Spread ICDs Over More Output

Increase the Output (O) over which a fixed cost ICD is used. This action reduces the quantity of a unique fixed cost ICD used to produce a unit of Output by increasing the units of Output. For example, a new product design, or a new process patent, are both ICDs that have virtually limitless capacity for use. These are fixed cost ICDs. You pay for them once and you can use them over a virtually unlimited amount of Output. Their ICD/O ratios are limited only by the current demand level for Output.

Advisories: These examples contain warnings and advice that should be considered as you are using the approach to cost improvement described below.

Examples: These are brief examples for each cost management concept, describing a situation where the concept is used or implied. Use these supporting examples in order to expand your range of ideas. These examples are neither mutually exclusive nor collectively exhaustive. There may be other illustrations of the concept in the outline.

We offer you both a short version and a long version of some of these cost management concepts. We have enough examples of some of these concepts to expand the concept into more specific concepts with their examples. Use the short version to complete your innovation in less time. Use the long version for more in-depth innovation.

A.
Acquire similar organization to spread fixed cost ICDs.
The acquisition of another organization with a similar business enables the company to take certain fixed cost ICDs in the form of processes and designs and use them over a larger amount of output.

  1. Warnings and Advice Advisories>>

  2. Buy company in complementary market Short Examples>> Long Examples>>

  3. Buy company in same market Short Examples>> Long Examples>>

B.
Use fixed cost ICDs with more customers.
By using fixed cost ICDs with more customer volume, the unit cost of the ICD declines as a component of the final Output cost.

  1. Warnings and Advice Advisories>>

  2. Use fixed cost ICDs with competitors who employ outsourcing. Sell ICDs in major cost functions of the company. Short Examples>> Long Examples>>

  3. Combine fixed cost ICDs with competitors into a separate business. Combine ICDs from the major cost functions of the company. Short Examples>> Long Examples>>

  4. Use fixed-cost ICDs with new customer segments. Sell ICDs in major cost functions of the company. Short Examples>> Long Examples>>

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