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||2844||2004||Avon expanded its cosmetics business globally by rebuilding its manufacturing and transportation infrastructure from top to bottom. Avon's new end-to-end view also changed how the company works with suppliers. The company used to seek out the least expensive material and buy in large volumes to keep costs low, but that didn't necessarily mean the lowest price equaled the lowest total cost. Today, Avon buys most of its inventory from suppliers close to its factories in Poland and Germany. Although the company may pay a slightly higher price on a per-unit basis, managing fewer relationships with more flexible, responsive suppliers resulted in a lower cost.|
|3||3571||2006||IBM Corp. plans to invest $100 million over the next two years to fund business ideas generated by a world-wide innovation contest. IBM also has signed an agreement with China's Ministry of Education to develop courses for Chinese universities to teach skills for the information-technology and business services sectors. IBM hopes to establish the curriculum at 50 Chinese universities over the next two years.|
|4||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.|
|5||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.|
|6||4813||1994||AT&T is aggressively hiring abroad. 10 years ago, it had only 60 employees outside the U.S.; today, it boasts 54,000, including 20,000 managers.|
|7||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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