Definition of Cost reduction

Cost reduction is planned positive approach to reducing expenditure. Cost reduction exercises are planned campaigns to cut expenditure. It is a continuous process with the object of getting a more or less permanent benefit.

Construction is defied by CIMA London as the achievement of real and permanent reduction in the unit cost of good manufactured or services rendered without impairing their suitability for use intended.

Thus the cost reduction is therefore the term used for planned and positive approach to the improvement in product design better technology and techniques incentive schemes new layouts and better method then very quickly the costs will grow back to their original size.