Techniques of Reducing Cost Gaps

Techniques of Reducing Cost Gaps

1.    Product Re-Design

First method of filling the cost gap is to re-design the product. Some features may be removed from the design of product. Usually features which add no value to the customer are removed.

2.    Review Supply Chain

Second method of reducing gap is reviewing the chain supple. This includes negotiation with supplier for reducing the cost of the supplied material. Direct purchases from the producer of material may also reduce cost. Supplier may be ready to offer a bulk discount for large amount of purchases.

3.    Economies of Scale

Third method of reducing gap is to produce large quantity of product. It will reduce the unit fixed cost and thus the total product cost will also reduce, which would ultimately reduce the Cost gap.

4.     Advance Methods of production

Fourth method of reducing gap is to use advance production techniques. It is believed that modern techniques are more cost efficient.

5.    Improve Efficiency

Fifth method of reducing gap is to improve efficiency of staff. The staff efficiency can be improved by training and introducing the incentive based remuneration packages