Reduce the Rate of Cost for the Input Used to Produce the Output
Use the same type of input and the same activities, but pay less for the unit of input employed in producing the output. A reduction in rate is equivalent to a reduction in the number of inputs for the same ICD. For example, if a person who makes $10 per hour could produce the same amount of output as a person making $20 an hour, the substitution of the $10 person for the $20 person in the process would be equivalent to cutting the number of people required to do the work by 50%.
A. Purchase in Larger Quantities:
Purchase in larger quantities to get lower unit prices. In most markets a customer who purchases in larger quantities gets a lower unit price than one who purchases in smaller quantities. These concepts increase the amount of purchases the company makes at one time.
Offer security in return for lower rate
|1||0||1993||Labor Unions are changing. At AT&T, Goodyear, Xerox, and Ford, union members are helping make management decisions, and giving up wage concessions to help save jobs by making industries more competitive.|
|2||2300||1991||When workers at Farris Fashions threatened to form a union, the owner of the factory vowed to close the factory. Workers then voted against having a textile union try to negotiate a contract for them.|
|3||3465||1988||Champion sold DeVilbiss Co., made factories more efficient, and satisfied union demands for more job security, winning a new contract with a minimal wage increase.|
|4||3711||2005||Ford Motor Co. plans to overhaul its global purchasing process to offer larger, long-term contracts to a smaller group of suppliers on future models, a switch that could save billions of dollars a year. In the initial phase, Ford will cut by more than half the number of suppliers from whom it buys 20 key parts such as seats, tires, and bumpers. Ultimately, Ford aims to shrink from about 2,500 suppliers world-wide to less than 1,000.|
|5||4111||1990||In March 1987, CED persuaded workers to accept 22% wage cuts, explaining that the alternative was to shut down the company.|
|6||4512||1983||In 1983, AMR negotiated a two-tiered wage system whereby newly hired people were paid 50% below the existing rates. In exchange, the unions received job security.|
|7||5331||2004||Suppliers working with Wal-Mart get long-term contracts in return for lowered costs, which can motivate firms to seek ways to cut costs and improve their productivity. On the downside, Wal-Mart's relentless cost pressure can lead vendors to cut corners.|
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