MGMT493 Management of Strategic Planning

Cost Drivers

Businesses use various cost strategies to increase their earnings including using advanced technology, continuous improvement, outsourcing some functions, and so forth. These strategies ensure that firm uses reduce cost significantly. Therefore, this post illustrates how organizations use cost to run drivers to cut down their cost using an example of amazon.

Employing advanced technology. Institutions use information technology to run their function with ease and reduce. The use of advanced technology help eliminates delays, extra man force, minimize time thus reducing some expenses (Rintala, Oskari, et al). For instance, Amazon uses robots to deliver goods to the client reducing shipping expenses and the time used for delivery. S

Effective supply chain. efficient and quick supply chain management together with innovative technology facilitate proper movement of goods and services. Excellent transportation, multi-tier inventory system, and an extensive network of warehouses have made amazon's supply chain be best compared to all giant corporations.

Outsourcing. Outsourcing allows the enterprise to assign some business function that can be done affordably by other entity allowing itself to focus on other critical functions. Amazon majorly outsources its inventory management Most merchandise infrequently ordered amazon does not store them and almost half of the sales are done by third parties partnerships (LeBlanc, Rick).

Economies of scale. Huge economies of scale reduce the cost of operation. The more the products, the less cost per unit. As such, a firm burden low cost suffocating other institution that has lower sales volume.

References:

LeBlanc, Rick. "How Amazon Is Changing Supply Chain Management." The Balance Small Business. N.p., 2021. Web. 2 Mar. 2021. https://www.thebalancesmb.com/how-amazon-is-changing-supply-chain-management-4155324

Rintala, Oskari, et al. "Drivers of logistics outsourcing: examining transaction costs, core competences and planned behavior." International Journal of Physical Distribution & Logistics Management (2021).

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