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May 29th, 2017

5/29/2017

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Happy Memorial Day from the Institute for Strategic Improvement
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Decreasing Product Cost

5/8/2017

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Decreasing Product Cost
Businesses often struggle with methods to decrease product cost. A key component of this is determining what can be removed from a product that has no value to your customers. These are the value added components. It becomes difficult as a business owner to set your widget on the table and determine what you think customers do not need. So how can you reduce your product cost?
  • Make a list of your cost drivers, which include the individual cost of the item, its characteristics and features, and function within your product. Analyze each of these to determine if it is needed by the customer or simply decorative or nonfunctional in nature.
  • Survey your customers and use the “voice of the customer” to determine which characteristics of your products are most valuable to them.
  • Use the Pareto effect and determine which small number of features generate the most of your costs.
  • Reduce waste to the extent possible in your production, including any modifications you can make on the size, volume, or weight of your product without sacrificing quality.
  • Lean any efficiencies or benefits that you can in your supply chain and warehouse and distribution services. Significant savings can be accrued by eliminating inventory.
  • Combine the list of cost drivers, surveys from your customers, analysis of most common costs, waste reduction, and supply chain efficiencies to develop some actions you can take to reduce your overall cost. To develop even more energy we suggest taking our Blue Ocean Strategies Course available at:
https://www.instituteforstrategicimprovement.com/store/p49/Blue_Ocean_Strategies_Course.html

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    Author

    Robert Kent Six Sigma Black Belt and improvement professional

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