Waste EliminationIdentifying and eliminating waste such as materials that go wasted in a production process.use less physical resources. The classic example is an office that goes paperless. energy efficiency of a data center.automation and tools. For example, farming robots may improve the productivity of a farm as work is shifted from physical tasks towards knowledge work.
SourcingOutsourcing things in areas where you're not particularly efficient. For example, a small business that decides to outsource its financial accounting and tax preparation tasks.
ConsolidationConsolidating things to make them easier to manage or to gain negotiating power. For example, a manufacturer consolidates its suppliers and demands steep discounts for the greater volume of orders. capabilities and structures that aren't adding much value and restructuring them.
PerksReducing perks such as business class air travel and stays at luxury hotels.scale or volume of your business. For example, unit costs may fall until an existing factory reaches its capacity. In this case, increasing sales through marketing efforts may result in declining cost per unit.
ImprovementMeasuring things and improving them continuously. For example, measuring processes to detect expensive bottlenecks and exceptions and finding ways to remove them. quality. This can easily backfire as it may result in lower sales volume and revenue. In some cases, improving quality can result in long term cost reduction in areas such as marketing costs. For example, a hotel with high ratings may be fully booked without need to advertise.
ServicesCutting back on service levels such as a restaurant that cuts back its business hours. This can also backfire. For example, customers may avoid a business that they perceive as often closed.business units, products, capabilities and processes that aren't working out. For example, an Australian bank expands to Asia but finds that it is a money losing venture year after year. The decision is made to cut and run.
ProximityReducing transportation costs by putting things closer together. For example, an ecommerce company that moves from 12 regional distribution centers to 1200 distribution partners closer to the customer.
PartnershipsFinding partners who can reduce your costs. For example, a cloud platform that eliminates the need to own and operate your own computing infrastructure.innovation that changes your entire cost base.tone at the top of financial discipline. For example, a CEO who regularly travels by economy may encourage others in the organization to spend responsibility.
|Overview: Cost Reduction Examples|