Last blog we looked at what causes part proliferation and why it takes the competitive edge out of companies. In this blog we will look at solutions that can potentially help manufacturers to reduce their inventory of parts sitting in the warehouse.
Standardization of parts,
The best way to avoid proliferation is through standardization of parts. For a company that has a legacy of parts a thorough analysis of all parts must be performed to create groups and families of parts to clean up the system. Parts that are the same must be consolidated into one part number. Parts that are similar in shapes and function can be consolidated into one part which can then be modified as required. Creating a Standard Bill of Material (BOM) of preferred parts and making it easy to consult using Off-the-Shelf applications will control and avoid the proliferation of parts. Unfortunately an iron fist is required to maintain a cleaned BOM, and this doesn’t mean that the system has to be inflexible, but rather the opposite. The flexibility is created through the designing of parts that can be modified for multiple purposes when required or the simple reuse of engineering or designing around Off-The-Shelf parts. It all starts at the very beginning in the definition phase of products.
The Zero-Based Approach,
In the previous blog we referred to this approach as the Empty Drawer or Empty Room concept. Dr. David M. Anderson has developed a similar method to reduce and cleanup parts off an inventory. The Zero-Based Approach is based on the principle of: “What is the minimum list of parts type we need to design new products”. This approach literally starts at zero and adds only the parts that are truly needed from an overwhelming list. It is like emptying a drawer and just put in what we want, rather than taking out what we don’t want. The latter takes more time as wanted and unwanted items are cluttered together. The exercise of cleanup your BOM using the Zero-Based approach must be done with a vision of developing products with a minimum of parts that can be reused in different designs. Obviously once this is done, a decision has to be made as to what will be done with the unwanted parts. Again, don’t send then back to the store room.
Designing for Standardization,
Standardization must be designed into the product. Designing for standardization, other than engineering a product, is in fact a consolidation of activities aimed at defining, evaluating availability, purchasing, and sustaining supply of parts during the concept phase in the development of a product. Before any lines are drawn on a CAD, the use of preferred parts, reusing already designed and tested parts or designing new parts is defined in a concurrent manner involving at a minimum; Engineering, Supply Chain Management and Manufacturing. This trio must reach a consensus on parts; their supply and how they will reach the production floor on time, without inventory, and zero Work-In-Process (WIP).
The compounded effect of working in a One-Piece-Flow environment and Standardization will virtually eliminate inventory and completely eliminate WIP, therefore resulting in substantial financial savings, and product out to the customers faster.
The Ripple Effect,
Standardization has a ripple effect on the operation of a company that develops products. The financial savings will come in the forms of: No inventory to support, less parts means less effort to purchase, better purchasing leverage due to a higher volume of the same parts ordered, reduced floor space means no need to expand to have more room, less overhead cost, better quality due to a lesser number of different parts to support. Having the product to the customer faster also means better financial returns and repeat business. It also means that supplier will have savings as well as they will supply a higher volume of the same parts, therefore passing savings onto the customers to repeat business, yet still be profitable.
Closing Comment,
Companies that have adopted standardization as a mean to control their part proliferation have seen their inventory, and WIP virtually eliminated and Total Cost reduced, making them more profitable and competitive than they were before, and allowed them to develop new products better and faster. Standardization is not something that is technically complex, but will require leadership and vision. Cleanup the system using a zero-based-approach is a fast and simple method to create a BOM of preferred parts. Professionals like Dr. David M. Anderson have proven that standardizing parts, the total cost of developing and producing products is dramatically reduced, and the exercise typically pays itself within 3 financial quarters.
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