economic evaluations do not consider the relatively high transaction costs of the investor and also the substantial risks involved in the case of long-term investments both aspects may be decisive for small efficiency investments (Ostertag, 2003). 

M. Koshiba, and K. Inoue, Simple and efficient finite-element analysis of microwave and optical waveguides, IEEE Transactions Microwave Theory Technology 40, 371-377 (1992). 

Uno, T., Asai, T., Uchida, Y., and Arimura, H, (2004) An efficient algorithm for enumerating closed patterns in transaction databases. Lecture Notes in Artificial Intelligence 3245, 16-31. 

Torts induce efficient behavior in the presence of transaction costs only if they imitate the outcomes of contracts in the absence of transaction costs. If damage awards to victims are to substitute for the outcomes of an explicit risk-information market that does not exist because of transaction costs, then the damage awards must be based on data that reflect the willingness of people to accept known risks, such as wage premiums found in risky occupations. Instead, damage awards are usually based on an injured person s actual lost income, a figure that is lower than the wages people demand to accept known risks (Dewees 1986). 

Equity or value conflicts involve the initial creation and distribution of property rights. Equity conflicts also arise when some citizens want to alter property rights by majority-rule political decisions instead of market transactions. Equity conflicts cannot be resolved with unanimous consent, while efficiency conflicts can. 

Weickert J, ter Haar Romeny B and Viergever MA 1998 Efficient and reliable schemes for nonlinear diffusion filtering. IEEE Transactions on Image Processing 7(3), 398-410. 

Which areas, then, should be outsourced Efficiency gains and reduction of capital employed have to be balanced against higher transaction costs and a considerable risk of losing internal knowledge. Services that can be clearly specified and planned would typically be purchased externally if this allows a cost reduction. Detailed engineering is one example, while breakdown maintenance clearly would not fall into this group. 

In pharmacy, it is often said, If it isn t documented, it didn t happen. With this in mind, it is easy to understand the importance of a system that is conducive to and promotes documentation. There is a need to build or select systems in which documentation is offered as a by-product of the transactions performed by professionals. Ideally, the system should anticipate and prepopulate documentation forms. Documentation is an absolute must in any well-designed information system, and therefore, a system should not even be considered unless it promotes efficient documentation. 

Of course, efficiency considerations are merely the beginning, and we now examine five other considerations relevant to auctions, namely the distribution of the economic rents created by C02 limits in the economy competitiveness effects of auctioning compared to grandfathering legal considerations dynamic incentives and transaction costs. 

Static efficiency Distribution of rents Competitiveness Legal considerations Dynamic incentives Transaction costs Auctions Auctions in theory, free allocation in practice Depends upon use of auction revenues Auctions Auctions Uncertain, favours auctions in medium term... 

Lewis, M.A., J.G. Masin (2005), Viability and Efficiency Calculations for the Hybrid Cu-CI Thermochemical Cycle , Transactions of the American Nuclear Society, 92, pp. 98-99. 

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