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%.
D. Use subsidies offered by third parties to reduce total rate:
While the company may pay the regular price to the vendor of the product, subsidies available in the market place may reduce this effective rate by offsetting part or all of the purchase price.
Warnings and Advice
| No. | Industry SIC | Year | Notes |
| 1 | 0 | 2007 | Faced with rising healthcare costs, some small businesses are encouraging their employees to get individual health insurance like that offered from Zane Benefits LLC. They skirt federal tax and insurance rules by giving employees money through a health reimbursement arrangement which can then be put towards an individual plan. A business with healthy employees can cover a large chunk of insurance bills at a much lower rate than that of a group plan. However, unhealthy patients may have trouble finding a company to insure them and the legality of individual plans has not been completely clarified.. |
| 2 | 3600 | 1995 | G.E. 's appliance division reverted to competitive bidding after finding that some preferred suppliers that had inventory on consignment weren't offering the lowest prices. |
| 3 | 7372 | 2004 | Nintendo and Sega made it risky for their development partners to increase the variety of the games because of the high up front investments to develop the software and load it onto expensive cartridges. Nintendo required its third party developers to pay all its proprietary cartridge cost as well as manufacturing fees and royalties up front so the soft ware developer or all the commercialization risk. In addition, the cartridges took a minimum of three months to respond to a change in demand. As a result, retailers also faced significant risk of purchasing cartridges and were unwilling to place orders for expensive new Nintendo titles that might flop. So retailers allocated shelf space only to a limited assortment of well known and proven game titles or sequels. This allowed Sony to develop a new market where it maximized variety. |
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