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.
Combine purchases with another purchaser: With related companies
|1||5331||2004||To cut costs, Sam's Club began leveraging its buying power with that of Wal-Mart's discount stores and stopped offering coupons, rebates and discounted memberships.|
|2||3711||1999||A well-managed smaller car company can outwit larger companies using economies of scale. GM got a 50% stake in Saab AB and Saab used GM's strength to get discounts from suppliers.|
<<Return to Reduce the Rate of Cost