By Ron Ketterling – President
In part 2 we discussed the different types of standardization used to reduce manufacturing costs. As you know, standardization improves flexibility and reduces cost, as well as supports other cost reduction methods, such as build-to-order and customization. However, the benefits of standardization do not stop at flexibility and cost-savings. The following benefits make standardization a great choice when looking for cost-saving strategies.
1. Cost Reduction
Standardization can reduce manufacturing costs by 50%. Through purchasing leverage, manufacturers can reduce their purchasing costs considerably. Once the purchasing of parts and products is standardized, the cost of inventory will go down coincidentally. Since common parts are stored and resupplied only as needed, BOM/MRP/ordering expenses will be avoided. Overhead costs, such as purchasing, put away, picking and bill paying, will go down as well. There is less overhead in procuring standard parts and materials that are common and more readily available. And, more standardization means less picking and manufacturing errors.
The quality of your product improves with standardization in place. Fewer picking and manufacturing errors means fewer quality problems. Reducing components means less testing form incoming components. Continuous improvements are made as manufacturing companies standardize their parts and processes in order to produce a high-quality, low-cost product.
Standardization eliminates set-up, greatly reduces inventory, and simplifies supply chain management. Improving the operational flexibility in the warehouse results in better delivery of products. With standardized components you can change over work centers quickly because you won’t have to put away and restock as many components with a product switch.
Without the additional concern of too many parts and unnecessary procedures, manufacturing companies can focus on improving their response time. Standardization frees up time and allows employees to concentrate on more efficient processes, such as Build-to-Order. With parts availability and quicker deliveries from vendors, companies can provide their customers a quick turnaround on requested products.
Standardization, along with a variety of other methods, greatly reduces costs and allows manufacturing companies to focus on improving their products and procedures. New technology, such as ERP solutions, can help you better manage your warehouse. Download our whitepaper, Defining the ERP Strategy, to find out how you can gain a better handle over your warehouse and its processes.