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%.
G. Expand in-house ICDs to reduce rate on purchased ICDs:
Sometimes it is better for the company to increase the activities (ICDs) inside the company in order to reduce the effective rate paid on purchased ICDs. This occurs when the price on purchased ICDs is high enough to allow the company to make a return on its investment by producing the same ICDs in-house rather than purchasing them from third parties.
Sell direct rather than through intermediaries:
Buy and operate current intermediary
|1||2085||1989||Foreign distillers, Guinness for example, have been buying up the importers that market their brands worldwide. The acquisitions give the companies better control over costs and brand strategies.|
|2||2086||1989||To gain greater control over the packaging and distribution of its sodas, Coke formed Coca-Cola Enterprises three years ago by buying several independent bottlers and combining them.|
|3||3316||2008||John McConnell managed Worthington Industries to become a conglomerate with nearly $2 billion in sales and an unbroken annual record of profits for almost 50 years. With a big demand for steel after WWII, the big steel companies had little interest in the specialized demands of smaller consumers. McConnell decided to open an independent service center to shape and process big steel sheets into smaller pieces for industries. The company produced a wide range of products for the automobile industry and acquired a former customer that produced propane cylinders, backyard BBQs, and helium cylinders for balloons.|
|4||3585||1992||Carrier's workers suggested that they themselves install new automation machines. Mgmt agreed, and some workers flew to machine-tool plants to learn how to assemble the equipment. Workers feel a sense of ownership, and the company saved $1 million on installation costs. Plus, workers don't have to wait for maintenance workers to come fix a machine that breaks down.|
|5||3634||1996||Premark recently replaced its Japanese distributor with a company-owned operation and bought out a Hobart licensee in Australia.|
|6||4813||2003||Cox will save money by routing calls over its own Internet network.|
|7||5141||1997||All stores have sign-maker equipment, which provides quick, professional-quality in-store promotional product.|
|8||7372||2000||Serena Software had previously only been a research-and-development company that relied on contractors for distribution. The Company decided to reach customers directly instead and bought reseller Optima.|
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