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%.
C. Change the components of the rate of costs to reach a lower total rate:
Sometimes it is possible to break the price of a purchase into its component parts. Then the company may seek to substitute a less expensive component for a more expensive component to reduce the effective rate the company pays on its purchases.
Minimum performance required for the standard rate
|1||0||2008||Managers need to learn how to bond with remote employees by close contact and clear objectives. If managers can't hire team members personally, have the managers meet them on their turf in either an individual meeting or town hall-like meeting. The meetings are a good way to set the tone for open and frequent communication with remote employees. Use simple and clear language as much as possible when meeting employees, not overdoing it on the metaphors and analogies. Communicate each person's role and business objectives regularly, and establish agreed upon ways to resolve conflicts and solve problems early on.|
|2||2721||1986||To save costs, Time is seeking a number of concessions from the Guild, including an increase in the workweek from 35 to 40 hours with no extra pay.|
|3||3500||2006||Germany sees job gains due to the increased flexibility by Europe's labor. Under the new labor deals forged with management, HAWE Hydraulics workers in Germany rely more on so-called "slide-time" accounts, which allow them to bank extra hours during busy periods and trade them in for pension credits, cash, or time off during slower periods. The practice has become more common in the German industry in the past five years. The work week now can vary from 29 to 42 hours, allowing HAWE to react quickly to its erratic work flow while reducing overtime costs.|
|4||3711||2008||Toyota's advantage in U.S. labor costs is disappearing as its plants age and Detroit cuts back. General Motors currently has 74,500 workers, but will scale back to 68,000 by 2011, and up to one-third of them will be earning the lower wage. GM could potentially cut its wage bill by $2.7 billion annually by 2011, which adds up to $841 a car, half of the current cost differential with Toyota. A retiree health-care deal, which will give the United Auto Workers union about $36 billion in exchange for taking over medical insurance, should cut an additional $699/car on the differential for GM. That would turn Toyota's labor cost advantage over GM of $1,394 per car to $108 disadvantage by 2011.|
|5||4512||2005||Southwest Airlines is spearheading some of the most aggressive moves that the low-fare king has made in years. It plans to increase capacity at least 10% this year, adding 29 planes to its fleet of 417. Southwest needs healthy expansion to help keep its own unit costs under control. It boasts the richest wages for pilots of narrow-body jets – 38% above those at United Airlines Inc., after that carrier's deep pay cuts. By growing, Southwest averages in new lower-paid employees and spreads its costs over more seats. At the same time, it's pushing for higher productivity from its already highly efficient workers. Southwest's pilots say they're being asked to fly 70 hours a month, up from about 65. Pilots at the traditional carriers average less than 60.|
|6||6321||2002||A self-insured company typically gives an employee who is single $1000 in pretax health care money to spend without restrictions ($1500 for a childless couple, $2000 for families). If the amount is exceeded, the employee is responsible for a $500 deductible, after which the employer picks up 80% to 100% if the bills. Unspent balances are rolled over for the next year.|
|7||7319||2004||Yellow Book USA is biting into major phone companies' profits as it lowers ad rates to attract more customers. The company is housed in one building with a sales force of 3,300, in comparison with Verizon's sales force of 2,100 at its headquarters. Yellow Book has sales that are only about a quarter of Verizon's $4 billion in yellow pages revenue. Yellow Book agents, however, don't have their own email accounts or laptops, though they do get small allowances for cars and cell phones.|
<<Return to Reduce the Rate of Cost