Cost reduction

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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.

Main cost reduction strategies[edit]

Three key factors to a successful cost reduction strategy

The design and implementation of a comprehensive cost reduction strategy should focus on three key deliverables:

1. Reducing overall operating costs

2. Improving the management of utility contracts and relationships

3. Reducing the waste generally across all departments within a business.


Five step cost reduction process

A good cost reduction company will deal directly with the client, the supplier and the client’s supplier. Please click here for more information about this. Over time Smith Bellerby have developed a five step process. Although this is not always a linear process, this is at the heart of the service. The process:

1. In-depth audit of current expenditure

2. Data analysis and market analysis/tendering

3. Presentation of report, detailing the findings and recommendations

4. Implementation of all agreed recommendations

5. On-going monitoring, query management and implementation of improved administrative procedures

Please click here to see an infographic showing the process of successful cost management between a client and the cost management company.


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 of injection molding tools", MIT DSpace