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.

Use input with lower Performance:
Less Function

No.	Industry SIC	Year	Notes
1	0	2002	Temps clearly take less out of a firm than permanent employees. Their use is considered a variable cost instead of a fixed cost, since temps have no benefits or severance packages. It's not surprising, perhaps, that temps are working their way into higher and higher levels of management.
2	2721	2005	Launched in 2001, The Week is aimed at the U.S. intelligentsia. The news magazine became a must-read for politicians, celebrities and CEOs who like its smart distillation, presentation and the array of subjects. The average household income of the reader is $137,000. Stories are lifted and compressed from a variety of sources by a team of 20 editors. Costs are lower than those of competitors because there is no original reporting. To market the product, discounts and free subscriptions are given to important celebrities and CEOs in hopes that they will publicly praise the publication. Discounted rates lure in readers, 55% of whom pay the full price of $75 once the special offer ends. The publication has forged relationships with the Conference Board and holds forums on a variety of subjects to increase its exposure and reputation.
3	3519	2003	Instead of scurrying to China and other low wage countries as many other U.S. manufacturers have done, the Wauwatosa (Wis.) based company relocated its assembly work to a clutch of factories in America's rural South. The facilities are all nonunion, which means much lower labor expenses. The new plants are also smaller and focus on only one or two product lines, making them more manageable. And they're highly automated, allowing Briggs to cut jobs and bring the union at its headquarters plant to heel.
4	3711	2008	Toyota's advantage in U.S. labor costs is disappearing as its plants age and Detroit cuts back. Now that some of Toyota's plants are more than 20 years old, more workers are being paid at the top wage of $25/hr. However, a contract signed last fall will allow U.S. automakers to replace many highly paid employees with cheaper workers, closing in on Toyota's cost advantage. The older Toyota factories could have the highest labor costs of any auto factory in the U.S.
5	3715	1995	Wabash has a young work force, which gives it low health-care costs.
6	5331	2002	The store buys unwanted/leftover items from brand-name manufacturers and sells them at price reductions of 20% to 40%.
7	5912	2007	Some companies are offering jobs and training to people with mental and physical disabilities that once rendered them "unemployable." At Walgreen's newest distribution center, 40% of employees are disabled and the center is 20% more efficient than older facilities. Walgreen automated the process to make it more intuitive, using pictures and videos rather than numbers and script. Walgreen benefits from increased productivity and government funds.
	7379	1998	Kaplan's Onsale buys surplus or distressed goods from companies at fire-sale prices so they can weather low online bids for the goods.

<<Return to Reduce the Rate of Cost