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.

Eliminate intermediary margin by purchasing direct

No.	Industry SIC	Year	Notes
1	0	2001	A lot of successful companies are starting to self-insure, which means that they act as their own health maintenance organizations. They negotiate for lower doctor's fees and pool drug buying. By doing this, they cut out middlemen. Health coverage costs $4,430 per worker last year and HMO premiums are rising 20%.
2	2800	2008	In an increasingly difficult economy, Geo-Tech Polymers was looking for a way to lessen shipping costs. To obtain timely quotes, Geo-Tech began using CarrierStore's online xCHANGE solution, in 2008, to receive spot quotes directly from major LTL and TL carriers. CarrierStore offers shippers a no-fee service that provides direct access to the pricing and linehaul departments of more than 35 carriers. Shippers receive multiple quotes within an hour based on supply and demand pricing with no added fees and no obligations. Taking advantage of the carriers' open capacity and eliminating broker fees allows substantial savings on the movement of volume and truckload shipments.
3	3498	1996	Shaw's size helps it get low prices for materials. Shaw can buy much of its steel for pipes direct from the manufacturer, cutting out distributors' costs and sometimes getting volume discounts.
4	4724	2002	Orbitz LLC. It sells plane tickets directly to consumers, cutting travel agents out of the loop.
5	4812	2006	Direct contracting helps big employers save money by cutting out the middleman and extra layers of bureaucracy and cost. The 16,000 employees at Sprint's new world headquarters in Overland Park, Kan., can choose health plans from big insurers or a plan Sprint put together in 2001 with physicians and four local hospitals. One of the payoffs of direct contracting has been greater predictability of costs. Sprint's plan has been 5% to 10% cheaper than programs with large insurance firms.
6	4953	2006	Direct contracting helps big employers save money by cutting out the middleman and extra layers of bureaucracy and cost. A year ago, Waste Management signed a deal with Kelsey-Seybold Clinic, a local doctors' group practice, to provide medical services for employees. Waste Management made the decision after an analyst's report found that Kelsey-Seybold's plan would be 16% cheaper than a regular insurance plan. Employees at Waste Management's headquarters can choose between a Kelsey-Seybold plan, called KelseyCare, or a Cigna PPO plan. KelseyCare can save corporate clients 15% to 30% on their health insurance costs. The savings come from better coordination of data and treatment. The idea works best in major metro areas. That's where medical groups are big enough to offer the widest range of expertise.
7	5112	1997	Superstore chains have been using their massive purchasing power to bypass middlemen and wring discounts from manufacturers.
8	5140	1994	Many large retail chains have begun buying direct from manufacturers.
9	5200	1996	Because of its large size, Wilmar gets price breaks from buying in very large quantities directly from manufacturers.
10	5331	2006	National brands face increasing competition as stores boost sales with their own labels. Last month, Levi Strauss & Co. reported a drop in sales of its low-priced Signature jeans, which is sells at Wal-Mart. One major reason was that the jeans were competing against Wal-Mart's in-house brand, called Metro 7. Levi's has run smack up against the private-label phenomenon, where retailers like Wal-Mart are cutting out the middleman and creating more brands of their own. That was they save money while getting their product to market much faster than if they relied solely on national brands. The upside for consumers is lower prices and more choice.
11	5531	1996	AutoZone, Pep Boys, Discount Auto Parts, and O'Reilly Automotive purchase from manufacturers, acting as their own wholesalers.
12	5600	2004	For many retailers facing continual margin squeezes, sourcing directly from China is proving to be an attractive option. Agents add markup that varies according to their services. Standard markups run from 3%-12%, and agents usually raise them even further. Some European and U.S. retailers may be paying 50% more than they need to as a result. By setting up local purchasing offices in China, like Wal-Mart, and equipping them with skilled professionals, and building relationships directly with suppliers, companies can eliminate this markup by agents.
13	5961	1998	Amazon will continue to increase direct buying from publishers to improve its cost structure over time.
14	5999	1999	Provident American had costly middlemen in an industry where distribution is inefficient. Cutting out the middleman will help it reduce costs.
15	6141	2004	First Data is expected to take the next step and offer banks its own credit cards. These cards would be co-branded with the banks, as Visa and MasterCard do today, but First Data could give the banks a bigger cut of each transaction fee than they now get from Visa and MasterCard. Banks and retailers would now have a way to bypass Visa and MasterCard and keep more of the money for themselves. The explosive growth in debit cards is changing the game. By being the first to market with emerging technologies–First Data can grab market share.
16	6311	1997	By eliminating the middle man, or the insurance agent, non-insurance companies such as banks and mutual fund companies can offer life insurance plans (underwritten by an insurance partner) at discounted prices.
17	7299	2007	As sales growth increased, TicketNetwork realized that it needed to create software that would simplify and speed-up the way it billed customers. The ticket broker previously received most of its payments from credit-card transactions, which carried a 2.7% fee and took several days. The company adopted a system that allowed it to send automatic electronic invoices and transfer money directly from customers' accounts to the company. The company pays Bank of America 20 to 25 cents per transaction, much less than the credit card surcharge. It has resulted in fewer bounced back transactions and has reduced necessary manpower dramatically. To encourage use of the system, TicketNetwork offers a small discount.
18	7361	1985	Firms that use large numbers of temps, including BofA, HP, and Fireman's Fund, have set up their own in-house pools to pare down the cost of hiring through temp agencies.
19	7841	1996	Blockbuster's new CEO is cutting costs by sacking middlemen & by strong-arming suppliers. It is eliminating its distributor and buying direct.

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