burt−dobler−starling: © the mcgraw−hill companies, 2003...

Burt−Dobler−Starling: World Class Supply Management, Seventh Edition

III. The Requirements Process

11. Specifications and Standardization

© The McGraw−Hill Companies, 2003

235

C H A P T E R 11Specifications andStandardization

World Class Supply ManagementSM requires supply management professionals andsuppliers to be actively involved in the tactical and strategic development ofspecifications and standards to proactively reduce total costs of products and services.

KEY CONCEPTS

■ Specifications and Standardization 236

■ Purposes of Specifications 237

Collaborative Development 237

■ Categories of Specifications 238

Simple Specifications 239

Complex Specifications 244

Combination of Methods 246

■ Development of Specifications 247

Organizational Approaches 247

Supply Management Research 249

Writing Specifications 249

Common Specifications Problems 250

■ Standardization 252

History of Standardization 252

Types and Sources of Standards 253

Benefits of Standardization 254





236 PART 3 The Requirements Process

■ Simplification 256

■ Developing a Standardization Program 256

Standards Team 257

Importance of Supply Management 257

Materials Catalog 257

Electronic Materials Catalog 259

CaseThe Simple Sandwich

In a recent training session for Chili’s restaurant chain, prospective employees wereasked to write a description for making a peanut butter and jelly sandwich. One of thetrainees was then summoned and asked to randomly select a description. The instructorasked the trainee to follow the description to make a sandwich strictly using the vast re-sources in the restaurant’s kitchen.

What was the result? Complete chaos! The trainee could not even start, because thematerials specified did not state whether the bread was wheat, white, rye, Texas toast, orhamburger bun. The author of the specifications assumed everyone knew that a peanut but-ter and jelly sandwich was made with white bread, creamy peanut butter, and grape jelly.

Even assuming the use of Rainbow brand white bread, Skippy creamy peanut but-ter, and Welch’s grape jelly, the specifications still failed to state how the materials wereto be assembled and with what tools. How much peanut butter? Should a spoon be usedfor spreading the jelly? Should one, two, or three pieces of bread be used?

The manager at Chili’s had made her point. Don’t assume specifications given by acustomer to you or by you to the kitchen are readily understood. In an analogous way,don’t assume that you, as a supply manager, understand all specifications given to youby an internal customer. In addition, do not assume that suppliers will understand yourdescriptions in a purchase order or contract.

Specifications and StandardizationParticipation by both critical suppliers and supply management in the development ofclear specifications and comprehensive standardization is required for an organizationto evolve to World Class Supply ManagementSM. Proactive development of specifica-tions and standardization can aid an organization in reducing total costs of a product orservice developed either in-house or externally. The importance of including supplymanagement in the design process was established in our chapter on new product development.

In a manufacturing firm, when specifications for the tangible product are fixed, thefinal design of the product is also fixed. The final design of the product often dictatesfixing ancillary costs such as packaging and required service for the product. Therefore,when the final design is fixed, the product’s competitive stance and its profit potentialare also fixed. As we stated in our new product development chapter, it is estimated that





CHAPTER 11 Specifications and Standardization 237

75 to 85 percent of avoidable total costs are controllable at the design stage. Conse-quently, early involvement of supplier professionals is essential in the firm’s effort to re-duce total cost.1

Specifications and standardization are two related topics in the field of supply man-agement. Specifications form what is called the purchase description. Standardizedparts, components, and services may be included in the purchase description, but stan-dardization goes beyond mere inclusion in a description. Standardization is treated inmany companies and supply chains as a philosophy for creating competitive advantage.As will be discussed in this chapter, the development of specifications and standardiza-tion requires strategic action as well as tactical vigilance. This chapter first discussesspecifications and then standardization.

Purposes of SpecificationsThe purchase specification forms the heart of the procurement. Whether or not a pur-chase order or contract will be performed to the satisfaction of the buying organizationfrequently is determined at the time the specification is selected or written. Purchasespecifications serve a number of purposes, among them to:

■ Communicate to professionals in the supply management department what to buy.

■ Communicate to prospective suppliers what is required.

■ Establish the tangible goods to be provided.

■ Establish the intangible services to be provided, such as warranty, maintenance, andsupport.

■ Establish the standards against which inspections, tests, and quality checks are made.

■ Balance the specification goals of individual departments, relevant suppliers, desiredproduct or service performance and cost.

Recognition that procurements should be made with the understanding of total costof ownership (as discussed in the Total Cost of Ownership chapter) requires supply man-agers to consider specifications that go beyond the tangible good or primary serviceneeded. For example, laptop specifications should include the desired warranty and sup-port levels.

Collaborative Development

Development of specifications should be conducted as a collaborative process whenevereconomically justified. Through collaborative interactions of various departmental repre-sentatives and relevant suppliers, the specifications output can balance goals that often con-flict with each other. Performance goals, such as quality and delivery, should be balancedagainst cost. Individual department goals should be balanced. Supplier goals should beconsidered. The balancing concept is illustrated in Figure 11.1. The balancing process is

1David N. Burt and Michael F. Doyle, The American Keiretsu (Homewood, IL: BusinessOne-Irwin, 1993),p. 158.






best done in an atmosphere of collaboration and mutual desire to develop specificationsoutcomes where “win-win” opportunities are maximized.

As suggested by Figure 11.1, multiple goals are balanced simultaneously. For exam-ple, in the design of a DVD player, high quality and timely delivery goals may conflict withcost containment goals. The objective in collaboratively developing the specificationswould be to simultaneously achieve the quality, delivery, and cost goals. Perhaps a suppliersuggests that a standard part that the buying firm was unaware of could be used where theoriginal specification used a nonstandard part. The standard part would decrease produc-tion time, improve quality, and cost less than the nonstandard part. Unfortunately, manycompanies do not pursue balanced specifications through collaborative efforts.

Categories of SpecificationsPurchase specifications can be classified into two broad categories—simple and com-plex—also referred to as low detail and high detail. The classification simple or complexis a reflection of the development of the specification itself and not the complexity of theproduct or service or the fulfillment of the specification. Both simple and complex spec-ifications require a balancing of departmental differences, along with quality, delivery,and cost. However, in most cases, simple specifications require less balancing than com-plex specifications.

Complex or detailed specifications are used when a simple specification is not pos-sible or preferable. A complex specification requires more resources and time to de-

Balanced Specifications

Etc.Quality GoalsDelivery Goals

Department GoalsCompany Goals

Etc.Cost GoalsCost Goals

Company GoalsSupplier Goals

Figure 11.1 | Considerations in Developing Balanced Specifications






velop. We discuss simple specifications first, and then complex specifications. All cate-gories of specifications are presented in the Figure 11.2, since combinations of the cat-egories of specifications are possible.

Simple Specifications

Simple specifications require less resources and time to develop than complex specifi-cations. In many cases, simple specifications are completed with one sentence and havelittle need for collaboration between functional areas or supply chain members. For ex-ample, the specification of an accounting department for supply management to pur-chase “12 Fujitsu Lifebook S Series model 4542 laptops with their default componentspackage and warranty” is a complete, yet simple, specification. Nothing other than thebrand name, model and package type, and warranty is needed. The astute reader will rec-ognize that supply management could contribute to the specification by working withaccounting to meet their needs with a lower-cost manufacturer or prequalified supplier.The six categories of simple specifications are desired performance, function and fit,brand or trade names, samples, market grades, and qualified products.

Performance Specifications A performance specification, in theory, is the perfectmethod of describing a requirement. Instead of describing an item in terms of its designcharacteristics, performance specifications describe in words, and quantitatively wherepossible, what the item is required to do. This type of description is used extensively inbuying highly technical military and space products. For example, the product wantedcould be a missile capable of being launched from a submarine with a designated speed,

Method & Material Performance

Function & Fit

Brand Names

Samples

Market GradesQualified Products

Design Specifications

Engineer Drawings

Commercial Standards

SpecificationsDevelopment

Figure 11.2 | Categories of Specifications






range, and accuracy. Potential suppliers are told only the performance that is required.Though performance is specified in precise detail, suppliers are not told how the prod-uct should be manufactured or what material should be used in its manufacture.

Performance specifications are not limited to such complex items as spacecraft.Electronics, aircraft, and automobile companies, for example, frequently use thismethod to buy such common materials as electrical wire, batteries, and radios. A per-formance specification for wire may require it to withstand a given temperature, have adesignated resistance to abrasion, and have a given conductivity capability. No mentionis made in the specifications of what materials are to be used or how the wire is to bemanufactured or insulated to give it the required characteristics. Manufacturers are freeto make these choices as they see fit.

Industry uses performance specifications extensively to buy expensive, complicatedmachines and machine tools. Today, more production machines are replaced because oftechnological obsolescence than because of wear. Therefore, in buying such a machine,a firm should make every effort to obtain the ultimate in technological advancement. Of-ten this can be done best by using performance specifications. To reduce and control theexpense associated with this approach to describing requirements, descriptions shouldbe written as explicitly as possible. Also, the product being purchased should be sec-tionalized into the greatest practical number of distinct components, with potential sell-ers required to quote on each component. This practice helps solve the difficult problemof comparing sellers’ prices by allowing comparison of individual components.

There are two primary advantages of describing quality by performance specifica-tions: (1) ease of preparing the specifications and (2) assurance of obtaining the preciseperformance desired. For complex products, it is by far the easiest type of specificationto write. It assures performance, and if the supplier is competent, it assures inclusion ofall applicable new developments. The clarity of a performance specification also bringsclarity into any legal or liability issue that may ensue if the supplier does not meet thespecification as agreed. A potential disadvantage is when the performance specificationis out of date given current technology. For example, a late model computer hard drivewill often cost more than a current technology hard drive that stores more and has fasteraccess rates and a lower price.

Proper supplier selection is essential when performance specifications are used. Infact, the ability to select capable and honest suppliers is prerequisite to the proper use ofperformance specifications. Because the supplier assumes the entire responsibility fordesigning and making the product, quality is entirely in its hands. If the supplier is notcapable, it cannot apply the most advanced technical and manufacturing knowledge. Ifit is not honest, materials and workmanship may be inferior. When using performancespecifications, supply managers must solicit competition among two or more capablesellers. Capable suppliers ensure quality; competition ensures reasonable prices.

Function and Fit Specifications Such purchase descriptions are a variation of per-formance specifications and are used in early supplier involvement (ESI) programs. Withthis approach, the design team describes the function(s) to be performed and the way theitem is to fit into the larger system (e.g., automobile, computer, etc.), together with sev-eral design objectives (cost, weight, and reliability).






Robert May supports the argument that ESI best meets the needs of companies bygiving suppliers performance specifications. According to May, “The optimal use ofsuppliers’ special skills and processes is experienced when suppliers are provided witha set of performance specifications.”2

As ESI becomes more common, this approach to describing requirements undoubt-edly will increase in popularity. With careful prequalification of suppliers, there are nosignificant disadvantages with this approach.

Brand or Trade Names When manufacturers develop and market a new product, theymust decide whether or not to brand it. Branding or differentiating a product is generallydone to develop a recognized reputation and thus gain repeat sales, protect the productagainst substitutes, maintain price stability, and simplify sales promotion.3 The primaryreason most manufacturers brand their products is to obtain repeat sales. Consumers de-velop a preference for brands. Therefore, branded products can generally be sold athigher prices than unbranded products of similar quality. A brand represents the manu-facturer’s pledge that the quality of the product will be consistent from one purchase tothe next. A supply manager can be certain that a reputable manufacturer will strive tokeep this pledge.

Brand name products are among the simplest to describe on a purchase order. Thus,they save time and reduce supply management expense. Inspection expense is also lowfor branded products. The only inspection required is sight verification of the brand la-bels. The brand is the quality ordered. The higher prices usually paid for name brandsthus are offset to some extent by reduced description preparation and inspection costs.

A supplier’s success in maintaining a consistent quality level is greatest in those sit-uations in which production and quality control are under the supplier’s own supervi-sion. If a supplier buys an item from several manufacturers, the quality variation in allprobability will be larger than if the supplier made the item or bought it from a singlesource. For this reason, it is important for supply managers to know who is responsiblefor the production and quality control of all branded products they buy. In situations inwhich tight quality control is essential, multiple sources of production should be avoidedif possible.

It is often said that when a supply manager purchases by brand name he or she elim-inates competition by limiting the purchase to a single source of supply. If a supply man-ager had to limit purchases to a single brand from a single source, this would representa major disadvantage of purchasing by brand name. In fact, however, there are very fewsituations in which only one brand is acceptable for a given purpose. A profitable mar-ket for any item in a competitive enterprise economy attracts other manufacturers tomake the item. Competition, therefore, is available by brands just as it is by other types

2Robert E. May, C.P.M., Sr. Consultant, Harris Consulting, Inc., “Top Ten Approaches to Cost Reduction,”presentation at the 1998 NAPM International Purchasing Conference, May 1998. See napm.org for fulltranscript of the proceedings paper.3Manufacturers also produce merchandise for wholesalers and retailers who market it under their ownprivate brand labels. In such arrangements the manufacturer is relieved of marketing and promotionalresponsibilities.






of quality descriptions. In addition, the same branded product may be available from dif-ferent wholesalers or jobbers who are willing to compete on price and service to get abuying company’s order.

Making a specification of “brand A or equal” on the bid forms usually ensures com-petition among brands. What does “or equal” mean? This question generates many ar-guments. Realistically, it means materials that are of equal quality and are capable ofperforming the function intended. Equal quality means similar quality of materials andsimilar quality of workmanship. Comparing the quality of materials is relatively easy,but comparing the quality of workmanship is particularly difficult. Here such nebulousconsiderations as precision of production, fit and matching of adjacent parts, types offinish, and shades of color must be resolved. The key to the “or equal” consideration is,“Can the ‘equal’perform the function for which the specified brand is desired?” If it can-not, it certainly is not equal; if it can, it is equal.

One practical way of resolving the “or equal” problem is to let the using departmentdecide which products are equal before prices are solicited. Only companies whoseproducts are accepted by using departments as equal are requested to submit prices. Thistechnique helps avoid wounded feelings among potential suppliers. It also permits req-uisitioning departments to make more objective decisions.

In some situations, purchasing by brand name can be made more effective by in-cluding additional references or limitations in the purchasing description. For example,if the supply manager suspects that other materials can perform the desired function, ref-erence in the description should give prospective suppliers the opportunity to offer suchother materials for consideration. When limitations concerning physical, functional, andother characteristics of the materials to be purchased are essential to the buying com-pany’s needs, they should be set forth clearly in the brand name description. For exam-ple, in many purchases of equipment, interchangeability of repair parts is essential.When this is the case, the above limitation should be spelled out in the brand name de-scription. The invitation for bids or requests for proposal should reserve the right to ex-amine and test the proffered item should an “or equal” product be offered.

For small quantities, brand buying is excellent.4 The primary disadvantage of pur-chasing by brands frequently is higher price. Many categories of branded items sell atnotoriously high prices. Antiseptics and cleaning compounds are common examples ofsuch items. For these, another type of purchase description is preferable. When they arepurchased by detailed or performance specifications, savings often exceed 50 percent.In recent years, buying drugs by generic name rather than by brand has resulted in spec-tacular savings for many hospitals; savings up to 70 percent are not uncommon.

Samples Samples have been called the lazy person’s method of describing require-ments. When samples are used, the supply manager does not have to look for an equalbrand, pick a standard specification, or describe the performance wanted. Samples areneither the cheapest nor the most satisfactory method of purchase. Usually the money

4Brand buying is mandatory in some situations. Common examples are when a supplier’s productionprocess is secret, when its workmanship exceeds all competitors’, or when testing competitive items is toocostly.






spent on inspection costs substantially exceeds the money saved in description costs. Itusually is difficult to determine by inspection that the product delivered is, in fact, thesame as the sample. Quality of materials and quality of workmanship are generally ex-ceedingly difficult to determine from routine inspection. Therefore, in many cases, ac-ceptance or rejection becomes a matter of subjective judgment.

Samples generally should be used only if other methods of description are not fea-sible. Color and texture, printing, and grading are three broad areas in which other meth-ods of description are not feasible. A precise shade of green, for example, is difficult todescribe without a sample. Proposed lithographic work is best judged by the supplier’sproofs. Establishing grades for commodities such as wheat, corn, and cotton by sampleshas proved to be the best method of describing these products.

Market Grades Grading is a method of determining the quality of commodities. Agrade is determined by comparing a specific commodity with standards previouslyagreed on. Grading is generally limited to natural products such as lumber, wheat, hides,cotton, tobacco, food products, and so on. The value of grades as a description of qual-ity depends on the accuracy with which the grades can be established and the ease withwhich they can be recognized during inspection. There are, for example, 13 grades ofcotton, each of which must be determined from an examination of individual samples.Trade associations, commodity exchanges, and government agencies all expend great ef-fort in establishing and policing usable grades.

In buying graded commodities, industrial supply managers often use personal in-spection as a part of their buying technique. Just as individuals select by inspecting theshoes, dresses, and shirts they buy, so industrial supply managers select by inspectingsome of the commodities they buy in primary markets. There can be a significant dif-ference between the upper and lower grade limits of many commodities. The differenceis so great in some that materials near the lower limit of the grade may be unacceptable.Hence, inspection is critically important in buying many materials by market grade.Brewers and millers, for example, usually inspect all the grains they buy. Inspection isnecessary if they are to obtain raw materials of the quality needed to produce a finishedproduct of consistent quality.

Beef is an excellent illustration of the wide quality spread that can exist within agrade. Normally, 700-pound steers dressed and graded as “U.S. Prime” have a spread ofroughly 40 pounds in fat content between the beef at the top of the grade and beef at thebottom of the grade. Such a wide spread may be a minor consideration to the purchaserof a one-pound steak. However, to the industrial food service manager buying millionsof pounds of beef, the difference can be thousands or hundreds of thousands of dollars.

Qualified Products In some situations, it is necessary to determine in advance of a pur-chase whether a product can meet specifications. These situations normally exist when(1) it takes too long5 to conduct the normal post-purchase inspections and tests that arerequired to ensure quality compliance, (2) inspection to ensure compliance with the qual-ity aspects of the specifications requires special testing equipment that is not commonly

5The federal government and some large industrial firms have defined “too long” as a period exceeding 30 days.






or immediately available, and (3) the purchase involves materials concerned with safetyequipment, life survival equipment, research equipment, or materials described by per-formance specifications.

When advance qualification is indicated, suppliers are prequalified by a thoroughreview and test of the entire process by which they ensure compliance with their speci-fications. After qualification, the products of the approved suppliers are placed on whatis called a qualified products list (QPL). Trade name, model number, part number, placeof manufacture, and similar identifying data describe approved products on the QPL.

Complex Specifications

Complex or detailed specifications are descriptions that tell the seller exactly what thebuyer wants to purchase. A simple specification for buying ketchup might be “12-ounceplastic bottle of Heinz tomato ketchup.” In contrast, ketchup specifications become com-plex if the actual recipe is given with ingredients and production procedures. A complexspecification often goes beyond the design of a product, to include specifications re-garding methodology, packaging, transport, delivery schedules, warranty, and service.

There are four principle types of complex specifications: commercial standards, de-sign specifications (generally accompanied by engineering drawings), engineeringdrawings, and material and method-of-manufacture specifications.

Commercial Standards Recurring needs for the same materials have led industry andgovernment to develop commercial standards for these materials. A commercial stan-dard is nothing more than a complete description of the item standardized. The descrip-tion includes the quality of materials and workmanship that should be used in manufac-turing the item, along with dimensions, chemical composition, and so on. It also includesa method for testing both materials and workmanship. Commercial standards are a cor-nerstone of the mass production system; therefore, they are important to efficient supplymanagement and to the standard of living in the United States.

All nuts, bolts, pipes, and electrical items that are made to standard specificationscan be expected to fit all standard applications, regardless of who manufactured the item.Materials ordered by standardized specifications leave no doubt on the part of either thebuyer or the seller as to what is required. Standard specifications have been prepared formany goods in commercial trade. National trade associations, standards associations,national engineering societies, the federal government, and national testing societies allcontribute to the development of standard specifications and standard methods of test-ing. Commercial standards are applicable to raw materials, fabricated materials, indi-vidual parts and components, and subassemblies.

Purchasing by commercial standards is somewhat similar to purchasing by brandname. In both methods, the description of what is wanted can be set forth accurately andeasily. Commercial standards are more complex because they require greater detail inthe description. With the exception of proprietary products, most widely used items arestandard in nature; hence, they are highly competitive and readily available at reasonableprices. There are many users of standard products; therefore, manufacturers who makethem can safely schedule long, low-cost production runs for inventory. They do not need






specific sales commitments before production. They know that materials will be orderedunder these standard specifications when they are needed.

Inspection is only moderately expensive for materials purchased by commercialstandards. Commercial standard products require periodic checking in addition to sightidentification to assure firms that they are getting the quality specified.

Commercial standard items should be used whenever possible. They contributegreatly to the simplification of design, supply management procedures, inventory man-agement, and cost reduction. Copies of standard specifications can be obtained from anumber of government, trade association, and testing association sources. In fact, theeasiest way to get a particular specification is to ask a manufacturer to provide a copy ofthe standard specification of the material or product that it recommends for the supplymanager’s intended need.

Design Specifications Not all items and materials used in industry are covered bystandard specifications or brands. For many items, therefore, a large number of buyingfirms prepare their own specifications. By so doing, these firms broaden their field ofcompetition. All manufacturers capable of making the item described in the firm’s spec-ifications are potential suppliers.

By preparing its own specifications, a company can often avoid the premium pricesof brand name items and the sole source problems of patented, copyrighted, and propri-etary products. When preparing its own specifications, a company should attempt to makethem as close as possible to industry standards. If any special dimensions, tolerances, orfeatures are required, every effort should be made to attain these “specials” by designingthem as additions or alterations to standard parts. Doing so will save time and money.

Describing requirements with chemical or electronic specifications, or with physi-cal specifications and accompanying engineering drawings, entails some risk. For ex-ample, if a buying company provides the exact chemical specifications of the paint de-sired, it assumes complete responsibility for the paint’s performance. Should the paintfade in the first month, it is the buyer’s responsibility. If a buying company specifies fora metal fabricator the exact dimensions wanted in a part, the buyer assumes all respon-sibility for the part’s fitting and functioning. Should it happen that a part, to fit and func-tion properly, must be 26.045 inches long, rather than 26.015 inches as specified in thepurchase order, the responsibility for failure rests solely with the buying firm.

The very nature of the materials purchased under this method of description tendsto require special inspection. The cost of such inspection to assure compliance with com-pany prepared specifications can be high.

Engineering Drawings Engineering drawings and prints are occasionally used alone,but more typically in conjunction with other physical purchase descriptions. Engineer-ing drawings may be part of design specifications described above. Where preciseshapes, dimensions, and spatial relationships are required, drawings are the most accu-rate method of describing what is wanted. Despite their potential for accuracy, excep-tional care must be exercised in using them. Ambiguity, sometimes present in thismethod of description, can produce costly repercussions. All dimensions, therefore,must be completely covered, and the descriptive instruction should be explicit.






Engineering drawings are used extensively in describing quality for constructionprojects, for foundry and machine shop work, and for myriads of special mechanical partsand components. There are four principle advantages in using drawings for description:(1) They are accurate and precise, (2) they are the most practical way of describing mechanical items requiring extremely close tolerances, (3) they permit wide competition(what is wanted can easily be communicated to a wide range of potential suppliers), and(4) they clearly establish the standards for inspection.

Material and Method-of-Manufacture These specifications are used most appro-priately by technically sophisticated large companies or organizations dealing withsmall suppliers having limited research and development staffs. When this method isused, prospective suppliers are instructed precisely as to the specific materials to beused and how they are to be processed. The buying firm assumes full responsibilityfor product performance. It believes that its own organization has the latest knowl-edge concerning materials, techniques, and manufacturing methods for the item be-ing purchased. In such a case, the purchaser sees no reason to pay another companyfor this knowledge.

A modified version of these specifications is sometimes used by industry. Largepurchasers of paint, for example, frequently request manufacturers of a standard paint toadd or delete certain chemicals when producing paint for them. Purchasers of largequantities of steel make the same type of request when purchasing special steels. Chem-ical and drug buyers, for reasons of health and safety, sometimes approach full use of thematerial and method-of-manufacture technique in describing quality. Usually, this tech-nique is little used in industry because it puts such great responsibility on the buyingfirm. It can deny a company the latest advancements in both technical development andmanufacturing processes. Specifications of this type are expensive to prepare. Inspectiongenerally is very expensive. Material and method-of-manufacture specifications areused extensively by the armed services and the Department of Energy.

There are two important advantages of this method of description. First, the widestcompetition is possible, and thus good pricing is assured. Second, since the product isnonstandard, the provisions against discrimination in the Robinson-Patman Act pose nobarrier to obtaining outstanding pricing and service.

Combination of Methods

Many products cannot adequately be described by a single method. In such cases, a com-bination of two or more methods of description should be used. For example, in de-scribing the quality desired for a space vehicle, performance specifications could be usedto describe numerous overall characteristics of the vehicle, such as its ability to with-stand certain temperatures, to perform certain predetermined maneuvers in space at pre-cise time sequences, and to stay in space for a specific period of time. Physical specifi-cations could be used to describe the vehicle’s configuration as well as the televisioncameras and other instruments it will carry. Commercial standards or brand names mightbe used to describe selected pieces of electrical or mechanical hardware used in the ve-hicle’s support systems. A chemical specification could be used to describe the vehicle’spaint. Finally, a sample could be used to show the color of this paint.






Few products are as complex as space vehicles; nevertheless, an increasing numberof industrial products require two or more methods of quality descriptions. For instance,something as commonplace as office drapes could require chemical specifications to de-scribe the cloth and fireproofing desired, physical specifications to describe the dimen-sions desired, and samples to describe the colors and texture desired.

Development of SpecificationsDeveloping specifications can be a difficult task to manage because it involves many vari-ables, including the problem of conflicting human sensitivities and orientations. Many de-partments are capable of contributing to specifications development; they are frequentlythwarted from fully doing so, however, because of conflicting views. Before the optimumin design can be achieved, these major conflicting views must be reconciled.

Organizational Approaches

Several approaches to developing balanced specifications are used individually or jointlyby most companies. The approaches in order of collaborative orientation from lowest tohighest include informal approach, supply management coordinator approach, earlysupply management involvement (formerly EPI), early supplier involvement (ESI), con-sensus development, and cross-functional team approach.

Informal Approach The informal approach emphasizes the concept of a supply man-ager’s responsibility to “challenge” materials requests. At the same time, top manage-ment urges designers to request advice from supply managers and work with them on allitems that may involve commercial considerations. Emphasis at all times is placed onperson-to-person communication and cooperation between individual supply managersand designers. Using this approach, a company-oriented, cost-conscious attitude is de-veloped at the grass-roots level throughout the organization.

Two potential problems exist with the informal approach. The most obvious is thatthe lack of formalization through corporate policy or organizational structure may ren-der the supply manager powerless and make the approach completely ineffective. Thesecond problem is that the supply manager may create animosity when it is appropriateto challenge a specification.

Supply Management Coordinator Approach One or more positions are created inthe supply department for individuals, frequently called materials engineers,6 to servein a liaison capacity with the design department. Typically, the materials engineerspends most of his or her time in the engineering department reviewing design work asit comes off the drawing boards. The materials engineer searches for potential supply

6The reader should not infer from this discussion any intention to disparage the work of the design engineer.Nothing of the sort is intended. Often, for reasons of policy, tradition, or expediency, the design engineer isrequired to make decisions alone that could be made more effectively in collaboration with others.Nevertheless, billions of dollars are lost annually through the adoption of unnecessarily stringentspecifications at the design stage.






management problems in an attempt to mitigate them before the specifications arecompleted.

The supply management coordinator approach is highly structured, as well as ex-pensive. It also is very effective. Therefore, it should be used whenever coordinationproblems stemming from the technical nature of a firm’s product or from the magnitudeof its cost justify such an investment.

Early Supply Management Involvement As we discussed in the chapter on newproduct development, progressive firms increasingly are creating design policies to in-volve supply management in the early stages of new product development. Early supplymanagement involvement was popularized in industry through the now dated term EPI,7

which stands for early purchasing involvement.Too often design engineers and production engineers resolve among themselves all

four of the major departmental considerations of specifications preparation without con-sulting supply management. This is regrettable because professional engineers seldomhave the commercial experience and the market information required to resolve the sup-ply management considerations of specifications. In their attempts to do so, they fre-quently develop stringent specifications that do not provide sufficient latitude to en-courage effective competition.

Early Supplier Involvement Early supplier involvement, or ESI, is widely used in in-dustry. To properly implement ESI, a buying company should first establish the policyof involving supply management in the design process. After such a policy is enacted,then ESI can be actively engaged. ESI coupled with early supply management involve-ment can improve product quality and reliability, while compressing development timeand reducing total material cost.8

Consensus Development Approach Consensus development calls for specificationsto be agreed upon by the department managers. This collaborative approach falls shortof developing a formal team. Although department managers disagree occasionally,compromise and consensus usually can be worked out when the various aspects of theproblem are understood and the organizational mechanism for reaching consensus hasbeen established. When specifications conflicts arise and consensus cannot be reached,final authority for the decision should rest with the department having responsibility forthe product’s performance.

Cross-Functional Team Approach The cross-functional team (CFT) approach rec-ognizes that a good specification is a compromise among basic objectives. A specifica-tions CFT is established, with representatives (as appropriate) from design engineering,production engineering, supply management, marketing, operations (including produc-

7While we expect the acronym EPI to continue to be used over the next several years, we believe theterm “purchasing” has become primarily associated with tactical activities. The involvement of supplymanagement in the design process is clearly a strategic activity, thereby requiring the shift interminology.8Burt and Doyle, American Keiretsu, p. 116.






tion control), quality, and standards. As described in the chapter on new product devel-opment, members of the design team are involved, as appropriate, throughout the devel-opment of the product and its specifications. A common variation to the above approachis for the development of the specification to be delegated to an appropriate technical ex-pert with the resulting specification being reviewed and approved by the CFT.

Supply Management Research

Once a need has been identified and functionally described, and when the size of the con-templated purchase warrants, supply management research and analysis should be con-ducted to investigate the availability of commercial products able to meet the need. Thisresearch and analysis also should provide information to aid in selecting a strategy ap-propriate to the situation. Supply management research and analysis involves obtainingthe following information, as appropriate:

■ The availability of standard products suitable to meet the need (with or withoutmodification).

■ The terms, conditions, and prices under which such products are sold.

■ Any applicable trade provisions or restrictions or controlling laws.

■ The performance characteristics and quality of available products, including qualitycontrol and test procedures followed by the manufacturers.

■ Information on the satisfaction of other users having similar needs.

■ Any costs or problems associated with integration of the item with those cur-rently used.

■ Industry production practices, such as continuous, periodic, or batch production.

■ The distribution and support capabilities of potential suppliers.

Writing Specifications

After the design of a product is determined, the next step is to translate the individualpart and materials specifications into written form. Optimal performance in all depart-ments is contingent on good specifications. To meet the needs of all departments, a spec-ification must satisfy many requirements:

■ Design and marketing requirements for functional characteristics, chemical proper-ties, dimensions, appearance, and other features.

■ Manufacturing requirements for workability of materials and manufacturability.

■ Inspection’s requirements to test materials for compliance with the specifications.

■ Stores’ requirement to receive, store, and issue the material economically.

■ Supply management’s requirement to procure material without difficulty and with ad-equate competition from reliable sources of supply.

■ Production control’s and supply management’s requirement to substitute materialswhen such action becomes necessary.

■ The total firm’s requirements for suitable quality at the lowest overall cost.






■ The total firm’s requirement to use commercial and industrial standard material when-ever possible and to establish company standards in all other cases in which nonstan-dard material is used repetitively.

Common Specifications Problems

Several problems that are caused by the specifications themselves commonly arise un-necessarily. These should be headed off beforehand and addressed in the specificationsdevelopment process, before the specifications have been completed. Three of thesecommon problems are given below.

Lack of Clarity Lack of clarity can result in unpleasant surprises. Specificationsshould be written in clear and unambiguous terms. Clarity in written expressions is notalways easy to achieve but the effort is worthwhile. One company recently lost $65,000on a closed circuit television installation. Its written specifications misled the supplierinto believing that a more expensive installation was specified than the buyer reallywanted. The likelihood of such experiences can be reduced, if not altogether eliminated,by writing specifications clearly.

Limiting Competition Care must be exercised to ensure that specifications are notwritten around a specific product, so as to limit competition. Several years ago, a firechief wrote into the specifications for a new fire truck the requirement that the supplierof the truck manufacture the truck’s 12-cylinder engine. This completely restricted com-petition, since only one supplier of fire engines manufactured 12-cylinder engines in itsown plant. Had the fire chief specified what was wanted in terms of performance char-acteristics, such as speed and acceleration, competition would have been plentiful. Thisexample typifies one of industry’s most common forms of specifications abuse—slanting specifications to one supplier’s product, thus reducing or precluding competi-tion. In this particular case, fortunately, the situation had a happy ending; the supplymanagement department challenged the specifications, and the fire chief agreed torewrite them in a form permitting maximum competition. A significant savings resultedfrom this change before the specs were completed.

Unreasonable Tolerances Specifying an unreasonable tolerance is another commonspecification mistake. Unnecessary precision pyramids costs! It costs more to make ma-terials to close tolerances, it costs more to inspect them, and more rejects typically re-sult. The best method of avoiding such unnecessary costs is (1) to adhere to the mosteconomical method of manufacture while (2) using standard specifications whereverpossible. For example, in procuring 1,000 drive pulleys for use in vacuum motors, thefirst decision would be to determine whether a casting process could manufacture thepulleys satisfactorily. Although this method dictates the use of looser tolerances, in largevolumes its unit cost is considerably lower than that of the alternative, machining thepulley from bar stock. The second decision would be to select an industrial standard forthe part, regardless of the method of manufacture used. This leads us directly to a con-sideration of standardization.






Unreasonable Tolerances Example Ben Rogers, a Ph.D. student in Production Op-erations Management at The University of Pittsburgh, was excited to start gathering re-search data at a manufacturer of heavy construction equipment in Ohio. The goal of theresearch was to develop a model to forecast product costs based on specifications givenin designs. Yesterday, he had met the managers in operations, design, and quality to de-cide what data to accumulate. Today he hoped to start the data accumulation processwith a senior design engineer, Keith Sampson.

As Ben walked up to the engineering department, he heard a loud and angry argu-ment ensuing between Keith and Gary Hamm, a production manager. In an agitated toneGary said, “Keith, we are on the floor reworking another nonstandard bore from our sup-plier that once again did not meet the tolerances your group specified. For four yearsthese tolerances have given us headaches. The tighter tolerances on the bores surehaven’t reduced the complaints from customers about the road grader. Heck, thereweren’t any complaints that I can recall that were ever related to the old tolerances forthis part anyway. I still don’t understand why you never consulted our department on thechange to begin with. One thing is for sure, the tighter tolerance has increased frustra-tion on the factory floor, angered our supplier who we keep charging for the reworks,and screwed up my schedule so I continuously miss due dates. I am fed up. It’s time youchanged this tolerance back to the old standard!”

Keith replied in a tense voice, “Gary, you know that to compete we needed to im-prove quality continuously and that means tightening tolerances. There is no way I amgoing to change the design again! If your supplier is incapable of producing to our spec-ifications, then dump the supplier. You are the operations manager—so start managingyour operations and deal with it!”

Gary bumped Ben as he stormed out of Keith’s office. Ben quietly walked on by,deciding that this was not the time to ask Keith for data. As Ben walked away, he won-dered if he had just had a foretaste of the problems he would discover in the next sixmonths.

This true story9 illustrates what can happen when internal functions do not work to-gether to develop specifications. The overspecification problem is a common one thathas been discussed for the last 30 years but unfortunately still exists today in most com-panies. Regardless of the method(s) used to describe specifications, only the minimumquality needed for the product to perform the function intended should be specified.Overspecifying and including restrictive features in purchase descriptions causes delaysand increases costs.

The importance of developing balanced specifications and standards through inter-functional and relevant chain member participation is paramount for companies thatneed to improve their competitive position. The balancing act is accomplished by meet-ing the needs of the functional areas while setting off performance measures, such asquality and delivery, against cost.

9The names of the individuals and company location involved in the story are changed. The story itself istrue with respect to the actual events that occurred.






StandardizationA uniform identification that is agreed on is called a standard. In business practice, theconcept of standardization is applied in either industrial or managerial standardization.Industrial standardization can be defined as “the process of establishing agreement onuniform identifications for definite characteristics of quality, design, performance, quan-tity, service, and so on.” Managerial standardization deals with such things as operatingpractices, procedures, and systems.

History of Standardization

Eli Whitney contributed to the development of standardization in 1801, when he accepteda contract to furnish 10,000 muskets to the United States government. When it appearedthat Whitney had fallen behind on his contract, he was summoned to Washington byThomas Jefferson to explain his delay. Whitney took with him a box containing the partsof ten muskets. On a table before his congressional interrogators, he separated these partsinto piles of stocks, barrels, triggers, firing hammers, and so on. He asked a congressmanto pick a part from each pile. Whitney then assembled these parts into a finished musket,repeating the process until all ten muskets had been assembled. After his demonstration, itwas easy for Whitney to explain his apparent delay. Rather than furnishing a proportionalnumber of guns each month, as an artisan gunsmith would have done after individuallymaking the parts for each gun and then assembling each gun in turn, Whitney had beenworking to design machine tools and dies with which he could mass produce parts whichwere interchangeable with each other. He had standardized the parts. When his machinetools were completed, he was able to produce all the muskets in a period of time in whichan artisan gunsmith could have produced only a few muskets.

Whitney discovered that by standardizing parts, the skills of artisans could be trans-ferred to machines that could be operated by less skilled labor. This, in turn, reduced theneed for highly skilled labor, which, at the time, was in extremely short supply. Of great-est significance, it was this practice that introduced mass production and brought sizableindustrial growth to the United States.

The burning to the ground of Baltimore’s business district in 1904 clearly illus-trated the need for standards in urban living. Like the battle that was lost for the lackof a horseshoe nail, Baltimore was lost for the lack of standard fire hose couplings.Washington, New York, and Philadelphia all responded to Baltimore’s cry for help.When their pumping equipment arrived in Baltimore, however, the rescuers just stoodby helplessly. There was no way to connect the different-sized hose couplings to Bal-timore’s fire hydrants.

Eli Whitney introduced mass production in the United States. Henry Ford made it uni-versal. Ford, however, misinterpreted in one important aspect the relationship betweenstandardization and mass production: He visualized mass production to mean a standardproduct produced on an assembly line. Ford thought he spoke correctly when he said, “Thecustomer can have any color car he wants as long as it is black.” Actually, he missed thefull implication of mass production. Mass production is the production of many diverseproducts, assembled from standardized parts that have been mass-produced.






Today, standardization has become a way of creating competitive advantagethrough mass customization. Perhaps no company today exemplifies this more thanDell, the largest assembler and seller of personal computers in the world. Dell workswith many suppliers to design and produce parts, components, and modules that can beused with multiple models. For example, several laptop models use the same DVDplayer module. A supply chain standard design was developed to allow interchangeabil-ity of several suppliers’ modules and ease of installation and support.

Types and Sources of Standards

In industry, there are three basic types of materials standards: (1) international standards,(2) industry or national standards, and (3) company standards. If a designer or user can-not adapt a national or international standard for his or her purpose, the second choice isto use a company standard. If the required part is truly a nonrepetitive “special,” then useof a standard is impossible.

Where can one get standard specifications? Specifications for items that have beenstandardized can be obtained from the organizations that have developed them, such asthose listed below:

■ International Organization for Standardization

■ National Bureau of Standards

■ American National Standards Institute

■ American Society for Testing and Materials

■ American Society for Quality

■ Society of Automotive Engineers

■ Society of Mechanical Engineers

■ American Institute of Electrical Engineers

■ Federal Bureau of Specifications

■ National Lumber Manufacturers’ Association

The European-based International Organization for Standardization (ISO) has sev-eral hundred specialized committees that develop a wide variety of standards that arepromulgated by ISO and usually are accepted worldwide. Many of these standards areadaptations of standards from the American National Standards Institute, the German In-stitute for Standards, the British Standards Institute, and other national standards organ-izations around the world.

A catalog of United States standards, international recommendations, and otherrelated information is published annually and distributed without charge by the Amer-ican National Standards Institute.10 The Institute is a federation of more than 100 na-tionally recognized organizations, trade associations, and technical societies, orgroups of such organizations. Its members can gain ANSI assistance in developing any

10ANSI, 1430 Broadway, New York, NY 10018.






standard desired. Recommendations for establishing a standard can be made at anytime. If, after appropriate research and debate, ANSI approves the recommended stan-dard, it will be adopted as a U.S. standard.

Both the civilian and military departments of the U.S. government participate instandardization work that greatly assists industry. For example, the National Bureau ofStandards (NBS), among other things, was established to serve “any firm, corporation,or individual in the United States engaged in manufacturing or other pursuits regardingthe use of standards.”

The need for international standards is fundamental; by eliminating technical tradebarriers, international standards facilitate increased international trade and prosperity.The ISO 9000 series of quality standards, now used voluntarily worldwide, is a good il-lustration. The economic stakes associated with the development of international stan-dards are so high in terms of increased international trade and prosperity that progress,albeit slow, is inevitable. Because private organizations, national and regional govern-ments, and other international organizations are all involved in the adoption process, po-litical infighting is inescapable.

Metric system measurements are among the important international standards. InDecember 1975, Congress passed the Metric Conversion Act, which provided foronly voluntary action. The voluntary conversion appears to be working, but at a veryslow pace. In many industries, America has already gone metric. The shutters ofthousands of 8, 16, and 35-millimeter cameras daily click across America. Work isdone daily in hundreds of repair shops on thousands of foreign automobiles manu-factured to metric standards in foreign countries. U.S. pharmaceutical companieswent metric over 20 years ago, and the electronics industry has used the metric sys-tem since 1954.

More recently, in 1996, the International Organization for Standardization adoptedISO 14000 to establish environmental performance standards. Conflicting environmen-tal regulations across national borders have long been a problem for international sup-ply management. Like the ISO 9000 series, ISO 14000 series focus on processes, notoutcomes, and both involve audit by a third party.11

Benefits of Standardization

Standardization benefits an organization in a variety of ways: it enables mass produc-tion, enables customization, improves supplier coordination, improves quality, enablessimplification, enables delayed differentiation and, as a result of many of the other ben-efits, lowers inventories.

■ Enables mass production. As Eli Whitney discovered, mass production becomespossible through the creation of interchangeable parts. Standardized parts and com-ponents enable management to stabilize production processes and focus on continu-ous improvement, thereby reducing costs.

11Frank Montabon, “ISO 14000: Assessing Its Perceived Impact on Corporate Performance,” Journal ofSupply Chain Management, National Association of Purchasing Management, Spring 2001.






■ Enables customization. Standardized parts and modules enable manufacturers tomake a wide variety of finished products from a relatively small number of parts. Withstandardization, the wide variety of finished products may be assembled when or-dered, thereby reducing inventory carrying costs and increasing flexibility to meetspecific consumer demands. Dell exemplifies this in its ability to customize comput-ers for customers on the same the day the order is placed. Dell accomplishes cus-tomization largely through standard components and modules.

■ Improves supplier coordination. Standardized parts and components provide a veryclear specification for the supplier. The dimensions, characteristics and performanceof a standard part or component improve the ability to communicate between the buy-ing and selling companies.

■ Improves quality. Standard parts and components are repetitively manufactured tothe same design, enabling investment by the producing company in better machinery,training, and materials. The result is a significantly lower defect rate.

■ Enables simplification. Once standard parts are identified, simplification can be usedto identify redundant standard parts that can be eliminated. Simplification is discussedin the next section.

■ Enables delayed differentiation. When customization of the product is accom-plished as close to customer demand as possible, the differentiation of the product orservice is delayed. For example, suppose a customer purchases a computer online witha customized configuration of standard parts and modules. The manufacturer has twopossible ways to fill the order. The manufacturer can preassemble hundreds or eventhousands of computer configurations that customers may want so they are ready toship when the demand occurs. Or, using delayed differentiation the manufacturerstocks standard components and modules that can quickly be assembled into cus-tomized configurations. Delayed differentiation results in carrying much lower in-ventory levels.

■ Lowers inventories. Lower inventories result from the number of distinct parts carriedbeing reduced. There are several other reasons standardization lowers inventories. Bet-ter quality from greater use of standard parts and components reduces safety stock. De-layed differentiation reduces the need to carry as many finished goods in stock, therebyreducing overall inventory levels. Standard parts and modules usually have more certainand shorter supplier order lead times. Reduced uncertainty in production lead time re-duces the need for additional inventories required for unreliable lead times. Shorter leadtimes directly translate into smaller order quantities.

The use of standards permits a firm to purchase fewer items, in larger quantities, andat lower prices. Thus, fewer items are processed and stocked. This reduces supply man-agement, receiving, inspection, and payment costs. Stocking fewer items makes con-trolling inventories easier and less costly. The use of standardized approved items dras-tically reduces the number of defects in incoming materials. Consequently, the purchaseof standardized materials reduces total costs in four ways: lower prices, lower process-ing costs, lower inventory carrying costs, and fewer quality problems. The benefits ofstandardization are presented in Figure 11.3.






SimplificationSimplification, a corollary of standardization, is another term for which recognized au-thorities have varying definitions. Most frequently, simplification means reducing thenumber of standard items a firm uses in its product design and carries in its inventory.For example, one company formerly used 27 different kinds of standard lubricatinggreases in the maintenance of its machinery. Analysis showed that in some cases thesame grease could be used for several different applications and that a total of only 6kinds of grease were needed. Hence, through simplification the number of standardgreases used was reduced from 27 to 6. Similar analysis showed that the number of stan-dard bearings and fasteners used in production could be reduced by about 50 percent.Reductions of this scope are commonplace. Simplification savings result primarily fromreduced inventory investment, more competitive prices, greater quantity discounts (be-cause of larger volume purchases and the use of blanket orders), and reduced clerical andhandling costs (because fewer different items have to be handled and controlled).

Some authorities consider simplification an integral part of standardization, ratherthan a corollary of it. They visualize the simplification process as taking place primarilyat the design level, rather than at the stocking level. They think in terms of simplifying(or reducing) the number of related items that are approved as standards in the first place.

Developing a Standardization ProgramThe benefits of standardization cannot be fully realized when solely developed internallyby design engineers. The next level up is to involve cross-functional teams with internal

Standardization

Enables Mass ProductionEnables Customization

Improves Supplier CoordinationImproves Quality

Enables SimplificationEnables Delayed Differentiation

. . . which reduces . . .

Inventories & Total Cost

Figure 11.3 | Benefits of Standardization






members from supply management, marketing, quality and other relevant functional areas. However, to yield all of the benefits of standardization presented earlier, stan-dardization should be addressed across the supply chain through cross-functional teamscontaining chain members.12 A standardization program can be approached in variousways; but because so many departments and suppliers are affected by standards deci-sions, a team effort is the most appropriate approach.

Standards Team

A standards team typically consists of representatives from engineering, supply, opera-tions, marketing, and transportation. Relevant suppliers should also be included in theteam under the guidance of supply management. The standards team typically is chargedwith the responsibility of obtaining input from all user departments and relevant suppli-ers, reconciling differences between them, and making the final standards decisions.

Theoretically, a member from any department could serve as head of the team. Sup-ply management is particularly well qualified to head the team in companies at whichmaterials complying with national standards or maintenance, repair, and operating(MRO) items form a large portion of the company’s total purchases. In companies thatmanufacture highly differentiated technical products assembled from parts made tocompany standards, engineering is well qualified to head the team.

Importance of Supply Management

Regardless of the organization employed, the supply management department occupiesa focal point in the process. Only in supply management are duplicate requests for iden-tical (or nearly identical) materials, overlapping requests, and “special buy” requestsfrom all departments visible. Hence, no program for standardization can be optimallysuccessful unless supply management is assigned a major role in the program.

Materials Catalog

Once the decision to implement a standardization program has been made, the most com-mon approach is to work toward developing a comprehensive materials catalog. A current,easily accessible materials catalog or database of approved standard items is the logicaloutput of a standardization program. The catalog greatly aids the firm’s design efforts.Many benefits of developing a materials catalog exist, the most obvious of which are:

■ Improved quality. The documentation of materials is the first step toward accumu-lating data to determine which materials have quality problems. The availability ofsuch a catalog virtually eliminates the possibility that designers will incorporate ma-terials that previously caused problems.

12An assumption is made that standards exist at the industry, national, or international levels that a supplychain team can use in its standardization decisions. If no such standards exist, then the supply chainmembers should consider addressing the industry’s reasons for not having industry standards and lead thedevelopment of such standards in conjunction with developing standards within their own supply chain.






■ Reduction in design time. Access to a materials catalog provides designers witha resource that will shorten the materials selection process in the design stage,thereby reducing the total design time.

■ Reduction of nonstandard parts. The exercise of developing a materials catalog fa-cilitates the use of standard parts.

■ Reduction of standard parts. Simplification is easier since the standard parts docu-mentation is centrally maintained. See the discussion on simplification given earlierin this chapter.

■ Reduction of inventory. Through standardization and simplification, two activitiesenabled by the development of a materials catalog, inventories are reduced. The re-duction is primarily owing to the decrease in the variety of parts carried and the im-proved quality.

■ Benefits of centralization. Development of a materials catalog for a company withseveral physically separated facilities provides the opportunity to take advantage ofcentralization benefits, including pricing leverage.

Electronic Materials Catalog

An emerging trend in companies is to move the materials catalog from a hardcopy formto an electronic one. A simple electronic materials database can be created in virtuallyany software package capable of organizing and maintaining data. The complexity of thesoftware is directly related to the complexity of the data. Included in the term “data” aregraphical images such as photos, drawings, and designs. The designs may be quite com-plex. For example, the rail industry (railroads) chose to include vector drawings in itselectronic catalogs. Vector drawings are created with a computer-aided design softwarepackage that generates arcs and lines from mathematical formulas. The rail industry de-cided that converting from a vector drawing to an image resulted in a loss of the under-lying intelligence.13

A simple database software package such as Microsoft Access is sufficient and al-lows for relatively sophisticated data maintenance, centralization, queries, and graphics.On the more complex end of the materials database continuum are enterprise resourceplanning (ERP) systems, which can centrally locate materials catalog information for ac-cess, updating, and utilization by all departments. Most ERP systems have already con-verted over to Web-based interfaces, allowing maximum access to centralized materialsinformation in even the most remote regions of the world.

Benefits of Electronic Catalogs Materials catalogs that are electronically maintainedare superior to hardcopy versions since they can be centralized in one location, updatedeasily, electronically disseminated, and queried using search techniques, and since theyprovide links to activate ordering and obtain additional information. The increasing dis-semination of information using technologies such as secured intranets and extranets,

13Dennis Smid and Jo-Anne Kane, “Another Link in the Chain—Electronics Parts Catalogs,” NAPM 81stAnnual International Conference Proceedings, 1996. For proceedings paper see napm.org.






data warehouses, and database-driven websites enable greater growth of electronic ma-terials catalogs. As companies move much of their intellectual property to cyberspace,the use of electronic materials catalogs is on the rise.

Concluding RemarksBoth specifications and standardization play important roles in the search for the rightquality and the right value. They also assist in resolving the design conflicts that existbetween engineering, manufacturing, marketing, and supply management. As presentedin this chapter, specifications serve as the heart of the resulting procurement. The strate-gic dimension of specification development cannot be ignored in today’s globally com-petitive environment. Long-term planning through organizational change and philo-sophical transformation must occur in most companies so that balanced specificationscontribute to the viability of the firm’s supply chain.

Likewise, many firms still do not fully appreciate the concepts embraced in standard-ization and its corollary, simplification. Nevertheless, the philosophies underlying theseconcepts play an important role in creating competitive advantage. It seems highly proba-ble that these same philosophies will continue to be important in the future. Aided by im-proved information technology and increased automation coupled with computer-aideddesign and computer-aided manufacturing systems, standardization is part of the answerto meet this decade’s desire for customized products and services at low cost.14 By furtherstandardizing component parts, processes, and operations, companies can refine andstreamline their systems. Such refinement should permit the production of low-cost, high-quality, differentiated products that will be competitive in the global marketplace.

14Recall the discussion in Chapter 1 describing the direct relationship between reductions in material costsand increases in profit margins and return on investment.

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