Brainstorming Ideas: 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.

Warnings and Advice

No.	Industry SIC	Year	Notes
1	1311	1996	Oil companies that are integrated (both drill for oil and refine it) can win on one end and lose on the other when prices are volatile.
2	2000	1993	Brand-name companies boosting private-label production often do so by buying from an existing private-label maker with an est. market, such as ConAgra. Companies often must keep separate sales forces to make distinctive pitches to retailers.
3	2273	1996	Inside observers feel that Shaw's early move into yarn spinning allowed it to lock in a low-cost position in nylon carpet manufacturing, but now this market is beset with excess capacity thus undermining Shaw's lock on industry capacity.
4	3537	1998	The company's strength is in direct distribution, which secures a high level of aftermarket service. Jungheinrich has 3,000 employees in service, and this is growing.
5	3571	1999	Compaq tried to counter Dell's direct selling over the internet by aggressively expanding its own direct sales program: DirectPlus. Their resellers became angry because customers could by-pass the resellers and buy computers directly over the web for 8-9% less.
6	3714	1989	One reason in-house parts suppliers are said to be less accurate than outside shops is because specifications are too tight due to a lack of communication between designers and manufacturers.
7	5411	2008	Tesco PLC opened its first stores in the U.S. last month, using Dunnhumby Ltd., which also works for Kroger Co., to fine-tune its offerings to shoppers' needs. Dunnhumby also works for other U.S. retailers such as Home Depot, Best Buy, and Staples.
8	5961	1999	Lens makers often balk at selling contacts to direct marketers for fear of upsetting the powerful optometrists.
9	5999	2003	Drop-shipping isn't for everybody. Small, specialty online retailers that carry fewer than a couple hundred products may find it less costly to manage inventory and ship the goods themselves.
10	7011	2002	Hotel parent companies are fighting back against web booking firms trying to increase bookings at their own branded web sites where costs are lower and they can control their own prices.

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