Following are some of the areas, in which saving can be done as discussed: 1. Materials 2. Machinability 3. Tolerances 4. Fewer Parts 5. Tool Design 6. Make or Buy 7. Increase Productivity 8. Distribution System.

Area # 1. Materials:

In order to reduce the cost of the product, materials of lower or different quality which will not affect the utility of the product are selected. Common examples of such substitution of material are—use of steel for window frames instead of timber frames, use of aluminium instead of copper in electric transmission lines.

This process of substitution is based on the principle that if a cheaper material can work satisfactorily then there is no use in using costly materials. Sometimes another alternative is desired to be found e.g., in the radio valve industry many parts made from expensive nickle can be manufactured with nickel-plated mild steel, similarly copper plated mild steel be used in place of pure copper.

Area # 2. Machinability:

Some materials are easier to machine and allow faster cutting speeds and less tool wear and breakage. Though such material might be slightly costly but can be adopted if saves more in machining and gives overall saving in the cost.

Area # 3. Tolerances:


When more exact the measurement and more insistence on more perfectness (i.e., very close limits), although the parts shall be much better but it costs more. Therefore a permissible variation (which may not effect the quality of the product) is allowed so that parts will cost less to manufacture.

The tolerance is, therefore, kept as fairly close, as too less toler­ance would mean unnecessary large number of rejects, frequent machine setting, more inspec­tions, more skilled operators etc. Hence the tolerance is decided looking to the importance and the place where the part is to be used.

Area # 4. Fewer Parts:

If extra facilities, features or parts can be reduced without affecting much in use of the product but saves lot of money, then we can reduce the parts. This is known as simplification of the product. As large number of components will reduce the reliability of product and there are much chances of failure of the product, due to the failure of one or other component.

Area # 5. Tool Design:

A compromise is made between the use of the new machine tool and the cost of the element of machine tool in the total cost of the product. That is, if the new tool is expensive then the products are manufactured with the help of existing tools and equipment’s whereas if we find that the purchase of new equipment will reduce the manufacturing cost, then we should definitely use the new tool or equipment.


Here it is also pointed out that use of standard tools is better instead of special tools unless extraordinary circumstances are arises.

Area # 6. Make or Buy:

If any part of the product is found to be uneconomical to manufacture, it must be purchased from some other manufacturer producing it on large scale.

Area # 7. Increase Productivity:

Main factor to reduce the price is by increasing the productiv­ity.

In order to increase productivity we must adopt:


(a) Work study techniques,

(b) Effective Production Planning and Control,

(c) Simplification and Standardization, and 

(d) Develop good in­dustrial relations etc.

Area # 8. Distribution System:


Cost of the product can be reduced by changing the method of distribution of the product e.g., (i) from wholesalers directly to the retailers, (ii) locating godowns with sufficient quantities of the product at suitable places of demand, so as to execute custom­ers order promptly without making much expenditure on transportation.