CHAPTER I

IntroductionAlmost every organization in the world today is looking at ways toReduce costs. Some companies can do this fairly simply byClosing factories or giving top-down targets to all relevant departments(Costs to be reduced by 20%). Other companies feel that they require aMore fundamental approach and restructure the way that they do their business.Sometimes this includes a strategic review of which products and servicesShould be offered to the market, other times the markets servedAre seen as stable. In the second case there is usually need to fundamentally re-assesshow the products / services are brought to market in order to radicallydecrease the costs and/or to improve service levels. .,Business managers and owners are responsible for a variety of tasks and functions.Important business functions may include reducing costs from wasted inputs, theinefficient use of resources or too many employees working on too few projects. Costcutting measures often start in the company's accounting department, which isresponsible for tracking and reviewing important financial information. Cutting costs is acommon way companies improve profits and cash flows from business operations.Cost reduction is an important factor in improving the state of a business. It can obviously result in higher profits and a stronger enterprise. Most business leaders and managers would like to reduce costs, but many find it difficult to do the right things.Following are major areas of Cost Reduction :One of the main responsibilities of a management is to find out the areas in which theexcess costs may be reduced. Following are the main cost reduction areas:

l. Product Improvement* Quality of a product* Wastage minimization* Proper designing of a product

2. Production Method and Layout Management* Material handling system* Layout management* Time and motion study* Standardization* Modernization of plants and equipment's

3. Marketing Areas* Distribution channels* Advertisement media* Promotional Schemes* Packing styles* Transportation arrangement

4. Administrative and Financial Areas* Purchase of supplies* Reward punishment system* Accounting system* Financing alternatives

Methods Mapping : Select and Map a product line/process Observe & analyse Quantify waste Identify opportunities for improvement Agree improvement plan

Implementation: Implement plan Remove waste Reduce cost Free Up Capacity

Cost Reduction Ideas & Strategies

In the current economic climate most organisations are looking for practical ways to reduce their expenditure. There are number of steps any business can take in the short to medium term and heres our top ten cost reduction ideas.TelecomsSince the telecoms market became deregulated theres plenty of competition for your business! You should easily save10% off your line rental if youre with a big brand provider and often more on call charges. Remember to compare like for like rates and consider the length of contract youre entering into.PrintingLose those desktop printers. Install MFDs (Multi Functional Devices) that can photocopy, scan, print and fax. Your overall hardware costs will reduce and running costs will drop by taking a CPC (cost per copy) contract, rather than paying out for maintenance and consumables.Office StationeryConsolidate your suppliers and invoices. Buying from one source will increase your negotiating power and using a buying group will increase this further. Monitor your own usage and limit the number of people who have the authority to reorder stock. Using own brand products can also save up to 25%.UtilitiesMany businesses have never compared their gas and electricity providers and are missing out on potentially huge savings for very little effort. Go through a broker as they will be able to access a wider range of tariffs. If youre still in a contract ensure that you know when to give notice to your current suppliers, many will only offer small window before rolling you into another long term deal.Go GreenSet the default printing function on all your office PCs to print mono and on both sides of the pages. Office paper is one of the single biggest costs and by taking this action you could not only reduce your paper costs by up to 50% but avoid paying for colour copies, often about 10 times the cost of Black & White! Turning off monitors, lights and electrical devices when not in use will help save money and the environment.OutsourcingOutsourcing non critical functions can potentially result in substantial savings. IT, HR and Finance are the main areas that usually come under review, but depending on your industry you may be consider outsourcing manufacturing, distribution, marketing or customer services.BankingReview your bank charges! Remember these are not fixed in stone and there are a number of areas where banks profit from your business. What interest rates are you being charged and what are you receiving for any accounts in credit? Many banks have different levels of online systems and paying a higher monthly fee to use these systems could result in a lower cost overall through reduced transactional fees.Business RatesYour business rates can be challenged every five years. Dont assume that the rates wont change; you can challenge this yourself or go through specialist consultants. If you use a consultant make sure they dont charge an upfront fee and that any charge only relates to savings they make.Capital AllowancesIts estimated that the capital allowance tax relief that businesses are entitled to hasnt been claimed on 95% of commercial premises in theUK!Imagine that, literally miions of pounds remain unclaimed. Capital allowances are a valuable form of tax relief available to anyone buying or building commercial property. As a business you can claim these allowances, deduct a proportion of them from your taxable profits and reduce your tax bill.Fixed Cellular Terminals (FCTS)FCTs are essentially a mobile device that allows fixed telephony devices such as PBX Telephone Systems to connect directly to the GSM Mobile Phone Network. This can be used to call other mobile users at reduced rates (depending upon available tariffs) or for use in remote offices where no fixed line services are available (e.g. building site / remote monitoring post). In an age where the landline to mobile calls are dramatically increasing for businesses FCTs can offer the potential of reducing these charges to around 3ppm which is a staggering saving when compared to competitive fixed line charges of around 7-8ppm currently in the market.

CHAPTER II

What is Cost Reduction?

Cost reduction is the process used by companies to reduce their costs and increaseTheir profits. Depending on a company's services or Product, the strategies can vary.However, it is important to remember that every decision in the product developmentProcess affects cost. Companies typically launch a new product without focusing tooMuch on cost. Cost becomes more important when competition increases and priceBecomes a differentiator in the market.Cost reduction, should therefore, not be confused with cost saving and cost control. CostSaving could be a temporary affair and may be at the cost of quality. Cost reductionImplies the retention of essential characteristics and quality of the product and thus itMust be confined to permanent and genuine savings in the costs of manufacture,Administration, distribution and selling, brought about by elimination of wasteful andInessential elements form the design of the product and from the techniques and practicesCarried out in connection therewith.In other words, the essential characteristics and techniques and quality of the products areRetained through improved methods and techniques used and thereby a permanentReduction in the unit cost is achieved. The definition .of cost reduction does not howeverinclude reduction in expenditure arising from reduction or similar action or theeffect of price agreements.

The three fold assumption involved in the definition of cost reduction may besummarized as under :

1. There is saving in a cost unit2. Such saving is of at permanent nature3. The utility and quality of goods remain unaffected if not improved.

ICWA LONDON"Cost reduction is to be understood as the achievement of real &permanent reductions inthe unit cost of the goods manufactured or services rendered without impassing theirsuitability for the use that is intended".

SCOPE OF COST REDUCTION :

The scope of cost reduction is wide and it could be applied to wherever cost is incurred.In many organizations the cost of human resources is very high. The top managementshould find ways by which the cost of human resources is reasonably reduced. Anyabnormal reduction of cost in this regard may lead to unfavorable climate. In autocratictype of climate the human resources cost will be reduced since the employer is not soparticular about keeping the morale of the employees high and to motivate them forhigher productivity. Since better performance is ensured through fear, threat, punishmentand occasional rewards, there is no need for spending on welfare cost.Cost reduction is attainable in almost all areas of business activities. There is perhaps nosituation which cannot be improved. It covers a wide range like new layout, productdesign, production methods, materials and machines in factories as well as in offices,innovation in marketing etc. it may also extend to specified activities like purchasing,handling, packaging, shipping, warehousing, marketing, use of administrative facilitiesand even the utilization of financial resources.

Excessive cost may result in every organization from:-

Lack of information about raw material, processes, products, components etc. Lack of utilization of ideas generated form performance and economic analysis. Honest but wrong beliefs that certain things are impossible for achievement. Temporary circumstances like features developed under pressure or modificationmade to meet certain circumstances. Habits and attitudes of confining to one conventional method.

It is not necessary for the management to proceed in any specific sequence in consideringthe various aspects of cost reduction and it may be necessary to start the campaign inmore than one direction at the same time.

ADVANTAGES OF COST REDUCTION

The advantages accruing form cost reduction can be discussed under the three heads:-

l. In so far as Individual capacity is concernedo cost reduction helps in profitimprovement. The more the profits, the more the stable the company becomes. Itenhances the share value, improves investment opportunities and facilitates thecollection of capital.

2. The society will be benefited by the reduced prices which may be possible bysavings form cost reduction programs. Competitive position will improve and theindustry as a whole will strive to improve the productivity and pass on theadvantage of such programs to the society. Workers and staff of the industry mayalso be benefitted through increased wages and improved staff welfare amenities.

3. The country also stands to gain immensely by the cost reduction programs.Industry will be able to maintain the international parity in prices of exportablecommodities and consequential increase in export will result in increased foreignexchange savings. Also internal revenue will increase through more tax savings.

The cost reduction benefits of aligning these functions can result from:

A tighter cohesion between the finance and risk functions, which delivershigher cost savings, use of shared resources and delivery models; Reducing reputation risk exposure; Centralizing well-structured information that features transaction level detail; Reducing effort and duplication in gathering, checking and repairing data; Increasing operational efficiency by putting in place reliable standard controls andassessment criteria. Lower infrastructure costs compared with building and supporting separate platforms; Eliminating IT system/process redundancy - increasing transparency, giving data architecture higher visibility, and enriching reporting and management information; Rationalizing financial and risk processes and greater streamlining across thewhole of the business to improve the integrity of performance measures.

CHAPTER III

COST REDUCTION vs. COST CONTROL

Cost control is operated through setting standards of targets and comparing actualperformance therewith, with a view to identify deviations from standards or norms andtaking corrective action in order to ensure that future performance conforms to standardsor norms.Cost reduction is a continuous process of critical cost examination, analysis andchallenge of standards. Each aspect of business viz., products, process, procedures,methods, organization, personnel, etc. is critically examined and reviewed with a view ofimproving efficiency and effectiveness and reducing the costs.Cost control lacks the dynamic approach which planned cost reduction demands. In costreduction, standards which are the basis of control are constantly challenged forimprovement.This process finds out the substitute by finding new ways or methods. This processundertakes the competitive analysis of actual results with established norm sunder thisprocess necessary step are taken for further modification in the method. Under this processthe variances are appraised and necessary course of action will be taken to revise norms,standards etc. It challenges the standards forth - with and attempts to reduce cost oncontinuous basis .It starts from established cost standards and attempts to keep the costsof operation of a process in line with those standards. The emphasis is partly on thepresent costs and largely on future costs. The main stress is on the present and pastbehavior of costs.It is universally applicable. It should be applied to every area of business. It does not dependon standards through target amounts may be set. It has limited applicability to thoseitems of costs for with standard shave already been set. The items for which standards areset mainly relate to productive operations Cost reduction is a corrective function. Itoperates even when efficient cost control system exists Cost control is a preventive function.Costs are optimized before they are incurred.

Steps in Reducing Cost and Increasing Profits

For most small businesses, the easiest way to increase profitability is to reduce costs.Reducing direct costs can dramatically increase the profit on each sale, and eliminatingunnecessary business overheads can have an immediate pleasing impact on your bottomline.The best way to improve profitability is to increase turnover as there is no limit to salesbut there is a limit on reducing your costs.

Reducing your costs:

Identify the steps you can take to minimize your direct costs, such as negotiating lowerprices with your suppliers, reviewing processes and systems to minimize wastage, andimplementing additional security to reduce the chance of theft.For example, the owner of one manufacturing business used the same supplier for 30years, and never investigated buying raw materials from anyone else. When the businesswas sold, the new owner put all the main purchase requirements out to tender. The resultshaved 14% off the company's inventory costs or close to $100,000.Most businesses tend to stick to the same supplier year after year, so this is an area wellworth exploring. Costs that could be put out to tender in your business include insurance,power, telephones and internet.

The value of good systems:

Introducing systematic procedures and methods will help reduce costs. Good systemswill help you minimize errors, and reduce time and money.The time invested in creating systems is usually minimal compared with that spentsolving a problem from scratch. Where appropriate, turn decisions into policies to avoidhaving to make the same decision again or sort out the same issues.Learn from mistakes and problem areas, and if systems go wrong, fix them. It's a goodidea to review your systems periodically to see where improvements can be made. Asoftware company placed all of their information centrally on their server, so that staffcould access information all the time, from anywhere. The owner found each employeesaved five hours a week, which could be applied more productively.

Keep focused:

Focusing management awareness on profitability can have a dramatic impact. Even ifcash flow is your top priority, this should not be at the expense of profitability.Make sure all your employees are aware of the importance of profitability. The mostcommonly used key performance indicators are actual sales against forecasts, costsagainst budgets, gross margin and staff costs. Get help from your accountant to ensureyou're monitoring the right indicators for your business.

Your team:

Monitor and measure employee performance and productivity, and reward productiveemployees by linking pay to effectiveness. It's important to praise and thank staff whenit's due, and provide a clear career path so they can grow and don't see their prospects aslimited.

Continuous improvement:

A simple planning cycle greatly enhances your ability to make continuous improvements.Good planning also helps you to anticipate problems. and adapt as circumstances change.Set measurable, time-limited targets to monitor how effectively your plans areimplemented. Then review what you've achieved so you can learn from your experienceand make continuous improvements. Keep improving the underlying systems and theplanning process itself, but be ready to alter your strategy if necessary.

Apply lessons business-wide:

Set up systems that encourage the communication of best practice in your business. Forinstance, benchmarking different parts of the business against each other can be a usefulway of sharing best practice.Also improve communications with your customers and suppliers - they can offer usefultips and advice. Your customers will be aware of any problems and can tell you what youneed to improve.

Increasing your turnover:

Below are some possible tactics to improve your turnover: Invest resources in increasing your sales volume. Look for new markets and distribution channels. For instance, are you really making the best use of the internet? Can you form a strategic alliance with a complementary business or a joint venture to tackle work you don't have the resources for on your own? Actively sell. Don't just take orders. Businesses that are content to simply take orders are less likely to survive, let alone grow. Retain existing customers through good service and explain to your staff why the lifetime value of customers makes this effort worthwhile. Review your credit limits if sales to a particular customer go up significantly andconsider a credit check. If they are stable and worthwhile customer, increase their limit or find out what else you can do for them. Maximize the value of your sales. Consider moving upmarket and providing a premium product and service. Add features to products if the perceived value to the user is greater than the cost to you. Keep your product or service up-to-date. If appropriate, extend your product range orwork to ensure it stays ahead of the competition. Compare your price and quality with competing products or services. Aim to charge afull price and offer value for money from the extras you provide, such as after-salesservice, installation and training or bundled extras. Focus your efforts on your most profitable customers. Look after the customers whoplace large or frequent orders, pay the full price on time and are low maintenance.

Review your profit margins:

Businesses that offer a menu of products can use a simple technique to improve overallprofitability. This involves reviewing sales and profit margins periodically, and dividingproducts into four categories:

1. High percentage of sales and high profit margins - nurture these stars.2. High percentage of sales but low profit margins - consider a price increase andexamine how you can cut costs to increase your profit margins.3. Low percentage of sales but high profit margins - consider a sales push.4. Low percentage of sales and low profit margins - eliminate these where possible.

CHAPTER IV

Cost Reduction Techniques

Cost reduction strategies are geared towards generating substantial revenue frompreexisting elements without making additional sales. The process identifies profitableprocedures already in place and optimizes procedures to maximize profitability. Costreduction enables businesses to identify their current needs, forecast future sales, andunderstand the factors that help or prevent their products from selling. A successful costreduction strategy includes the entire organization and all levels of management.

Analyze Supply and Demand:

One needs to analyze supply and demand in order to effectively lower supply costs andincrease productivity in your organization. Work with the sales team reviewing salesfigures from the past several years, forecasting sales for the next three months based onconsumer confidence, past sales, acquisitions, and merges. Keep in mind externalvariables such as weather, the economy, holidays, and national events. Repeat the processeach quarter, refining forecasts as necessary. A good cost reduction strategy requiresbusinesses to stay one step ahead of the consumer.

Learn and Shop Smart:

Supply costs vary depending on the time of year, market demand, manufacturer supply,and industry variables. Reduce supply costs by shopping around to find the best deal onoffice supplies, production equipment, and raw materials. Utilize bargain hunter servicesto find the best prices on electronics and every day equipment. Consider hiring aprocurement officer to monitor and maintain supply levels, as their training andknowledge are invaluable assets to your organization. Ensure that the decision makerswithin the company know how to find the best prices by using a variety of tools andresources. Monitor changes in pricing, purchasing the products when the price ishistorically low.

Minimize Transactional Costs:

A great deal of business revenue is depleted by payment processing companies, such asPayPal and credit card companies. Encourage cash-based transactions such as check,money order, and cash, Form partnerships with processing authorities and choose a planthat is cost effective for your organization. Streamline the purchasing process by usingauto-generated purchase orders and advanced notification systems. Additionally, you canautomate the shipping and receiving procedure by using electronic metered postage andbulk discounts where applicable. Review your PO history as part of your cost reductionstrategy at the end of the year, creating notifications for the New Year regardingcommonly ordered products. An example would be the acquisition of raw materials for aseasonal product.

Manage and Optimize Inventory:

Enhance your cost reduction efforts by monitoring inventory on a weekly basis, notingthe exact supply levels of each item in the warehouse. Internal inventory management iscost efficient, however; larger companies may find external inventory management aviable option. Create an automated system to automatically order new supplies, whichreduces back office labor expenses. Improve efficiency and maximize space byorganizing inventory supplies and modifying the layout of the room or warehouse. Keepthe aisles free of debris and narrow, with enough room for handcarts, forklifts, or otherequipment. Consider liquidating products that are expiring soon or have a history of poorsales.

Reduce Lead Times:

When a product arrives at the warehouse it inevitably takes several days for it to reach thecustomer. Review and refine your receiving protocols to ensure products hit the shelveswith minimal delay by maintaining adequate order supply rates and throughput levels.Consider rationalizing SKUs by removing inappropriate products from the shelves.Maintain optimal levels by reducing safety stock inventory and increasing order fill rates.

Utilize Bulk Discounts:

Contrary to some business sustainability policies, buying select materials in bulk reducessupply costs and increases productivity by lowering human interaction. Every companyorders certain supplies more than other products. Consider purchasing non-perishableitems with long shelf lives in bulk to reduce supply and labor costs. Ordering items lessfrequently reduces the costs associated with placing orders and saves money by loweringthe cost per unit. Before placing the order, ensure the savings per unit are worth the risk,given current market demands. Never purchase more than one year's worth of inventoryat one time, ensuring the warehouse has the ability to hold the products without finesse.

Reduce Shipping Charges

Cost reduction strategies require advanced planning and efficient spending; thus it isessential to order supplies well in advance to reduce shipping costs. After attempt to purchaseitems in large groups based on the manufacturer or vendor to save on freight charges,utilizing merge-in-transit techniques to reduce transit times. When shipping toconsumers, utilize bulk discounts by shipping multiple quantities of the same item.Choose carriers and form partnerships with them to reduce shipping charges. Orderinventory early to avoid rush-processing charges and expedited delivery fees, which addup quickly for bulk orders.

Collaborate with Suppliers :

Your vendors are your best allies when implementing cost reduction strategies withinyour organization. Consider a variety of programs, such as vendor managed inventorysystems (VIM), vendor stocking programs (VSP), and common supplier jointprocurement policies. Choosing a VSP reduces inventory costs for less popular items andincreases supplier reliability and dependency. Alleviate the nightmare of managing2Linventory by giving the responsibility to the vendor, which reduces your inventory andrelated expenses.

Ask for Employee Suggestions:

Employee suggestions play a vital role in cost reduction and increasing productivitybecause employees have more experience regarding daily operations in a business. Everysuggestion that your business implements improve your business in some way.Performance may be improved, customer satisfaction may increase, costs reduce, or someother positive impact improves your business in some way. The average employeesuggestion saves the company $6,224 in operational expenses. The more ideas youimplement the more your business will improve. These suggestions will add up over timeand can be used as a competitive advantage.

Eliminate Paper Flow:

Another great way to improve productivity while lowering costs is to eliminate paperflow. The average office worker prints 10,000 sheets of paper ayear. The best approachis to place all documents online for employees to download, read, and make changes to.Also, instruct all employees not to print e-mails and other unnecessary documents thatWill usually end up in the trash upon a few quick glances. Have IT set all printers to printdoubled sided.

Example of Cost Reduction Techniques

Six typical cost reduction examples: raw materials and supplies; water and waste water;energy; waste management; transport and travel; and packaging.

1. Raw materials and supplies:

The following are the most frequently used measures with the greatest cost cutting effectin the materials and auxiliary materials sector:Environmental optimization of products and changes in production processes to reducematerial input, in particular for material which is hazardous for the environmentRecovery of production residues and return of used products, recycling them directlyfor new products.An example from Louis Leitz International GmbH & Co. (office supplies):Uses of recycled injection die casting granulate (savings: DM 450,000).The manufactureof plastic articles using injection die casting technology gives rise to small quantities ofwaste, which previously went to the recycling industry. A crusher has been installed inorder to return this waste material directly into the production process, after transformingthe waste material to a granulate. The granulate obtained in this way can be added to theproduction process without impairing product quality. The savings are about220,000kilograms of new injection die casting granulate per annum. As the cost of making thegranulate is TSY below the cost of new material, this reduces purchasing cost by DM -418,000 per annum. It also eliminates the disposal charge for used plastic. Waste disposalcosts were thus reduced by about DM 32,000 per annum.Total savings were DM 450,000 per annum. The amortization period for the crusher plantwas just one year.

2. Water and waste water:

The following are the most frequently used measures with the greatest cost cutting effectin the water/waste water sector:Establishment of water recycling circuits, mostly in connection with cleaningoperations, to allow process water to be used several times in the production process.Replacement of water-intensive processes by new technologies which require onlysmall quantities of water or do not use water at all.Example from Siemens Nixdorf Information system AG (electronics):Water recycling circuit in electroplating (DM 714,000).4 closed-cycle rinsing watersystem was established in electroplating. The system includes mechanical filters and anion exchanger for contaminant removal before the water is reused for rinsing.Related to total water consumption, about 70% of the water is retained in the cyclicalsystem, which means savings of some 140,000 m2 of water per annum (DM 714,000).The inveslment in the closed-cycle system and the ion exchanger was DM l.l million,giving a payback period of about l_ years.

3. Energy:

The following are the most frequently used measures with the greatest cost cutting effectin the power sector:Use of combined heat and power systems (CPH) in companies having a high demandfor electricity and process heat.Energy management system, i.e. including all energy flows and individual solutionsbased on this.Use of waste heat from machines, cooling water, etc., for space heating or process preheating.Je Control of machines, heating, lighting, air-conditioning, etc., closely matched to needs.This avoids idle time and saves energy.Example from Grammer AG/Grammer Biirosttihle GmbH (office furniture):"Energy Commissioners" identify saving potentials (DM62,000).The appointment of"Energy Commissioners" enabled this company to achieve economies of about 9Yo onpower in the 1995 to 1996 period, with consequent savings of some DM62,000.Individual measures included:Switching off machinery during breaks.Replacement of the central compressed air system by small compressors, thuspermitting shutdown wherever compressed air is not required.Identification and elimination of leaks in the compressed air system. Separation ofpower supplies to the individual production areas, thus making it possible to disconnecteach area individually.

The return rate is more than 80%, This means each packaging set can be re-used morethan seven times. The reduction in wood consumption is more than 90%. There arefurther reductions in the waste and energy sectors. The cost saving with this re-usablepackaging system is about DM2.2 million per annum.

Main cost reduction strategies Supplier consolidation Component consolidation Re-source to low cost countries Request For Quotations (RFQ) Supplier cost breakdown analysis Function analysis / Value analysis /Value engineering Design For Manufacture / Design For Assembly Reverse costing Cost driveranalysis Productbenchmarking Design to cost Design workshops with suppliers Competitor benchmarking

CHAPTER V

SummaryThe cost reduction examples given here, and the others cited in the book, Reducing Coststhrough Environmental Management, are characterized by some common points amongthe companies involved:High priority is given to environmental protection.Environmental protection is firmly established in company organization, with clearlydefined responsibilities and contact persons.Environmental guidelines and goals are clearly defined.More than half these companies are validated/certified (at least at some plants) inaccordance with the EMAS (EU's Eco-management and Auditing Scheme) or ISO 14001,or intend to obtain these qualifications in the near future.In Know-how is disseminated rapidly and effectively'by inter-company exchange ofexperience, as organized by member associations of INEM, e.g. B.A.U.M. in C.and KOVET in Hungary.This exchange of experience is very important, especially to enable small and medium-sized businesses to achieve savings.

Suggestions

Many companies have taken rapid and sometimes significant cost cutting action to helpsurvive the worst of the recession. However, the forthcoming period of potential recoverymay still feel like a recession and is likely to remain just as tough.Half dead, half alive zombie consumers depressing demand. Zombie banks andgovernments are unable to lend or stimulate demand, and low cost economies are creatingstrong competitors and constraining future price rises.Each sector will be impacted differently but many companies in the UK and acrossEurope will now need to formulate a plan to remain competitive and rebuild their profitwithout raising prices or relying on significantly increasing revenues.This will call for a new wave of cost management - not to find short term fixes and costcutting but to uncover a wholly more efficient and low cost way of delivering value tocustomers.Companies that achieve this can create a platform for a higher level of performance totake them through the immediate economic constraints and give them a platform for shortterm growth through increasing market share and long term growth as demand rises in thefuture.There are three key steps that companies can follow:.Refocusing on what the customers really value: by re-examining the goods, servicesand propositions that are offered. Through checking how existing goods and servicesmeet changing customer requirements there is the opportunity to re-designing thoseofferings so that they cost less to produce and deliver changing the operating model: by looking at new, lower cost operating and deliverymodels. This can be achieved by considering channels to market, new distribution andproduction partners, and new internal operating model which focus on the goods andservices you know your customers wantDriving ruthless internal efficiency: by stopping any activity that does not add value:companies should uncover inefficient end to end delivery processes right across thesupply chain; drive out waste and the cost of failure, maximize the use of the capacity ofall resources; and seek new value by exploring sourcing options for services andcomponentsRelationship should be maintained to decrease labor turnover. The royalty on miningaggregate should be reviewed from time to time and steps have to be taken for reductionin above cost. The overhead cost per ton has decreased slightly during a period 2007-10'This is due to a reduction in the factory overheads and control overheads' Even thoughselling and distribution cost have increased slightly have no effect on the overheadreduction but it effect on increase in rate of final product. The salaries and wageshave decreased slightly during a period z0o7-10. This is due to a reduction in thefactory overheads and control overheads. Even though administration and othercharges have decreased slightly have no effect on the overhead reduction' Eventhough own generation cost has increase it has no effectover Overall power consumption cost'.

Conclusion'Quick Fix' approaches generally do not work. When fewer people do more of the samework will deteriorate productivity, quality and morale with serious consequences. Costlyerrors quickly offset savings in the short-term and lack of innovation erodescompetitiveness in the long-term. Successful cost-reductions require deep-rooted change,a redesigned cost structure, efficient processes and systems, and skilled people todevelop, implement, and sustain them.The decision on whether or not an organization should outsource a part of their businessis a complicated one, and should not be taken lightly. Searching for short-term costsavings is not a bad idea, but choosing outsourcing based solely on cost reduction ortactical problems are a short-term solution and will undermine a company's potential forlong term success. The organization should have sufficient management skills and theability to adapt new behaviors and processes to successfully manage an external part oftheir business. These skills should include knowledge management abilities and awillingness to apply them to a new and more challenging situation. Tacit knowledge mustspecifically be considered when planning an outsourcing strategy, particularly if thecomponent of the business to be outsourced already exists internally and valuableinstitutional knowledge will be lost. The transfer of tacit knowledge can have a profoundeffect on quality and overall strategic business value. Cultural and language barriers addchallenges to the already difficult process of transferring tacit knowledge and are ofparticular concern in cases of cross-border outsourcing.28