Concept And Meaning Of Cost Reduction

Cost reduction means conducting some innovations in the way of working in a new style, so that the
excess costs of production and operation could be eliminated. Cost reduction programs are directed
toward specific efforts to reduce costs by improving methods work arrangements and products. Cost
reduction can be made in different areas and stages of production, storing and distribution process
by applying more advanced and scientific techniques of operation. So, a cost reduction program
needs

research

and

development

activity.

Cost reduction programs may require a bulk amount of research and development budget, but once
a new technique is introduced, it gives competitive advantages for the long period.
The aim of cost reduction is to see whether there is any possibility of bringing about a saving in the
costs

Cost

incurred

reduction

Obtaining

Using

on

is

more

lesser

Simplifying

materials,

possible

outputs

quantity

the

through

from

of

labor,

the

the

inputs

overheads

following

same

to

methods

obtain

inputs

the

of

* Improving the location and layout of plant, warehouse and other resources.

etc.

improvements:

and

same

facilities.

output

distribution.