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. 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.

Cost reduction strategies

• Supplier consolidation
• Component consolidations
• Low-cost country sourcing
• Request for quotations (RFQ)
• Supplier cost breakdown analysis
• Function cost analysis / Value analysis / Value engineering
• Design for manufacture / Design for assembly
• Reverse costing
• Cost driver analysis
• Product benchmarking
• Design to cost
• Design workshops with suppliers
• Competitor benchmarking

References

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