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%.

E. Request supplier to lower the price of the input:

Negotiations with the supplier may sometimes result in a lower unit price for the input.

Request productivity pass-through

No. Industry SIC Year Notes
1 2033 1998 ODWA improved gross margins to 51.6%, a full three points above last year, and the highest margins the company has achieved since 1994. The continued realization of distribution efficiencies from third party partners also contributed to the company's profit.
2 3571 1984 Flextronics orders directly from suppliers at quantity discounts – as much as 40% less than what their customers might pay – and passes along some of the savings to clients.
3 3576 2004 Adtran's sales declined in 2001 and 2002, but it still turned in a profit both years. One move that helped is that the company let go only 100 people, keeping 1600 who took pay cuts. The result: Adtran had key talent ready to fight again as the market picked up. If it had fired more people, it would've needed to hire and train replacements. The company's revenue increased 15% to $397 million last year.
4 3711 1993 The automotive division of Britain's Lucas Industries PLC has promised VW price reductions for each of the next 3 years on disk and drum brakes.
5 3711 1995 Using air conditioning that is factory-installed rather than dealer-installed trims price from $1200 or more to $850.
6 3711 2004 ChryslerDaimler and its unionized workers are letting others shoulder the capital and labor costs of building a car. The idea is based on the premise that when suppliers are left to themselves they will design, build and operate a factory more cheaply than their customers can. Chrysler is also aiming to curb wage costs and get more flexibility to adjust production if necessary. It offloads much of those costs to suppliers and could significantly lower Chrysler's future labor costs.
7 3711 2005 Mitsubishi Motors had initial success, which meant business for other Mitsubishi group members who supplied steel, rubber, glass and electronic parts. But Mitsubishi never squeezed suppliers for cost savings in the manner of Toyota Motor whose ruthless reputation for quality has made it the world's most profitable auto maker. Toyota posted income of more than $11 billion in 2004.
8 3721 2000 In order for Eclipse to manufacture low cost jets it must get its suppliers to redo their manufacturing processes in order to bring down their cost levels.
9 5141 1997 ProSource shares with the customer the savings achieved from that buying power. In 1995 only 3.4% of total non-proprietary product was purchased and then resold by the company. Management believes this can be expanded to 50% over time.
10 5651 2006 Steve & Barry's University Sportswear lures shoppers with casual clothing priced $7.98 or less – a 40% discount to prices at Wal-Mart Stores Inc. and Target Corp. While malls usually give new tenants allowances of $20 to $30 a square foot to build interiors, the popularity of Steve & Barry's has allowed the chain to command “build-out” fees as high as $80, considerably more than actual costs. That's enough to cover a store's initial inventory, lowering operational costs further.
11 6321 2001 Progressive's biggest cost in its self-insurance is maternity. Therefore, it haggled on obstetric fees; doctors have agreed to charge the same amount for normal delivery and a Caesarian section. Progressive looks at the math to find the best approach to health benefits.

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