You are on page 1of 4


by Dr. David M. Anderson, P.E., fASME, CMC Build-to-Order Consulting Cost Reduction Strategy (home page) SeminarsConsultingArticlesBooksSite Map

Copyright 2011 by David M. Anderson

In mass production, economies of scale are realized at the product level. In Lean Production, Build-to-Order, and Mass Customization, economies of scale are realized at the level of part and raw materials.
Standardization supports the fundamental precepts of build-to-order and mass customization: All parts must be available at all points of use, not just "somewhere in the plant," which eliminates the setup to find, load, or kit parts. As a stand-alone program, standardization can reduce cost and improve flexibility.1 Standardizationmakesiteasierforpartstobe pulled into assembly (instead of ordering and waiting) by reducing the number of part types to the point where the remaining few standard parts can receive the focus to arrange demand-pull just-in-time deliveries.Fewertypesofpartsorderedinlargerquantitiesreduces part cost and material overhead cost. The following practical standardization techniques are presented in all of Dr. Anderson's in-house seminars.Dr. Anderson is an experienced workshop facilitator who can help companies quickly implement standardization.

The Zero-Based Standardization Approach

Dr.Andersonhasdevelopedaneasy-to-apply approach that is more effective than part type reduction measures, which require tremendous efforts for their return. Reducing active part numbers, say from 20,000 to 15,000 will, in fact, lower material overhead somewhat, but may not reach the threshold (eliminating part related setup) that would enable the plant to build products flexibly without delays and setups to get the parts, kit the parts, or change the part bins. This is a very effective technique to reduce the number of different parts (part types) by standardizing on certain preferred parts. This usually applies to purchased parts but it could also apply to manufactured parts. The methodology is based on a zero-based principle that asks the simple question: "What is the minimum list of part types we need to design new products?" Answering this question can be made easier by assuming that the company (or a new competitor) has just entered this product line and is deciding which parts will be needed for a whole new product line. One of the advantages of new competitors the ability to "start fresh" without the old "baggage:" too many parts. Just image a competitor simultaneously designed the entire product line around common parts. Now image doing the same thing internally. This is called the zero based approach. Thezerobasedapproach,literally,startsatzeroandaddsonlywhatisneeded,asopposedtoreducingpartsfroma overwhelming list. An analogous situation would be cleaning out the most cluttered drawer in a desk, a purse, or a glove compartment; removing unwanted pieces would take much effort, and still not be very effective. The more effective zero-based approach would be to empty everything, and add back only the items that are essential. Where the "clutter" ends up is the difference in the approaches: in the drawer, purse or glove compartment or in the garbage can. Similarly, parts reduction efforts have to work hard to remove the clutter (excess part variety) in the system, whereas zero-based approaches exclude the clutter from the beginning. The clutter is the unnecessary parts that would have not been needed if products were designed around common parts. Not only do these excess parts incur overhead costs to administer them, they also lower plant efficiency and machine utilization because of the setup caused by product that are designed to have more parts than can be distributed at every point of use. Standard Parts List Determination consists of the following steps: Establish baseline list from usage history (see graph below) Add new generation parts

Eliminate parallel lines of parts (tolerance, strength, etc.) Investigate and optimize availability and sourcing Structure parts lists into some logical order Obtain feedback and concurrence from Engineering, Manufacturing, Quality and Purchasing.

Thisapproachdeterminestheminimumlistofpartsneededfornew designs and is not intended to eliminate parts used on existing products, except, when the common parts are functionally equivalent in all respects. In this case the new common part may be substituted as an equivalent part or a "better-than" substitution, where a common part with a better tolerance can replace its lesser counterpart in existing products. EvenifpartStandardizationeffortsonlyapplytonewproducts,rememberthatinthesedaysofrapidproduct obsolescence and short product life cycles, all older products may be phased out in a few years.


Purchasing Leverage.Beingabletoorderlargerquantitiesofstandardpartsandmaterialsprovidespurchasing leverage where buyers can benefit from suppliers economies-of-scale and arrange more frequent deliveries, to support just-in-time operations. Lowering Material Overhead.Thereisfarlessmaterialoverheadtoprocurestandardpartsandmaterials,which are more common, more readily available, and have more sources. When asked during Design for Manufacturability classes, purchasing managers say that their effort to procure standard parts are 5% to 10% of the effort to procure the rest of proliferated parts lists. Thus, material overhead for standard part is ten times less and the material overhead rate should be structured accordingly. In the article on measuring total cost, the easy procedure to used to quantify overhead would be to split the material overhead so that standard parts are charged 10% of the total material overhead and the unusual parts are charged 90% to (a) reflect the real costs and (b) to encourage use of the standard parts and materials. Spontaneous Resupply Possible. Manycostscanbereducedbyarrangingspontaneous resupply of parts and materials, instead of the more expensive forecast-based purchase orders and holding inventories.


ThispartstandardizationprocedurewasimplementedbytheDr. Anderson at Intel's Systems Group. Starting with 20,000 parts for printed circuit boards and computers, this standardization approach generated a preferred parts list of 500 parts, which is 2.5% of the original! For resistors, capacitors, and diodes, 2,000 values were reduced to 35 values (less than 2%). Fastenersforcomputersystemswerestandardizedononescrew!Thisishowthestandardizationprocess worked: Service wanted a Phillips head so they, and customers, could keep using the same tools. Quality wanted a captivated crest cup washer to protect surface finishes and yet still have a locking effect. Engineering wanted the 632 size screw to be only a quarter inch long. Manufacturing recommended that the screw be three-eights of an inch long so that it would not tumble as it was fed to auto-feed screwdriver. PreviousdesignshadsomanydifferentscrewsthatManufacturingcouldnotusetheirauto-feed screwdriver at all. The next design used the standard screw in 40 locations. This, and the correct screw geometry, made use of the more efficient auto-feed screwdriver practical. In order to feed the screw, it had to be one eighth of an inch longer, but this meant that the screw would protrude beyond the fastened material. This violated a workmanship standard prohibiting such protrusions; some people even thought the standardization was doomed. But the workmanship standard was modified to allow the protrusion as long as it did not pose a safety hazard or compromise product functionality in any way. Intel'senforcementgoalwasnot100%,asmightberequiredforatotallyflexibleoperation,butwefeltthateven 95% usage would result in significant material overhead savings. Ingeneral,itshouldbepossibletogenerateapreferredpartslistthatis2to3percentoftheproliferatedlist.For very standard parts like fasteners or passive electronic components, it should be possible for the preferred parts list to be less than 1 percent of the current list.


Tool Standardization. A subject related to part Standardization is tool Standardization, which determines how many different tools are required for assembly, alignment, calibration, testing, repair, and service. Company-wide tool standardization can be determined as follows: Analyze tools used for existing products. Prioritize usage histories to determine the most "common" of existing tools. Work with people in manufacturing/service to determine tool preferences. Coordinate common tool selection with common part selection. Issue common tool lists with common parts lists. Feature Standardization. "Features" are any geometry that requires a separate tool like a drill, ream, hole punch, bend radii, and cutting tool bit for machine tools. These tools need to be standardized using the same procedures as parts. Raw Materials Standardization. If raw materials can be standardized, then the processes can be flexible enough to make different products without any setup to change materials, fixturing mechanisms, or cutting tools. Raw material Standardization can apply to bar stock/tubing, sheet-metal, molding/casting, protective coatings, and programmable chips. Process Standardization. Standardization of processes results from the concurrent engineering of products and processes to ensure that the processes are actually specified by the design team, rather than being left to chance or "to be determined later." Processes must be coordinated and common enough to ensure that all parts and products in the mass customization platform can be built without the setup changes that would undermine flexible manufacturing. Example: auto-feed screwdrivers.

Standardization of parts helps part suppliers rationalize their product lines and allow them to: C reduce their overhead costs and subsidies, which allows them to be more cost competitive C improve their operational flexibility, resulting in better delivery. C simplify their supply chain management, C free valuable resources to improve operations and quality, implement better product development

practices, and introduce new capabilities like build-to-order & mass customization.

C Cost Reduction

Purchasing costs reduced through purchasing leverage Inventory cost reduction Floor space reduction BOM/MRP/ordering expense avoided when common parts are simply drawn as needed from spontaneous resupply Overhead cost reduction

C Quality:

Product quality Continuous Improvement Vendor reduction

C Flexibility:

Eliminating setup Inventory reduction Simplify supply chain management Internal material logistics Breadtruck deliveries Flexible manufacturing

C Responsiveness:

Build-to-Order Parts availability Quicker deliveries from vendors

Dr. Anderson is a California-based consultant specializing in training and consulting on build-to-order, mass customization, lean/flow production, design for manufacturability, and cost reduction. He is the author of "Build-toOrder & Mass Customization, The Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory" (2008, 512 pages; CIM Press, 1-805-924-0200, and "Design for Manufacturability & Concurrent Engineering; How to Design for Low Cost, Design in High Quality, Design for Lean Manufacture, and Design Quickly for Fast Production" (2010, 456 pages; CIM Press, 1-805-924-0200; He can be reached at (805) 924-0100 or; web-site: References 1. David M. Anderson, "Build-to-Order & Mass Customization, the Ultimate Supply Chain and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory," (2008, 512 pages, CIM Press,1-805924-0200;; Chapter 4, "Standardization of Parts," and Chapter 5, "Material Variety Reduction." For more information call or e-mail: Dr. David M. Anderson, P.E., fASME, CMC phone: 1-805-924-0100 fax: 1-805-924-0200 e-mail: Cost Reduction Strategy (home page) SeminarsConsultingArticlesBooksSite Map