Cost reduction is the process used by companies to reduce their costs and increase their profits. Depending on a company’s services or products, the strategies can vary. Every decision in the product development process affects cost: design is typically considered to account for 70–80% of the final cost of a project such as an engineering project[1] or the construction of a building.[2]

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.

The importance of cost reduction in relation to other strategic business goals is often debated.[3]

Cost reduction strategies

References

  1. Barton, J. A. et al., Design determines 70% of cost? A review of implications for design evaluation, Journal of Engineering Design, Volume 12, published 1 March 2001
  2. Designing Buildings Wiki, Cost control in building design and construction, last updated 15 August 2021, accessed 11 September 2021
  3. Green, W., Growth trumps cost cutting, says survey, Supply Management, published 31 January 2018, accessed 12 September 2021
  4. Turney, P., Activity-Based Costing: A Tool for Manufacturing Excellence, Association for Manufacturing Excellence, published summer 1989, accessed 13 September 2021
  5. High, P., AstraZeneca CIO Makes IT Twice As Good At Half The Cost - Here Is How, Forbes.com, published 3 January 2017, accessed 10 January 2021

Further reading

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

See also

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