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.
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 intendedICWA London.
www.themegallery.com
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Achieving the goals of cost reduction

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
Obtaining agreement
Analysis
Selecting a solution
Cost Reduction Process

Examination
Developing Solution.
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FishBone Diagram
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Areas of Cost Reduction

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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3 Dimensions of Cost reduction

1. Internally drive: Keep improving processes Employee suggestion programs 2. Externally driven : Top of the technology and process
Cost reduction
3)Competitor driven: Benchmarking against competitors Real time data

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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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Tools and Techniques of Cost Reduction

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 design of 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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Cost reduction in materials in Manufacturing setup.

1. Vendor consolidation.
2. Value engineering.
3. Assembly outsourcing
4. Standardization
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Precautions in Implementations
1) Must be planned soundly . 2) Appropriate to organization. 3) Requires cooperation and coordinated efforts. 4) Reluctance should be recognized and dealt with. 5) Programs should be clearly communicated. 6) Should not have undesirable effects on external parties. 7) Unnecessary costs can be reduced not eliminated. 8) Is expensive and complicated To implement.
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For Example: Cutting Plan in Bussiness

MICROSOFT Freeze in hiring . Personal awareness to cost cutting. No bonuses or pay hikes. Night home drops and pick ups are charged. Reducing off-shore trainings. Outlook comm. Used in Place of Bharti
1. 2. 3. 4. 5.
6.
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HP COMPUTER
1. 2. 3. 4. 5. 6. The share ownership plan discount scrapped Reducing work hours for trainees. Delay in freshers joining the company. WFR carried out. Paycut of 5%. Annual shutdown of a week extended to a fortnite
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INTEL CO.Lt d
1.
2. 3.
4. 5. 6.
Shutting down older fabrication units. Freeze in hiring. Reduced travel expenses,using video chats &voice chats as alternatives. Reducing/reusing inventory. Increasing personal awareness. Avoiding discretionery expenditures.
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BOMBAY DYEING
1. Introduction of new cost effective technology. 2. Process re-aligning. 3. Re-engineering of product 4. Restructuring of workforce. 5. Rationalising input costs
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Librio Group

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LOGO

DEFINITION OF COST REDUCTION

goods manufactured or services rendered without

Achieving the goals of cost reduction

How to reduct the cost?

Cost Reduction Process

Cost Reduction Process

Areas of Cost Reduction

3 Dimensions of Cost reduction

3)Competitor driven: Benchmarking against competitors Real time data

program consulting all Do an ROI analysis

Explore all options, not

(consider offshoring and outsourcing

Tools and Techniques of Cost Reduction

Advantages of Cost Reduction

Cost reduction in materials in Manufacturing setup.

For Example: Cutting Plan in Bussiness

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