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||3200||2006||In industries from airlines to glass-making, companies are curbing usage, revamping machinery, and shifting production schedules to offset energy costs. Pinehall Brick Co., for example, has started putting slightly larger holes in its bricks because lighter bricks take less power to produce.|
|2||4213||1997||Substituting rail transport for Teamster-driven trucks over the linehaul (terminal-to-terminal) portion of the move produces a cost savings of 25-40% per mile.|
|3||5331||2007||Software is allowing large retailers to implement more logical scheduling and reduce costs. Mervyns has adjusted its staffing to include a lot more part-time workers, which reduces costs. The system helps retailers conform to federal wage-and-hour laws and state variations. It may also alert management when a worker is approaching full-time status or overtime, which would require higher wages and benefits.|
|4||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. Whereas Wal-Mart can only open their huge stores on the outskirts of towns, discounter chains can put up their stores right in the downtown neighborhoods where people live. Parking is easier, product prices are sometimes lower than Wal-Mart's, and shopping can be faster. Wal-Mart competes on price and assortment while dollar stores compete on price and convenience. Dollar stores can beat Wal-Mart's prices for a number of reasons. First of all, they offer even less frills, thus having very low overhead costs. They also open stores in second-tier strip malls and pick-up cut-rate leases when other retailers go out of business. To save money, the discount stores basically don't do any marketing and employ only about four people per store. All the discount chains rely on closeout and overstocked merchandise for a portion of sales. Dollar General and Family Dollar generally sell items that are $10 or less. Dollar Tree Stores Inc. prices all their goods at $1, while Dollar General prices most goods in round numbers under $10.|
|5||6512||2008||Software start-ups such as Carbonetworks Corp., Optimum Energy LLC, and Verdien Corp. are making new programs to help businesses to monitor their energy use and cut fuel bills. Glenborough LLC, a property-investment and management company, paid about $350,000 after rebates on one of its buildings for software designed to make air-conditioning chilllers use power at times of the day when power is cheapest. Optimum Energy's software was installed in the office building in La Jolla, CA, which Glenborough oversees. The energy savings are expected to run about $110,000 a year.|
|6||7311||2005||Kmart recently turned to new media ad agency Not Traditional Media to raise its profile in nine markets. The agency connected Kmart with the Active Network of San Diego, which provides online registration and Web services to sports and recreation departments. The Active Network got Kmart to donate a new scoreboard marked with its logo for the gym at an Illinois high school, among about a dozen community improvement projects. The efforts put Kmart's name out to 85,200 people and cost less than $500,000.|
|7||8062||2008||Hospitals are recycling a growing number of medical devices labeled as single-use such as scissors, scrubs, and surgeon blades, in a bid to save costs and stem medical waste. Kaiser Permanente started working with Ascent to reprocess single-use devices more than a decade ago, and sharply increased its use of reprocessed devices in 2006. Kaiser shaved about $3.5 million from its device costs in 2007, and eliminated about 45.7 tons of medical waste.|
<<Return to Reduce the Rate of Cost