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Costs: Brainstorming Ideas to Increase the Output for Your Fixed-Cost ICDs

Here's What's New on StrategyStreet

We have upgraded the Improve/Cost Management section of StrategyStreet, where we provide brainstorming ideas to help you reduce your costs. Specifically, we have streamlined our ideas and added many new examples in the fourth method of improving productivity.

There are four approaches to increasing a company’s productivity, measured by the units of Input over the units of Output. The fourth of these four approaches to managing costs calls for increasing the Output over which a fixed cost Intermediate Cost Driver (ICD) is used.

In this new section, we describe the major approaches to increasing the Output for a fixed cost ICD:

  • Acquire a 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.

  • 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. We have found that astute managements use three approaches to the use of fixed cost ICDs with additional customers:

* Use the fixed cost ICDs of major cost functions of the company with competitors who employ outsourcing.
* Combine fixed cost ICDs from the major cost functions of the company with competitors into a separate business.
* Use fixed cost ICDs from the major cost functions of the company with entirely new customer segments.

This new brainstorming outline offers many more concepts and examples than our previous version.

This completes our upgrade of the Improve/Cost Management section of StrategyStreet. In total, now, we offer several hundred concepts, illustrated with about 3500 real-world examples, of proven methods to reduce costs. To our knowledge, this is the most comprehensive set of cost reduction ideas available anywhere in the world.

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