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.

Use sources related to the company

No.	Industry SIC	Year	Notes
1	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. After joining an MPA, partners may engage in different levels of involvement. Partners can engage in formal exchange of information, participate in committees where proposals are negotiated, design and certify products, or oversee the MPA's operations by gaining a seat on the board. Less-involved partners can benefit from the collective effort of other partners by accessing technology and marketing resources without adequately sharing the cost and other burdens of managing and promoting the MPA.
2	3200	2004	Temex, the highly inventive Mexican cement maker, devotes nine days each year to the harvesting of employee ideas. Each of these innovation days is focused on a particular business or function. In advance of the event, a sponsoring vice president personally invites hundreds of employees to submit ideas around a chosen theme-developing novel customer solutions, for instance, or dramatically improving cost efficiency.
3	3600	1986	GE's switch from steel dishwasher interiors to plastic cut costs because plastics and plastics-forming technology are major GE businesses.
4	3600	2007	Companies are reluctant to outsource engineering services as it typically accounts for a tiny portion of the total cost of the product. Managers are often fiercely protective, fearing intellectual properly theft. However, some simple parts may be handled advantageously in low-cost regions. Delphi Corp. shifted auto parts engineering to Eastern Europe and Asia and slashed its engineering costs by as much as 65% while boosting sales to international firms.
5	3651	2008	Sony and Sharp are partnering up in the flat-panel TV business, with Sony investing in a Sharp plant to make LCDs. In December, Toshiba said it will team up with Sharp as well to buy LCD panels for Toshiba flat-panel TVs and stop producing its own panels.
6	3711	2007	The Global Engine Manufacturing plant, a joint venture between Daimler-Chrysler, Hyundai and Mitsubishi employs union employees and lower-paid contract employees and gives employees a stake in the plant's success with performance bonuses. The plant is heavily automated and much more efficient than comparable operations. Workers work longer but have more vacation time and their contracts are simplified. Despite its success, analysts predict that the plant cannot be used as a model for the reform of the auto industry as it was built from scratch, employees were selected for their flexibility and education and union resistance.
7	4832	1997	Jacor also recently purchased a satellite provider, which will enable the company to more efficiently distribute its programming and, separately, a traffic information company located in Southern California that provides reports to radio and television.
8	4832	1997	Jacor is able to develop regional clusters by leveraging the costs associated with the delivery of expensive programming by transporting content via satellite into markets adjacent to the company's core broadcast areas.
9	5944	2005	Tiffany & Co. grades all of its diamonds through its own laboratory and doesn't rely on any outside gemological institutes.
10	7372	2001	Microsoft self-insures 30,000 workers. "We've historically had and continue to have a young, healthy population. It doesn't make sense for us to be pooled with other employers who don't." Self-insurance has allowed the company to higher 24-hour nurses to cut doctor visits.
11	7372	2008	Outstart, an online technologies provider, allows ExactTarget's sales force to post and answer questions about the software company's products and procedures. Sales-support staff can also post useful tools on the website, including videos, training quizzes, and case studies. ExactTarget has also designated half a dozen sales reps to be the system's internal champions, encouraging and showing others how to use it.
12	7832	2007	Research indicates that ads played in theaters are more effective than television advertising yet ad sales are stagnant. National CineMedia, a entity owned by AMC, Regal and Cinemark is working to increase ad revenue for its theaters. New technology has made it faster and cheaper to run ads. The NCM partnership should appeal to advertisers by streamlining the purchasing process.
13	8111	1990	Since late 1960s, law firms have been regularly boosting billing rates to cover their associates' soaring salaries. So companies started taking the work in-house. Corporate consultants say it costs 1/3 less to have work handled by in-house lawyers.
14	8221	2007	Many elite universities have generated strong returns on their endowments. They are now allowing alumni and donors willing to donate at least $100,000 to get in on the action. The donation will provide investors an immediate tax deduction and an income for life but cannot be passed down to heirs. In order to do so, donors must set up a charitable remainder trust, often funded with appreciated stock. The trust can sell the shares tax-free and invest the proceeds in the endowment, which will pay the beneficiary at least 5% of its fair market value each year for a set period. While this can be a good source of income for investors, they do have to pay standard income tax rates on the proceeds.

<<Return to Reduce the Rate of Cost