Cost reduction


Cost reduction

Cost reduction is the process used by companies to reduce their costs and increase their profits. Depending on a company’s services or Product, the strategies can vary. However, it is important to remember that every decision in the product development process affects cost. Companies typically launch a new product without focusing too much on cost. Cost becomes more important when competition increases and price becomes a differentiator in the market.

Main cost reduction strategies

• Supplier consolidation
• Component consolidation
• Re-source to low cost countries
Request For Quotations (RFQ)
• Supplier cost breakdown analysis
• Function analysis / Value analysis / Value engineering
• Design For Manufacture / Design For Assembly
• Reverse costing
• Cost driver analysis
• Should cost
• Product benchmarking
• Design to cost
• Design workshops with suppliers
• Competitor benchmarking

Tools for cost reduction

"Tutorials and cost reduction analysis tools"
"Should cost estimating"
"eSourcing system"

References

Barrett R. Crane, http://hdl.handle.net/1721.1/11020 "Cycle time & cost reduction in a low volume manufacturing environment", MIT DSpace
Apichart Jearasatit, http://hdl.handle.net/1721.1/60836 "Using a total landed cost model to foster global logistics strategy in the electronics industry", MIT DSpace
Bryan K. Parks, http://hdl.handle.net/1721.1/12092 "Cost and lead time reduction in the manufacture of injection molding tools", MIT DSpace


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • cost reduction — UK US noun [C or U] ► the process of reducing the amount of money that a company spends on wages, production, etc. in order to make it more profitable: »further/continuing/significant cost reductions …   Financial and business terms

  • cost reduction — See cap cost reduction capitalized cost reduction …   Dictionary of automotive terms

  • cost reduction effort — See supplier cost reduction effort …   Dictionary of automotive terms

  • capitalized cost reduction — A fancy name for a cash down payment, money you pay up front that is applied to the final purchase price of a lease. A large cap cost reduction will, of course reduce the monthly payments, but it will also negate one of the big advantages of… …   Dictionary of automotive terms

  • Capitalized Cost Reduction — Any upfront payment that reduces the cost of financing. Capitalized cost reduction is generally associated with the purchase or lease of an automobile, and reduces the monthly payment owed if the vehicle is financed. Reductions can be made from… …   Investment dictionary

  • cap cost reduction — See capitalized cost reduction …   Dictionary of automotive terms

  • supplier cost reduction effort — (SCORE) A United States program that urges suppliers to develop processes to cut costs. Suppliers are allowed to keep half the savings and pass on the other half to the automakers …   Dictionary of automotive terms

  • reduction — re‧duc‧tion [rɪˈdʌkʆn] noun FINANCE 1. [countable, uncountable] when prices, costs etc become lower or are made lower: • Our winter sale includes many price reductions. • We can make a reduction (= sell something more cheaply …   Financial and business terms

  • cost — {{Roman}}I.{{/Roman}} noun 1 money needed to buy sth ADJECTIVE ▪ considerable, high ▪ The high cost of energy was a problem for consumers. ▪ enormous, exorbitant, huge, prohibitive …   Collocations dictionary

  • reduction — A chemical reaction in which an element gains electrons, i.e., has an increase in positive valence. Compare oxidation. See cap cost reduction capitalized cost reduction double reduction gearing noise reduction …   Dictionary of automotive terms