Implementing a Standardization Program
by Bruce D. Caldwell, C.P.M.
Vice President, CAPM

Most successful organizations are using proven methods to reduce the costs of purchased goods. Standardization is just one tool available to an organization to reduce costs. Purchasing should be the driving force that initiates a formalized Standardization Program for the organization. For a program to be successful, senior management of the organization must endorse it.

The benefits of a standardization program would include the following:

1. Effective way to reduce costs
2. Reduce the number of inventoried items
3. Buy off-the-shelf items, eliminating inventory
4. Promotes competition among suppliers
5. Avoids misunderstandings and simplifies the procurement function
6. Reduction in storage and transportation requirements and improved delivery

In a Standardization Proposal to management, the above listed benefits would be identified using real items used in the facility, data collected and projected dollar savings resulting from standardization. The formal Standardization Proposal would then be presented and sold to management, highlighting the benefits. Management must endorse the Standardization Program for it to work and be successful.

If management still has not bought in, the Procurement Department can easily implement a Standardization Program for MRO supplies.   Companies spend 5 to 10% of their purchases on MRO supplies, and these low-priority items consume about 80% of their procurement resources. This is an area that can produce quick results, which should be documented and savings calculated. With documented proof that standardization has merit, the previous Proposal should be again presented to management. If the business is a for-profit organization, how can they not buy in!

The goal of any Procurement Department is to keep the organization supplied with quality materials at the best price. Standardization of materials will allow Procurement to attain this objective.