Chapter 10

„ Codification,
Standardization and
Variety Reduction
 Classification
„ The materials procured by a firm
must be classified and coded before
the materials are inspected,
accounted in stores ledgers and
binned and hence materials are
broadly classified according to their
nature, use and service before the
job codification is taken up.
Codification
„ This is the system adopted for
accurate identification of materials by
allotting a numerical number for each
item procured and stored.
Advantages of Classification
and Codification
„ Systematic grouping for correct
identification of similar items.
„ Avoids duplicate stocks of same items
„ Reduction in sizes and varieties
„ Helps in standardization of materials
„ Ensures accuracy in correspondence,
records and postings of receipts and
issues in appropriate records
Principles of Classification and
Codification
„ Consistency
„ Comprehensiveness
„ Mutual exclusiveness
„ Simple
„ Easily adoptable
Groups of Materials
Classification
„ Raw Materials
„ Components
„ Consumables
„ Spare Parts
„ Supplies
„ Tools
„ Packing Materials
„ Work-in-progress items
„ Finished Goods
„ Completely knocked down items
„ Hard ware items
„ Fasteners
„ Subcontracted items
„ Wires and cables
„ Paints and chemicals
Systems of codification
„ Alphabetic system
„ Simple numeric system
„ Alpha-Numeric System
„ Block System
„ Decimal System
„ Numeric System
„ Mnemonic System
Objectives of Codification
„ To bring all similar items together under
one classification or group
„ To classify an item according to its
nature or characteristics
„ To avoid duplication and confusion
„ To fix essential parameters to specify
an item
Steps involved in Codification
System
„ The large number of items of different
varieties comprising the inventory
needs to be classified under major
groups known as “Generic Groups”
„ Further divide into distinct subgroups
according to the type of material
„ Further listed in alphabetical order and
then according to the size.
Codification Systems
„ The Kodak System
„ The British System
Standardization
„ It is the process of establishing basic
specifications for a set of commonly
used characteristics of size, shape and
performance for products.
Simplification
„ It is closely related concept or process
which refers to the reduction in the
number of different sizes and shapes of
items produced or stocked.
Two Areas of Standardization
„ Industrial Standardization
„ Managerial Standardization
How Standardization Reduces
Costs?
„ It enables a firm to purchase fewer items, in
large quantities and at lower prices
„ Due to fewer items are processed and
stocked reduces purchasing, receiving,
inspection and payment costs
„ Inventory control becomes easier and less
costly because of stocking of fewer items
Objectives of Standardization
„ To achieve maximum overall economy
„ To ensure maximum convenience in use
„ To ensure uniformity and reduction in
variety
„ To help in quality assurance by
improving quality in every activity
Levels of Standards
„ Individual Standard
„ Company Standard
„ Industry Standard
„ National Standard
„ International Standard
Advantages of Standardization
„ Fewer parts to deal with inventory and
in manufacturing
„ Simpler and more routine purchasing,
handling and inspection procedures
„ Facilitates longer production runs and
automation
„ Helps in better understanding of
customer requirements
Disadvantages of
Standardization
„ Decreased variety of end products results in
less consumer appeal and thereby affecting
the competitive advantage for the firm.
„ Designs may be frozen with too many
imperfections remaining
„ Design changes involve high costs which will
increase resistance to improvements in
design
Objectives of Standardization
Program
„ To standardize the materials used in
firm
„ To bring the company standards in line
with the industry standards
„ To reduce the varieties of raw materials
and components used
„ To establish the specifications of
materials to be purchased
Types of Standards
„ Product Standards
„ Engineering Standards
„ Material Standards
„ Quality Standards
„ Process Standards
„ Equipment Standards
„ Safety Standards
„ Administrative Standards
Simplification
„ It is defined as the elimination of
superfluous varieties, sizes, dimensions,
features etc., making the design,
assembly or product simpler, less
complex and less difficult to use.
Specification
„ A Specification is a detailed description
of a material, component part or a
product, including physical measures
such as dimensions, volume, weight,
surface finish etc.
Specification Types
„ Dimensional and Material Specifications
„ Performance Specifications
Kinds and Sources of
Industrial Standards
„ International Standards
„ Industry or National Standards
„ Company Standards
Variety Reduction
„ The process of standardization logically leads
to simplification and variety reduction.
„ Variety reduction defined as a form of
standardization consisting of the reduction of
the number of types of products, or materials
or parts within a definite range to a lesser
number which is adequate to meet prevailing
needs at a given time.
How to control Variety?
„ By Simplifications
„ By Standardization
„ By Specialization
Value Analysis
„ This is another approach to variety
control and thereby cost reduction
Benefits of Variety Control
„ Better after sales service
„ Greater technical productivity
„ Better understanding of technical
problems
„ Lesser set up times
„ Higher equipment utilization
„ Reduction in inventory
„ Higher equipment utilization
„ Easier inventory control
„ Better use of storage space
„ Quicker stock-checking
„ Reduction in purchasing effort