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


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