By Ron Ketterling – President
In part 2 we discussed effective ways to reduce manufacturing costs. As you know, standardization improves flexibility and reduces cost. Standardization also 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.
Reduce Manufacturing Costs
Standardization can reduce manufacturing costs by 50%. Through purchasing leverage, manufacturers can reduce their purchasing costs considerably. Once purchasing of parts and products is standardized, the cost of inventory will go down. 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 also. There is less overhead in procuring standard parts and materials that are common and more readily available. Subsequently, 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 for 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 flexibility of operations, that results in better delivery of products. With standardized components you can change over work centers quickly. This is a result of not having to put away and restock as many components when a product switch occurs.
By eliminating the amount of parts used and simplifying 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 being available and delivered quickly from vendors, companies can provide their customers a quick turnaround on requested products.
Standardization 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, To ERP or Not to ERP: It Isn’t Even a Question, to find out how you can gain a better handle over your warehouse and its processes.