Cost Reduction and Cost Control
In view of the imprecision of cost terminology, it is useful to make a distinction between two related concepts, cost reduction and cost control. Cost (or expense) reduction programs are directed toward specific efforts to reduce costs by improving methods, work arrangements, and products. To illustrate, a company reported a significant reduction in the manufacturing costs of a small screen designed to cover an air intake by simply reducing the number of cross wires (without reducing the utility) that needed to be “turned at the ends” as shown below. Another company, as a result of a cost reduction program, replaced all shown below. Another company, as a result of a cost reduction program, replaced all old-style water faucets with others that automatically turn off when released. The cost reduction was substantial.