Cost Reduction -- It's More Than Just Parts And Labor

REDUCING THE COST of a product or service can encompass a range of activities from those that generate actual cost benefits to those that do not. ... one really needs to take a holistic view of all the costs of product development, promotion, production, distribution and maintenance in order to effectively reduce these costs without compromising the whole product structure.

This article defines cost reduction in basic business terms, outlines a rationale for a setting up a cost reduction program and identifies an answer to the question, Why should, and how, can a company develop an effective cost reduction methodology?

What Is Cost Reduction?

In this article cost reduction is viewed as the execution of a group of corporate sanctioned activities which are designed to increase a company's net profits while continuing to provide a mature service or product to customers. Why is cost reduction important?

Competition! Its a sure thing that if a product or service has good market acceptance then there will be competition - perhaps globally. Any cost advantage gives more maneuverability with existing customers, a hook for new customers, a longer life for the product or service and, especially, price control within the market and distribution channels. In fact cost reduction should be 'planned milestones' within the product or service life cycle.

EVERY COST REDUCTION TASK IS UNIQUE !

Profit! Increasing a company's bottom line, employee happiness, fulfillment of civic duty, community awareness, minimizing business complexities or whatever else a company deems valuable to its business success are incentives for doing cost reduction.

JUMP TO PAGE

BACK TO: RICHARD (DICK) HANEY IDEAS