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||2899||2006||DuPont is saving a bundle by farming out legal services to OfficeTiger in Asia. Much of the work OfficeTiger's attorneys do is tedious: digitizing and indexing decades-old paperwork. In one case against 10 insurers, DuPont aims to recover more than $100 million in payouts to thousands of former workers who claimed their illnesses came from exposure to asbestos in DuPont facilities. By going offshore, DuPont is planning to save 40% to 60% on document work and cut up to $6 million from its annual $200 million-plus in legal spending. It also hopes to shave months off the discovery process in court cases.|
|2||3021||1996||Sierra Industries is importing from Indonesia materials to manufacture 21 models of running, basketball and tennis shoes, among others.|
|3||3021||1997||Nike Inc. is considering 'significant' expansion in Vietnam as part of plans to widen its production network in Southeast Asia. Vietnam now provides about 3% of Nike's output.|
|4||3572||1993||Conner continues to use only U.S. talent to design products. But it has shifted virtually all its manufacturing to Asia. 3 years ago, Conner employed no engineers abroad. Today, 200 of its 675 engineers are Singaporeans.|
|5||3674||1994||So far, Japanese electronics makers have preferred to shift production of lower-tech items overseas, leaving in Japan the manufacture of higher-value-added products.|
|6||3711||2004||General Motors is ending the autonomy its branches in other countries have had for over 80 years. By tapping engineers in far-flung units who previously would have worked only on local models, GM is hoping to speed up development of U.S. models without spending more. GM is now using engineering centers in India, South Korea, and China to get work done at a lower cost while American and European engineers sleep.|
|7||3990||1990||A few firms like Keystone Camera Products refusing to move production overseas where labor is cheaper. Competitor Eastman Kodak makes cameras in Asia; as a result Keystone has had to cut prices 25% in the past two years.|
|8||5411||2005||The German retailer Metro is covering Eastern Europe and Asia with its warehouse stores. Farmers gain from the entree to a wider world that a network like Metro's can provide. Farm-raised Vietnamese catfish and shrimp are now supplying Metro stores worldwide. In India, Metro is working with nonprofits to train 14,000 shepherds and 1,000 fishermen in hygiene and chilling techniques, even as it finances repairs to ocean piers for tsunami-stricken fishermen. For Metro, it's not charity so much as quality control.|
|9||5611||2004||To hold down costs, Men's Wearhouses are located in shopping plazas rather than malls, and shuns splashy flagship stores in high-rent neighborhoods. It recently cut expenses by moving the manufacturing of one line of suits from Italy to Korea.|
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