cost reduction present

8/2/2019 Cost Reduction Present

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Cost Reduction

Cost cutting is no longer the solution to

sustainable profitability, the key to success is

finding creative ways to prevent cost.


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DEFINITION OF COST REDUCTION

Cost reduction is to be understood as the achievement of

real and permanent reductions in the unit cost of the

goods manufactured or services rendered without

impassing their suitability for the use that is intended-

ICWA London.

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Achieving the goals of costreduction

Reducing the cost per unit.

Increasing productivity.

Create cash for reinvest in research and development

Reduce manufacturing costs to stay competitive

Reduce costs as a nonprofit so able to serve more people Lower costs of service in order to provide additional

services

To become more efficient

To prevent employee lay-offs

To prevent reduction in employee benefits


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How to reduct the cost?

Elimination of waste

Improving operations.

Increasing Productivity.

Cheaper materials.

Improved Standards of Quality.

Across the board reductions

Prioritized reductions

Departmental reductions

Reductions based on professional assessment

Budget reductions

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Cost Reduction Process

Selecting asolution

Obtainingagreement Analysis

ExaminationDevelopingSolution.

CostReduction

Process


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FishBone Diagram

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Areas of Cost Reduction

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1. Raw Material procurement:

Design. Purchasing.

Storage.

Transport.

Production.(Process ,time & work study, maintenance ,automation)

2) Labour : Human Resources ( out sourcing)

3) Overheads:

Increasing the production volume.

Extension of market and price differentials. Size of business units.

4) Energy

5) Sales and marketing


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Com an Lo o

3 Dimensions of Cost reduction

1. Internally drive:

Keep improving processes

Employee suggestion programs

2. Externally driven :

Top of the technology and process

3)Competitor driven:

Benchmarking against competitors

Real time data

Cost

reduction


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Cost reduction

Set realistic goals

Develop cost reduction

program consulting all

Do an ROI analysis

Explore all options, not

only BPR/technology

(consider offshoring and

outsourcing

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T l d T h i f C t


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Tools and Techniques of CostReduction

1. Value Analysis.

2. Work Study.

3. Job Evaluation and merit

rating.

4. Quality Control.

5. Economic Order Quantity.

6. Use of Better Technology.

7. Standardization.

8. Improvement in the designof a product.

9. Inventory Management

and Control.

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Advantages of Cost Reduction

A. To a particular concern :

Improves profits - financial position competitive

capabilities.

Serves as an index of efficiency.

B. To the Industry

One company serves as a trend setter for the other

companies.

C. To the Nation

Efficient utilization of Scarce Resources .

High taxes can be levied by the government.

Retaining the markets and gaining new buyers.

Combating inflation.

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C t d ti i t i l i


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Cost reduction in materials inManufacturing setup.

1. Vendor consolidation.

2. Value engineering.

3. Assembly outsourcing

4. Standardization

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HP COMPUTER

1. The share ownership plan discount scrapped

2. Reducing work hours for trainees.

3. Delay in freshers joining the company.

4. WFR carried out.

5. Paycut of 5%.

6. Annual shutdown of a week extended to a fortnite

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LOGO

Librio Group

cost reduction present

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