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%.
D. Use subsidies offered by third parties to reduce total rate:
While the company may pay the regular price to the vendor of the product, subsidies available in the market place may reduce this effective rate by offsetting part or all of the purchase price.
Use supplier subsidies
|1||3672||1993||Hi-Tech Manufacturing has hired more than 100 people supplied by Western Temporary Services over the past year. Western permits customers to pay for its services 30 days after the temps start. That gives Hi-Tech an extra monthly pool of $50k to finance growth.|
|2||3711||2007||Soaring healthcare costs have prompted companies and unions to look at Voluntary Employee Beneficiary Associations. General Motors and UAW forged a tentative deal that would create a $35 billion trust to fund and administer benefits for retirees and dependents. While GM will take a large hit, the ongoing drain of retiree health are costs will end. UAW members will be protected in case of corporate bankruptcy.|
|3||4213||1998||Preston Trucking, not party to the NMFA talks, will now need to reach its own agreement with the Teamsters. Preston has been working under a concession pact that has kept its workers below the "standard" rate for several years.|
|4||5945||2004||Suppliers Mattel Inc., Hasbro Inc., Leap Frog Enterprises Inc., and Lego AG are releasing a set of holiday toys to be sold exclusively at Toys 'R' Us stores – and footing the bill to advertise them on television. Wal-Mart dislodged Toys 'R' Us from its perch atop the toy business in 1999, largely by underpricing the competition. Analysts estimate that Wal-Mart currently commands 25% of the toy market, compared with 17% for Toys 'R' Us, now in second place. Wal-Mart's exclusive toys this season include Mattel's Disney Princess ride-on vehicle and a West Coast Chopper remote-controlled toy, which the retailer commissioned directly from a manufacturer in Asia. Wal-Mart's "Shrek 2" DVD will have an exclusive feature, a five-song CD.|
|5||7372||2005||In an effort to push back against Google, Yahoo, and other rivals, Microsoft has created a new series of Web services. These services are online counterparts, accessible through any browser, to its Windows and Office franchises and will be largely paid for by advertising. Windows Live will be for consumers, and Office Live will be for small businesses.|
|6||7515||1996||Oxford has formed links with a number of lenders who finance its leases at fairly low cost. They assume the credit risk for Oxford's leases and pay the company a premium for them upfront.|
|7||7841||2001||Netflix will purchase between 30 and 50,000 copies of a big title. Occasionally, more than 100,000. The company has supplier arrangements with the major studios that include discounted disks, and even getting disks free up front in exchange for revenue.|
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