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%.
B. Reduce the quality of the input used by using a cheaper form of the input:
The reduction in quality should bring with it a reduction in the rate paid for the input.
|1||2086||2008||PepsiCo is reducing the amount of plastic it uses in the bottles of some non-soda drinks, in an effort to reduce environment waste and appeal to environmentally conscious customers. By reducing the thickness of bottle walls using new technology, the new half-liter bottle contains 20% less plastic. The bottles are still structurally sound enough to protect ingredients and strong enough to be stacked and transported.|
|2||5411||2004||While dollar stores still rely on low-income households for the majority of sales, some dollar store companies are moving up the retail food chain. As a result, dollar stores are gaining clout among the consumer-products and food manufacturers who once ignored them. Procter & Gamble Co., for example, created for dollar stores a special 18-ounce bottle of Dawn dish soap that sells for $1. Kraft Foods Inc. sells a 12-ounce box of macaroni and cheese through dollar stores. It’s about 25% larger than the traditional supermarket size and isn’t available in fancy shapes or enhanced flavors. Limiting such choice is one way dollar stores simplify their distribution processes and keep costs down.|
|3||5411||2004||Dollar stores are gaining in popularity as a growing legion of shoppers find Wal-Mart too pricey or too hard to get to. Many suppliers are also courting the dollar chains. Procter & Gamble has installed a team of workers at Dollar General’s headquarters, just like at Wal-Mart. Its products now account for 11% of Dollar General’s sales. P&G is even producing special, smaller sizes of its products so that the discount stores can hit their low prices. For example, P&G produces 18-ounce bottles of Dawn dish soap to sell at $1.|
<<Return to Reduce the Rate of Cost