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: Through a major customer

No. Industry SIC Year Notes
1 0 2007 Lobbying and legislation has made it easier and cheaper for small companies to offer health insurance to their employees. Independent contractors affiliated with a larger organization have seen their insurance options expand as many professional associations allow agents to buy into group plans.
2 4213 1998 National carriers with their large volume purchases have opened the door for owner operators to buy new equipment from the manufactures at prices more favorable then the owner operator could obtain on his own.
3 4213 1998 Landstar is also somewhat unique in that it provides its BCOs the ability to lower operating costs through joint purchasing agreements.

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