Cost avoidance is better than cost reduction
According to Arno Hiller , an authority in Product Cost Management:
- Controlling costs is a challenge for manufacturing companies.
- The two strategies for controlling costs are “cost avoidance” and “cost reduction.”
- Most companies focus on cost reduction, instead of cost avoidance.
- Solely focusing on cost reduction is expensive and drains far more profits over time.
- The solution: combine cost reduction with cost avoidance, putting the majority of the focus on avoiding costs before production begins.