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:
Eliminate intermediary and sell direct

No. Industry SIC Year Notes
1 2273 1993 Shaw bypasses wholesalers through a communications system that enables them to take orders directly from 37,000 retailers.
2 2321 2000 Gildan is a maker of blank sweatshirts, T-shirts, and golf shirts that sells its products via official distributors. These distributors then sell to screen printers. Its rivals, however, bypass distributors and sell directly to major retail accounts.
3 2800 1996 Sigma now shifting to direct sales (from catalogs) to sell their research products.
4 3571 1999 Dell Computer, for years, has bypassed store-front retailers and the PC distributors who traditionally keep them stocked, going instead straight to the consumer with catalogs, an 800 number and Web sites.
5 3571 2000 By using the Internet, mail-orders, and phone sales computer companies are able to reach buyers previously too small for dealers to reach. Direct marketing allows sellers to reach those markets previously too small for dealers.
6 3576 1996 Bay Networks moves products through distributors; Cabletron sells direct.
7 3639 1992 Forward Integration: Maytag has terminated customer relationships with many of its JennAir distributors, who are large customers, and opted to serve customers direct.
8 4512 1996 Rather than buy into a central reservation system, Western Pacific sells 60% of its tickets directly.
9 5399 2002 Online retailing has transformed the structure of many old-line businesses, particularly large manufacturers and distributors that now sell direct to consumers.
10 5511 1999 CarOrder's president plans to go Smith one better by letting people order cars on-line and having deliverymen in neatly pressed polo shirts and khakis drop off cars at customers' driveways.
11 5961 1999 With Bluefly, the company can use the Net to reach a broader audience without costly retail outlets.
12 7011 2002 Serving customers from their own web site is by far the cheapest way for the big hotel companies to sell rooms.
13 7372 1986 Unlike Microsoft and Lotus, Ashton-Tate said it has decided not to bypass its independent distributors and sell software directly to large corporate customers. "We're not skimming the cream off the top."
14 7812 1990 New Line, a small independent movie producer, handles its own distribution.

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