Micro Economics Case Analysis

(Faculty:)

When Youve Got to Cut Click to edit Master subtitle style Costs
Group# 8
Roll No. Name

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Cost Reduction Methods

Competitive Advantage

Cost Reduction or Value Creation or both

Dont aim for single big idea Cost reduction Disruption

Organizational

Use combination of short run and long run initiatives

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Ti m e Pe rio d

W i p r o

Cost Reduction Initiatives / Indian Organizations

I n f o s y s L t d

I n d i a n O il

M H K a A L r L G u ti

V er y S h or t R u n

10% Saving Initiatives Consolidate incidentals Waste elimination unnecessary stationery, prints, photocopies etc Milk Run Effective utilization of transportation Changing Over Time Wage rules Elimination of unnecessary and repeated activities

8/11/12 S Revising Performance Related Pays, Incentive schemes

Ti me Per iod

Cost Reduction Initiatives / Indian Organizations

W ip r o

In fo sy s

In di a n O il

MH K a A L r L G u t i

20% Saving Initiatives Lo Controlling pay hikes ng Yield improvement initiatives Kaizen Ru Using alternate mode of transport for raw n material/finished goods For example, road/rail to pipeline for petroleum products Inventory Reduction JIT Standardization of parts to leverage economies of scale Outsourcing of non-core functions Insourcing/Import substitution/Localization 30% Saving Initiatives Ver Reducing tax liability by re-aligning processes, y utilization of SEZ, STPs Lo 8/11/12Engineering Value ng

Some specific examples

Very Short Run

Milk Run Effective use of transportation Sharing of Equipment and facilities In sourcing/Indigenization Reducing tax liability SEZs, STPs etc

Short Run

Long Run

Very Long Run

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Very Short Run

Milk run: Combination of shipments from multiple vendors in close geographic proximity into one shipment received by the customer

Implementation of Milk Run at MSIL

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Short Run

Sharing of Facilities

Capacity of each pump : 18.5 KW Earlier recorded currents for both the pumps = 15 + 15 = 30 Amp After the said modification, current of the sole running pump = 23 Amp Saving = 7 Amp. = 4 KW (approx.) Annual Savings = 4 X 24 (hrs.) X 365 Days) = 35040 KWH Monetary savings = 35040 * Rs. 7.00 = Rs. 2,45,280/-

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Long Run
HALs experience of MiG-27 project: Choice between make or buy of Test equipment and Tools in SU-30MKI

Approx 35% Test equipment & 45% tools were in-sourced saving 20% of cost Avionics were indigenized with the help of 5 friend countries which resulted into :

Modern Avionics Saving in cost & Saving in weight & size

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Very Long Run

IT companies look to expand in SEZ to reduce their tax liability Incentives Income Tax: Minimum Alternative Tax (MAT): Dividend Distribution Tax (DDT): Central Sales Tax: Sales to DTA Domestic Tariff Area: SEZ 15years exempted exempted exempted permitted STP 10years 15% 16.995% exempted permitted only up to 50%FOB

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