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Reducing complexity of your direct material supplier parts can help drive significant savings within your company. Similar to our recently published blog which described the importance of conducting internal price benchmarking activities as a prerequisite to competitive benchmarking on a company’s direct material purchases. In both scenarios it’s surprising what you find when you are able to cleanse and enrich your purchase part data,  it can expose a variety of opportunities to reduce direct material spend without having to make major changes to your products. To reduce the complexity, we recommend grouping your direct material spend into these 3 groups:

When it comes to controlling costs in business we seldom use the obvious tactics, especially if the solution relies on cross-departmental efforts. It is always easier to control your own department’s costs from within than to gain consensus from other departments. As a result, we default to what we know best, standard department cost reductions. But does this really make the biggest impact for the company? 

One example is Direct Material Cost, the cost of raw materials and components used to create a product. It is the most significant cost in manufacturing and can represent 50% of revenue for manufacturing companies. Yet it is often ignored as an area of cost reduction, or worse each department will attempt to reduce this cost independent of the other groups resulting in marginal cost benefits and unsustainable solutions.

Taking the right approach to implementing a good classification structure will yield many benefits to your organization. However, if you don’t do the right up-front planning, you may end up with significant rework or your program may just stall or die.  There are some important steps to take early in the planning phases to help insure your program is a success providing critical benefits to your company. CDS will leverage its 15+ years of experience executing challenging classification programs across a variety of industries and companies to help you successfully plan and execute a new classification structure inside your organization.

Convergence Data knows the importance of your part data. We know that part data is a core asset for your company, and that the quality of that data is fundamental to the health of the business and the bottom line. Start the new year right with a review of the best ways to enrich your data in 2018. Below is a recap of our top five part classification blogs of 2017 ranked by our readers to help you stay on top of your company’s core assets in the new year.

 Top 5 Data Quality Blogs: