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Cost Reduction Strategies

Updated on March 16, 2011

cost reduction strategies

In today's world when Corporate are struggling for profits and with fierce competition in the market, cost reductions, productivity enhancement and lean organizations have become today's mantra s for survival.Folllowing are the key area where you can implement cost reduction methods with significant results.Cost distributions of any manufacturing industry are following

Raw material : 60%

Fuel: 6%


Adverisement :5%


Taxes : 5%

Maint & others : 4%

Following are major areas of cost reduction

1. Raw material procurement:

a) Bulk buying

b) Opportunity buying

c) Make or buy

d) Annual Rate contracts

e) E-procurement

2. Logistics- Inbound and Outbound

a) Route mapping

b) Loadability

c) Transportation

3. Warehouse and Stores

a)Low inventory

b) Space management

c) EOQ

4. Manufacturing Process (Production)

a) Manufacturing -

b) Automation

c) OEE


a) Motors

b) Lighting

c) Pumps

d) Cooling Towers

e) Compressors

f) Fuels

6. Packaging

7. Recycling of waste and waste reduction

Waste water management

8.Information Management

Enterprise Resource management

9. Human Resources

Out sourcing


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    • nationalwholesale profile image

      nationalwholesale 8 years ago

      Great checklist on areas where you can reduce costs! Low inventory is important, especially if companies do find themselves in a position where excess inventory is hurting the bottom line.