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%.
F. Change source of supply to a less expensive supplier:
A change in the supplier relationship may enable the company to switch to a less expensive supplier. The supplier may be less expensive because it has lower costs or because it reduces the company’s logistic expenses.
Source from new suppliers in better locations for costs: Near low-cost labor:
|1||3571||2005||In response to upstarts overseas, IBM is taking a new approach by betting that giveaways of precious technology will expand the market and boost its products sales to meet that new demand. IBM has responded to the threat from upstarts in India by cutting 14,500 jobs, mostly in Europe, and then hiring a reported 14,000 people in India as a strategic low-cost move. The hires in India would add to the 13,000 programmers already from India, Brazil, or China. It is expected that IBM Services' headcount in India will top 52,000 next year, putting IBM in India on par with Winpro, the largest Indian software company.|
|2||3674||1994||Japanese electronics sector increasingly moving production to Taiwan, and Sony also to India, thanks to the high yen which makes Japanese exports more expensive and the relatively high cost of labor in Japan.|
|3||8742||2007||In 2001, Accenture committed to the aggressive expansion of its business processing unit. Accenture set up a portion of its consulting operations in India. Accenture can take advantage of low labor costs while leveraging the company's tech know-how and expertise in a way that Indian companies cannot.|
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