Organisation for Cost Reduction
Cost reduction as stated above includes real and stable reduction in costs. It is a permanent process. Though, it needs co-operation of people at all levels. The environment in the organisation should be made very congenial that healthy discussion can occur at all levels of management. The appreciations should be supposed in right spirit with honesty and grace through all, so that corrective action might be taken in time. This needs the creation of a separate Cost Reduction Cell in the organisation. The Cell functions within the supervision and direction of a high-powered authority termed as Cost Reduction Committee. The committee contains responsible executives from several functions like distribution, purchase, planning and design, finance, research, production, sales, etc. The committee should chalk out a specific cost reduction programme and fix up responsibility of the executives to reconsider the actual performance from time to time.
(i) It collects cost data from dissimilar departments.
(ii) It invites suggestions from different executives for enhancement and reduction of costs related to their areas.
(iii) It forms cost reduction environment in the organisation through emphasising and describing to the workers the significance of cost reduction and the benefits that will accrue to them.
(iv) It recognizes areas where cost reduction is
(a) Necessary;
(b) Desirable; and
(c) Possible and fixes the priorities.
(v) It frames guidelines, policies, and issues directives for bringing alterations in product designs, introducing new designs and new products in consultation along with technocrat for reducing the cost of production with no impairing the quality.
(vi) It frames policies concerning reduction of costs in administrative and distribution divisions with no adversely affecting their efficiency
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