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%.

C. Change the components of the rate of costs to reach a lower total rate:

Sometimes it is possible to break the price of a purchase into its component parts. Then the company may seek to substitute a less expensive component for a more expensive component to reduce the effective rate the company pays on its purchases.

Optional components of the rate paid:
Price cap

No.	Industry SIC	Year	Notes
1	0	1989	Kohlberg, Kravis arranging interest rate cap: it will pay a fee, in exchange for a promise that if interest rates exceed a certain level, the bank will pay the excess interest to Kohlberg, Kravis.
2	0	2006	Instead of ending coverage, some companies are turning retiree health care into a 401(k)-like perk. As of the now, the amount of unfunded retiree health obligations of S&P 500 companies total to $321 billion. Many companies have been trimming these costs by dumping retiree health care entirely. Only 21% of large employers offered such benefits to those ever 25 in 2005, compared with 40% in 1993. But rather than drop benefits altogether, a small but growing number of companies are trying one new approach: instead of promising to pay, say, half a retiree's premiums, these companies are setting aside a fixed amount for each pensioner's medical care. After that, retirees are on their own, even if costs top what's in their account. Embarq Corp. is setting aside $1,300 for every year an employee works past the age of 50, and the money accumulates with interest.
3	0	2008	Companies are offering stipends to workers who buy their own health coverage in the individual market, such as eHealthInsurace Services Inc. This strategy shields employers from premium increases and reduces administrative burdens, while providing employees with help toward their medical expenses.
4	3713	2005	To further offset the higher costs of health care besides higher co-payments and deductibles, companies are testing new ways to find more savings. Oshkosh Truck Corp., has veered away from its old and costly health plan that contributed to the double-digit annual growth in Oshkosh's health-care bill. Under the new plan enacted in January 2004, annual physicals and other preventative tests such as mammograms and prostate cancer screening are fully covered. After that, workers and their families receive a $1,000 annual health-care account. Any unspent portion can be rolled into the following year, but once that account is tapped out, workers are responsible for the next $1,500 of medical expenses. If the expenses go beyond that, the company steps back in and will pick up 90% of expenses. A pilot test of the program showed costs going up only to the high single digits.
5	5699	2006	Built NY, an accessories maker based in New York, is stopping product imitators in patent infringement cases. Globally, Built NY has relied on two U.S. lawyers who have a network of attorneys in other nations. It tells attorneys “Here is the budget.” These lawyers then hire associates in Denmark, Australia, and other countries, and those lawyers only spend the budgeted sums to do their legal work. This keeps costs from spiraling.
6	5941	1996	Hibbett prides itself on obtaining advantageous terms such as exclusives, kick out clauses, ceilings put on common area maintenance charges, as well as percentage rents.
7	8062	2004	In partnership with Sharp HealthCare, Bidshift developed an Internet-based system that turns the scheduling of extra shifts into a sort of auction. When Sharp needs nurses for additional shifts, it puts those shifts up on BidShift's Web Site with the top price it's willing to pay for the shift. The nurse who's willing to work for the least wins the shift. Some 1,400 shifts have been filled through BidShift.

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