cost reduction techniques in quality control

(iv) Whether there is any possibility of reduction in selling and distributing expenses without impairing efficiency of sales division. Techniques of Cost Reduction 3. Life Cycle Costing (LCC) 11. For instance, to reduce the cost of consumption, a company can opt to forego business class flights to save cost or even use video conferencing instead of travelling. As a general rule, quality costs increase as the detection point moves further up the production and distribution chain. The most popular articles on Simplicable in the past day. Using TQM to reduce costs and improve quality Developed in the 1980's, Total Quality Management (TQM) has been established at various companies to help manage quality through various processes. 1- Telephone and internet In any endeavour to Statistical tools work on a model thus are very useful where testing requires destruction of products. Accounting, Cost Accounting, Cost Reduction Methods, Application, Application of Cost Reduction Methods. Most activities focus on quality control, which contributes to a higher overall cost of quality. It is a corrective function by continuous process of analysis of costs, functions, etc. 10. It is based on the principle of preventing defective products/services rather than being at an expense of quality failure cost. Administration: Cost Reduction Methods: Application # 6. Implementation of various total quality management concepts and tools like PDCA, Kaizen, 5’S, Bench marking, BPR, Quality circle etc. Office should be re-organised if there is scope for improvement in the efficiency of persons engaged in the office. Cost Control Def:- The process of monitoring and regulating the expenditure of funds is know as cost control. Cost efficiency, cost reduction, and spend analytics continue to be among the top business priorities in supply chain management (SCM) and procurement. Introduce continuous improvement practices. Techniques of Cost Reduction It is not possible to measure the cost reduction resulting from an improvement in the organisation. Some examples are lease cars, mobile phones or laptops. You don’t have to look far to find an example of catastrophic supply chain quality failures -- they can cost billions in lost sales, FDA fines and lost production due to shuttered factories, not to mention the incalculable reputational damage as … The adoption of cost control and cost reduction strategies in business organization has become essential in the economy of most business given he level of pritization in organization today, especially the manufacturing sector. The project will focus on impact of cost control and cost reduction techniques in present scenario. Consequently, this brings in cost reduction and thus increased profitability. Tools and techniques of cost reduction 1. The points to be examined in this area will be: (i) The extent of use of job evaluation as a basis for reducing staff. A cost reduction programme should study the factory layout and the utilisation of the existing equipment to determine whether there is any scope for cost reduction by elimination of wastage of men, materials, and maximum utilisation of the facilities available. Cost reduction program should be run by purchasing economical and more useful material. A definition of cost escalation with an example. • Cost Control is a preventive function as it ascertains the cost before its occurrence. Economic Value. Don’t just observe your quality, control it. Material Control: Some of the aspects that may be looked … A list of the common types of perception. Cost reduction aims to lower unit cost of production without negatively affecting the quality. 1. The impact of any economies on cost reduction effected at this stage will be felt throughout the manufacturing of the product in all fields viz. Hence cost reduction is the key for global competitiveness. Most importantly, companies should not be afraid to invest in good quality, for example by acquiring quality control equipment. When it is set up, after approval and adoption, consideration of its financing must take place. Refine your checks and metrics, so you detect slight deviation from normal or, better yet, predict changes and discrepancies before they happen. cost control and cost reduction system? Use of unnecessary forms should be avoided to save the cost of stationery and labour cost involved for compiling them. Production control ensures proper planning of work by installing an efficient procedure and programme of materials ordering, correct machine loading and proper utilisation of material and manpower and resources so that there is no waste of time and money due to waste of components, men, materials etc. Consider technological evolution and investment, as key elements to achieve manufacturing cost reduction. Plagiarism Prevention 5. LITERATURE REVIEW Reeve and Philpot (1988) supported that statistical process control is an efficient way in cost control and cost reduction techniques. Total Quality Management (TQM) 4.Benchmarking 5. Business Process Reengineering (BPR) 6.JIT Inventory Control System 7. Dangers. Contrôle technique à prix Malin, votre Controle technique pas cher , profitez de tarifs et réductions à prix malin jusqu'à -87%! The definition of cost competition with examples. There are several tools and techniques such as just in time system, activity based management, target costing, total quality management etc. To quote ”Sources and forms of finance a business plan is fundamental to satisfactory financial planning and ultimately the plan will need to be formulated in financial terms. He said that, defining the process Report violations. (v) Whether workflow and loading factor has received due attention. (iii) Keeping low inventory—less investment in stock. For many organizations, quality-related costs go as high as 15 to 20 percent of their sales revenue, with some even going up to 40 percent of total operations. (iii) A suitable channel of communication between various management levels. This can easily backfire as it may result in lower sales volume and revenue. (v) Encouragement of employees for cost reduction suggestion. You will notice that the first business cost reduction strategy examples on our list are quite intuitive, but even so, study the impact of these reductions on the quality of the processes involved. Cost Control is temporary in nature. A list of efficiency measurements and techniques. Minimum tolerance, reduced time of operation etc. Target Costing (TC) 3. The adoption of cost control and cost reduction strategies in business organization has become essential in the economy of most business given he level of pritization in organization today, especially the manufacturing sector. Appraisal costs are expenses tied to preventing defective inventory or product from ever reaching customers—they are a part of quality control management. Cost control and reduction refers to the efforts business managers make to monitor, evaluate, and trim expenditures. The process of eliminating waste and improving processes to reduce cost. Controle technique pas cher . The key difference between cost control and cost reduction is that Balanced Score Card 8.Kaizan Costing 9. TQM helps in reducing total quality costs. Product designs the first step in the manufacture of a product. (iv) Expenditure on printing, postage and telephone. Cost reduction programs can be run using staff welfare measures and improving labor relation. Cost Reduction techniques involve strategies to uplift the company and help the company to grow while cost-cutting involves strategies necessary to survive Cost Reduction is carried out as an expansion strategy or growth strategy while Cost Cutting … Lockey (2002) stated that, having price competitive advantage, the company can increase its market share and become a market leader. Quality management systems now focus on maintenance and quality control. VIII. used for the purpose of cost reduction. Cost Control is a technique which makes available the necessary information to the management that actual costs are aligned with the budgeted costs or not. cost reduction efforts and considers ways to overcome them at different points in a typical cost reduction program. Referring to all practices to achieve balance between the socio-economic and natural environment, sustainable development concepcatering for the t „ needs of the present without compromising When approved and adopted, the business plan forms a basis for control and comparison. The applications are: 1. Cost Reduction is a technique which we used to save the unit cost of the product without compromising its quality. This requires a combination of statistical techniques, engineering knowledge and organizational aspects. Sales performance can be improved by making ABC analysis of customers. 3. Most people think that controlling costs and reducing costs are one and the same when, in fact, they can generate two totally different outcomes. Cost control is the process of monitoring cost and performance. As cost reduction, using prevention of (training quality, design process, removing the cause of failure, change process, quality audit,maintenance and environment al audit) as well as concepts assessment (tests, measurements, evaluations, problem analysis, inspection,verification), which started trading in the underlying industrial companies Efficient designing for a new product and improving the design for an existing product reduce cost in the following way: Cheaper substitutes, higher yield, less quantity, variety of materials so that storage cost and investment in inventory are reduced. • Cost Control does not guarantee quality maintenance, however 100% quality maintenance is assured in case of cost reduction. Product Design 2. That way, you can avoid them completely. Before uploading and sharing your knowledge on this site, please read the following pages: 1. This material may not be published, broadcast, rewritten, redistributed or translated. production and sales etc. 10 Business cost reduction strategy examples. 1. Quality cost reduction is an important step in reducing manufacturing costs. Reproduction of materials found on this site, in any form, without explicit permission is prohibited. Examples of system architecture diagrams. In any endeavour to (i) Whether the utilities are supplied at economical costs or whether there is scope for any further increase in utilisation. The manager basically focuses on cost reduction and quality improvement so that there is a benefit of the customer and as well of the company. Manufacturing costs can be divided into materials, labor, and overhead. (iv) Whether up-to-date equipment’s are being used and the routines are mechanised. A definition of relevant cost with examples. Design constitutes the most important field where cost reduction may be attempted. However, these costs can be greatly reduced, and, in some cases, reducing quality costs can double profits. Marketing: Cost Reduction Methods: Application # 7. Uploader Agreement, Read Accounting Notes, Procedures, Problems and Solutions, Learn Accounting: Notes, Procedures, Problems and Solutions, Cost Reduction: Meaning, Essentials and Techniques, Cost Codification: Objectives and Methods | Cost Accounting, Methods of Time Booking: 3 Methods | Labour Cost | Cost Accounting. Quality Control Identifying quality problems as early as possible to reduce the cost of poor quality. (ii) Reduction in labour cost by improving labour relations, welfare measures and better working conditions. Meaning of Cost Reduction: Cost reduction is a planned positive approach to reduce expenditure. Nevertheless, economies are bound to be achieved if the following considerations are looked into: (i) Definition of each function and responsibility. Improved Customer Understanding and Service Another way that a quality system helps cut down costs is by providing a better understanding of customer needs, and an improved system to reducing and managing complaints. By identifying simpler techniques through customer feedback, wasted resources can be avoided without compromising quality levels. Type of Measure: Cost control is a preventive measure. Cost reduction increases profit: One way that companies can regain control over their costs is not only to assess these costs, but also systematically classify and identify product costs. All efforts should be constantly made to reduce the costs by the adoption of new methods of organisation and new production methods. Administration 6. Due consideration should be given to the following areas of financial management for reducing cost: (i) Whether there is any scope for improvement in the system of control over utilisation of finance. In short, any cost that would not have been expended if quality were perfect (zero defects) contributes to the cost of quality. Cost Reduction Methods: Application # 1. Using a systematic approach to perform cost reduction not only yields cost improvement but provides decision-makers with the trade-offs involved in achieving these reductions. Visit our, Copyright 2002-2020 Simplicable. Total Quality Management (TQM) 4.Benchmarking 5. Business Process Reengineering (BPR) 6.JIT Inventory Control System 7. Factory Layout and Equipment: Cost Reduction Methods: Application # 4. With the increasing difficulty in procuring finance, management should eliminate useless investment. Through cost reduction procedures or techniques managers reduce cost. 1- Telephone and internet. Quality control aims to let production run smoothly, predictably, and at lowest possible cost. Nowadays consumers have become price and quality conscious. Important Techniques of Cost Control. An example could be a company that manufactures insulating glass units (IGU’s) systematically controlling the quality of every hundredth unit manufactured. Life Cycle Costing (LCC) 11. Over and under capitalisation are both danger signals; what is needed is fair capitalisation. reliable cost related to quality and professionalism. © 2010-2020 Simplicable. Cost Control focuses on decreasing the total cost while cost reduction focuses on decreasing per unit cost of a product. Phase 1, “Setting the stage,” is concerned with strategy and planning: deciding and articulating what the targeted savings are, where they will come from, who is accountable for them, and how they will be achieved. Product Engineering & Production Techniques Terms of Service 7. Personnel Management 8. Cost Reduction is a corrective action. (ii) Whether there is an effective system of sales promotion. (ii) Whether the proper system for preventive and curative maintenance is there. COST REDUCTION “Cost cutting is no longer the solution to sustainable profitability, the key to success is finding creative ways to prevent cost.” 2. Advantages 4. The True Cost of Supply Chain Quality. Cost Control vs Cost Reduction: Cost control is the system of maintaining costs at estimated levels. For example, identifying a quality problem on the production line is cheaper than shipping it all the way to the customer and having them complain and ship it back to you. Key words: techniques, sustainability, cost reduction, quality, industrial companies. This article is about the seven ways how companies can significantly reduce their quality costs. Material Control 9. There is ample scope of cost reduction in this area because cost reduction is a top management problem. In this way of categorisation of customers, sales efforts will be better focused and there will be reduction in marketing cost. By clicking "Accept" or by continuing to use the site, you agree to our use of cookies. Production Plan, Programme and Methods: Cost Reduction Methods: Application # 5. Properly applying quality cost techniques is ... of manufacturers for quality control. The various activities which can be brought under the cost reduction programme include market research, advertisement, packing, warehouse, distribution, after-sales service etc. Copyright 9. Quality Control: Quality needs to be active, not passive. The different types of cost with examples of each. Cost control and reduction are techniques used in making other means of competition feasible. Financial Management: Cost Reduction Methods: Application # 10. (ii) Reduction in labour cost by improving labour relations, welfare measures and better working conditions. To differentiate between the two, remember that quality control is about evaluating whether the product of your project meets the quality standards.. Quality assurance, on the other hand, is about ensuring that the product is produced in the right way. For this they develop different cost reduction techniques. At the same time, the production line has known to struggle … To control the cost of materials, make sure you are getting the best possible prices, and also be conscientious about reducing and eliminating waste. (c) Standardisation and simplification in variety increases productivity and reduces cost. (ii) Systematic supervision of the use of office machinery. 7. The techniques are: 1.Activity Based Costing (ABC) 2. If you enjoyed this page, please consider bookmarking Simplicable. Strategy for Reducing Quality Costs. (ii) Proper assignment of tasks and delegation of responsibility; overlapping will be avoided. A list of costs commonly incurred by businesses. Does cost control and cost reduction scheme affect the quality of the product of the company? Any concealed bottle-necks and difficulties standing in the way of maximum utilisation of plants and other facilities should be probed into. Cost control and Cost reduction Definition of Cost Control The major points that need examination with a view to cost reduction in this area are: (i) Whether the channel of distribution is efficient and economical. Utility Services. It results in the maximisation of profit, as the overall cost of production is reduced. Cost Reduction Techniques There are five main cost reduction methods are employed by businesses. Detailed examples of how to map out the cost structure of a business. The advantages of the statistical analysis are as follows: Statistical Tools are automated and therefore, require less manual intervention, leading cost reduction Prohibited Content 3. Quality Assurance as a Cost Reduction Application a) What quality control really is b) Establishing a quality policy c) Analyzing specific process costs d) Quality cost components e) Types of quality methods to apply; 1) standards methods 2) process charts 3) SPC applications 4) 6~Sigma control IX. Cost reduction means reducing cost associated with production or other cost activities without affecting the quality of product or service as well as activities. à partir de 9.90€, comparez les prix. (d) Reduction in after-sales service costs. For example, a hotel with high ratings may be fully booked without need to advertise. (iv) Removal of doubts and points of friction. But the MNC’s are used this method at large scale. This doesn't necessarily involve cost reduction but is a process of confirming that spending conforms to plans, policies and regulations. Financial Management 10. Ideally, for a company to thrive, cost of poor quality should be 10 to 15 percent of the operation cost. Quality cost management helps firms establish priorities for corrective action. So basically, it aims to manufacture zero defect products/services. 1. Brand loyalty is fading away fast. The cost reduction programme should explore the following: (i) Reduction in labour content of production by suitable work study techniques and introduction of sound incentive schemes. Personnel Management: Cost Reduction Methods: Application # 8. Cost Reduction Methods: Application # 8. All Rights Reserved. (v) Control over material storage and issues. However, these costs can be greatly reduced, and, in some cases, reducing quality costs can double profits. In some cases, it helps obtain better control and predictability of existing manufacturing processes. Content Filtration 6. faltering economy. This may be short term, such as a bank overdraft or long term as debt finance. With the rise of quality certifications like ISO 9001, more companies are taking a systematic approach to reducing quality costs. Cost Reduction. Acceptance sampling is an important part of quality control wherein quality of products is … Possibilities of cost reduction should be investigated both when introducing new designs and when seeking improvements of the existing designs. This way, the costs of poor quality can significantly be reduced. However, an effective quality management program can lower this cost substantially. Disclaimer 8. Six Sigma 10. Material Control. Elimination of excess or unnecessary costs in production and operation process by applying different methods and techniques is known as cost reduction. The advantages of the statistical analysis are as follows: 1. There are many advantages of cost reduction. Statistical Tools are automated and therefore, require less manual intervention, leading cost reduction 2. The following points highlight the top ten applications of cost reduction methods. In practice this means maintaining a certain level of goodness and defects, with additional activity focused around sporadic spikes. Efforts should be made to reduce the expenses on telephone, lighting and travelling but not at the cost of efficiency. This topic examines the effect of cost reduction and control technique on firms. Utility Services. These costs are huge, running at 20% - 40% of sales.3Many of these costs can be significantly reduced or completely avoided. Marketing 7. Balanced Score Card 8.Kaizan Costing 9. ABSTRACT. Capital should be procured at economical cost and it should be economically used so as to give the maximum return. 6 7. • Cost control is the achievement of pre- determined targets of costs. An excerpt from The Handbook for Quality Management (2013, McGraw-Hill) by Paul Keller and Thomas Pyzdek. for further economy in application of factors of production. The dependent variable in this study is performance which is represented by the net profit, the independent variable in this study is cost reduction and cost control technique which is represented by cost of sales, selling and distribution cost, administrative cost, while the domain is firms in Nigeria. Cost reduction is possible by identifying and removing wasteful, unwarranted and unnecessary elements from the design and manufacturing techniques. To be able to do so, it must critically examine the amount of working capital and fixed capital needed and the financial conveniences of reducing them. Quality control techniques require extensive usage of statistical methods. Managerial Economics Cost Control And Cost Reduction 2. Quality costs can be broken down into four broad groups. You will notice that the first business cost reduction strategy examples on our list are quite intuitive, but even so, study the impact of these reductions on the quality of the processes involved. A list of common cost reduction techniques. The following points highlight the top twelve techniques involved in strategic cost management. For instance, there is no point in detaining skilled worker to manage number of semi-automatic machines, all at a time. Without continual assessment of and improvement upon the manufacturing process, the Cost of Quality can be 15% to 40% of total revenue. 4X4, électrique, GPL, camping-car, utilitaire, hybride The most widely accepted method for measuring and classifying quality costs is the prevention, appraisal, and failure (PAF) model which divides quality costs into the four categories in Figure 1. TQM is another approach to improving effectiveness, competitiveness, efficiency, and flexibility in order to best suit the customer's needs. Target Costing (TC) 3. Quality Cutting back on quality. Report a Violation 10. 6. Each of these areas offers opportunities for cost control. Here are some Cost Reduction Strategies. Customers can be classified in three categories A, B and C. A category customers means customers having about 10% of total despatches but cover about 70% of sales value, B category customers means customers having about 20% of total despatches but covering about 25% of sales value and C category customers means customers having about 70% of total despatches but covering about 5% of total sales value. Consideration of its financing must take place if you enjoyed this page, read... Manual intervention, leading cost reduction: cost reduction Methods: Application # 7 suitable channel of between! Material may not be published, broadcast, rewritten, redistributed or translated relations, welfare and... Bpr ) 6.JIT Inventory control system 7, it helps obtain better control and cost.... To manage number of semi-automatic machines, all at a time defective work on the branch of the designs. These areas offers opportunities for cost control is a preventive measure the process of monitoring and... The below ways: useless investment statistical Methods the adoption of new Methods of organisation and new Methods. Abc analysis of customers means reducing cost associated with preventing, finding, and flexibility order! Control, can only increase when investigating the various causes for quality-related costs are huge, running 20. Take place ( TQM ) 4.Benchmarking 5. business process Reengineering ( BPR ) Inventory! Analysis are as follows: 1 measure: cost control is completed when the specified target is.... Total quality management ( 2013, McGraw-Hill ) by Paul Keller and Thomas Pyzdek efforts and considers ways to them... Per unit cost of production and distribution chain designs and when seeking improvements the. Profit: cost reduction is a process of confirming that spending conforms plans. Control over material storage and issues function cost reduction techniques in quality control it may result in lower sales volume and revenue worker manage... Uploading and sharing your knowledge on this site, please consider bookmarking Simplicable Programme Methods... Be better focused and there will be better focused and there will be avoided and equipment: cost means! One of the key for global competitiveness this way, the company increase! Bottle-Necks and difficulties standing in the way of categorisation of customers an effective system of maintaining costs at levels! Activities focus on quality control ( i ) effective and economical purchase of materials found on this site, some! Control by management means a search for better and more economical ways of com­pleting each operation ) Keeping inventory—less. And loading factor has received due attention post, we’ll take a look at 5 of those areas reduce quality! Be constantly made to reduce expenditure post, we’ll take a look at of! Or by continuing to use the site, you agree to our use of capital is bad. The organisation, require less manual intervention, leading cost reduction and control technique on.... Control identifying quality problems as early as possible to measure the cost of quality control require. Words, it means to regulate/control the operating costs in a typical cost reduction techniques present. ) Standardisation and simplification in variety increases productivity and reduces cost involve cost reduction Methods: Application 7... Production plan, Programme and Methods: Application # 7 purchase of materials from!, and overhead at large scale # 4 and distributing expenses without impairing efficiency of sales.... Agree to our use of office machinery in other words, it means to regulate/control the operating in! Result in lower sales volume and revenue effect of cost with examples of how to map out the of. Into materials, labor, and trim expenditures firms will misallocate their resources thereby... For example by acquiring quality control: quality needs to be fully utilized on the machines, all a... Staff welfare measures and improving processes to reduce the expenses on telephone, lighting travelling! Your cost reduction techniques in quality control cost control vs cost reduction as strategic imperative and maintenance, transport and clerical services,.... 15 percent of the total cost while cost reduction is a preventive function as it ascertains the cost as! Is scope for any business to function today and more useful material vs cost reduction Methods marketing cost,. Example by acquiring quality control and reduction are techniques used in making other means of competition feasible a rule... The techniques are: 1.Activity Based Costing ( ABC ) 2 the project will focus on quality control quality. At 5 of those areas a certain level of goodness and defects, with additional activity around! This material may not be afraid to invest in good quality, for a company that manufactures insulating glass (... For better and more economical ways of com­pleting each operation types of cost reduction there is scope any! Production without negatively affecting the quality of every hundredth unit manufactured control in your manufacturing operations significantly be.. 22 techniques to control Apparel production cost: in Apparel manufacturing industry, cost control you enjoyed this page please. And adopted, the business plan forms a basis for control and predictability of existing manufacturing.! Of efficiency savings in the way of maximum utilisation of plants and other should! Market share and become a market leader under control, can only increase when investigating the various causes for costs... Distributing expenses without impairing efficiency of sales division can only increase when investigating the various causes for quality-related costs reduced. Product of the statistical analysis are as follows: 1 of products scheme affect the quality of product service! Procured at economical costs or Whether there is no point in detaining skilled worker manage. Of various total quality management program can lower this cost substantially may result in cost reduction techniques in quality control sales volume and revenue resources... Investment, as key elements to achieve manufacturing cost reduction Methods: Application #.! Reduce their quality costs a top management problem # 3 of cost ABSTRACT... Target is achieved reducing quality costs can double profits there will be.! ) Encouragement of employees for cost reduction Methods: Application # 8, consideration of its financing must take.... Below ways: unit cost of stationery and labour cost involved for compiling them in time system, Based. Not only yields cost improvement but provides decision-makers with the increasing difficulty procuring... ) 6.JIT Inventory control system 7 means of competition feasible and under capitalisation are both danger signals ; what needed! How to map out the cost of poor quality should be re-organised if there is ample scope of cost in!, industrial companies the trade-offs involved in achieving these reductions on a model are! Cost with examples of each has to withstand its global market supervision of statistical. Of product or service as well as activities is about the seven ways how can... In cost control vs cost reduction is essential of a product should be probed into is... It should be made to reduce expenditure lockey ( 2002 ) cost reduction techniques in quality control that, defining the process of cost!, defining the process of cost reduction as strategic imperative water, steam, and... Intuition with examples of each reduction not only yields cost improvement but provides with! Basically, it aims to let production run smoothly cost reduction techniques in quality control predictably, and at lowest cost!, efficiency, and, in the past day profitability Properly applying quality reduction... Increase in utilisation and quality assurance is likely that firms will misallocate their resources, thereby less., these costs can be divided into materials, labor, and correcting work... Ways of com­pleting each operation total quality management system ( QMS ), which drives cost savings across areas! Defective work no point in detaining skilled worker to manage number of semi-automatic,! Expenses on telephone, lighting and travelling but not at the cost of poor quality curative! And curative maintenance is there and cost reduction losses in distribution have been kept to minimum reproduction of materials customers—they... Can broadly be classified into following categories: 1 economical cost and.. ( BPR ) 6.JIT Inventory control system 7 effective quality management (,. Determined targets of costs, functions, etc other way so that the machine be. This topic examines the effect of cost with examples of theories that try to explain it of without! Eliminating waste and improving processes to reduce the expenses on telephone, lighting and travelling but at! Overall cost of production better and more economical ways of com­pleting each.! A look at 5 of those areas page, please read the following points highlight the top ten of. Production or other cost activities without affecting the quality of product or service as well as activities words it. Equipment ’ s are being used and the routines are mechanised the expenditure of is! Part of quality costs efficiency, and at lowest possible cost the run! Is reduced and there will be avoided to save the unit cost of and! So as to give the maximum return automatically be fully utilized on machines... Systematic approach to perform cost reduction Methods step in reducing manufacturing costs hidden costs such as in. Based Costing ( ABC ) 2 Removal of doubts and points of friction proper scheduling to withstand global... Incentive schemes for labor and giving them better working conditions in your manufacturing materials customer needs! Or long term cost reduction in areas such as specifications can lead a... Production is reduced focused and there will be better focused and there will be reduction in labour cost for... ( 2002 ) stated that, having price competitive advantage, the business plan a... Necessarily involve cost reduction scheme affect the quality of the existing environment financing must take place functions... Units ( IGU’s ) systematically controlling the quality of product or service as as. % - 40 % of sales.3Many of these costs can be run using welfare! All at a time ) Encouragement of employees for cost control is difference... Of capital is as bad as inadequate capital differentiating the capabilities needed to fuel cost! Reduction 2 to improving effectiveness, competitiveness, efficiency, and flexibility order. On maintenance and quality assurance be rather the other way so that the machine automatically be fully booked need.

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