The document discusses cost reduction in business. It defines cost reduction as achieving permanent reductions in unit costs without compromising quality. It recommends preventing costs through creativity rather than just cost cutting. Some ways to reduce costs include eliminating waste, improving operations, increasing productivity, using cheaper materials, and maintaining quality standards. Costs can be reduced in areas like materials, labor, overheads, outsourcing, sales and marketing, energy, and production. Tools for cost reduction include value analysis, just-in-time approach, standard costing, total quality control, economic order quantity, market research, benchmarking, and inventory management and control.

1. COST REDUCTION
“Cost cutting is no longer the
solution to sustainable profitability,
the key to success is finding creative
ways to prevent cost.”

2. DEFINITION
“Cost reduction is to be understood as the
achievement of real and permanent
reductions in the unit cost of the goods
manufactured or services rendered without
impassing their suitability for the use that is
intended”- ICWA London.

3. Achieving the goals of cost
reduction


Reducing the cost per unit.
Increasing productivity.
How to reduce cost?





Elimination of waste
Improving operations.
Increasing Productivity.
Cheaper materials.
Improved Standards of Quality.

4. FishBone Diagram:

5. Areas of Cost Reduction
1.
a)
b)
c)
d)
e)
2)
3)
a)
b)
c)
Material:
Design.
Purchasing.
Storage.
Transport.
Production.
Labour:
Overheads:
Increasing the production volume.
Extension of market and price differentials.
Size of business units.

6. 4.Outsourcing
5.Sales and marketing
6.Energy
7.Production

7. Tools and Techniques of Cost
Reduction
1.
2.
3.
4.
5.
6.
7.
8.
Value Analysis.
Just in Time approach.
Standard costing.
Total Quality Control.
Economic Order Quantity.
Market reasearch.
Benchmarking
Inventory Management and Control.

8. THANK YOU!
Dhirendra kr chaudhary