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||0||1986||Inter-Tech selected Haiti over other Caribbean countries for manufacturing because it found the Haitians had no preconceived ideas about Americans, while other countries resented the American presence.|
|2||2033||1996||Most food-processing companies use chemicals or steam to peel fruit because labor is so expensive. UniMark delivers a tastier, fresher product because it can afford to hand-peel the fruit using Mexican labor.|
|3||2339||2006||Chinese factories are ramping up production of knock-off denim meant to compete with the expensive Japanese fabric that has become the hallmark of premium jeans. To hit that lower price point, the Paper Denim and Cloth label is cutting its jeans prices this month to $88 from $120, and to $180 from $220. The company says it's still using Japanese denim, but has shifted its final wash process to much cheaper facilities overseas, in China and the Dominican Republic.|
|4||3579||1992||Smith Corona announced that it would close its last American plant and open one in Mexico that would save the Co. at least $15 million annually in labor and other costs.|
|5||3621||1997||With 75% of its production in Mexico at an average hourly wage below $3.00, the company not only boasts strong 12-13% margins in its electric motors division, but also is well positioned to absorb acquisitions and bring acquired cost structures into line.|
|6||3634||1997||More than 500 employees of the Sunbeam-Oster plant here will lose their jobs because the company is moving most of their operation to Mexico. The company announced last November that it was closing 18 of its 26 plants.|
|7||3700||1996||Paccar had to close a plant when union workers struck. Has moved some production to Mexico and China.|
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