Cost reduction is the process used by companies to reduce their costs and increase their profits. Depending on a company’s services or Product, the strategies can vary. Every decision in the product development process affects cost. Companies typically launch a new product without focusing too much on cost. Cost becomes more important when competition increases and price becomes a differentiator in the market. In linear programming, reduced cost, or opportunity cost, is the amount by which an objective function coefficient would have to improve (so increase for maximization problem, decrease for minimization problem) before it would be possible for a corresponding variable to assume a positive value in the optimal solution. It is the cost for increasing a variable by a small amount, i.e., the first derivative from a certain point on the polyhedron that constrains the problem. When the point is a vertex in the polyhedron, the variable with the most extreme cost, negatively for minimisation and positively maximisation, is sometimes referred to as the steepest edge. Given a system minimize subject to , the reduced cost vector can be computed as , where is the dual cost vector. It follows directly that for a minimisation problem, any non-basic variables at their lower bounds with strictly negative reduced costs are eligible to enter that basis, while any basic variables must have a reduced cost that is exactly 0. For a maximisation problem, the non-basic variables at their lower bounds that are eligible for entering the basis have a strictly positive reduced cost.
Business process re-engineering is a business management strategy, originally pioneered in the early 1990s, focusing on the analysis and design of workflows and processes within an organization. BPR aimed to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. In the mid-1990s, as...
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