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:Read More
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.Read More
Convergence Data knows the importance of your part data. We know that part data is a core asset for your company, and 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 get your data clean in 2017. Below is a recap of the top 2016 data quality blogs we published to help you stay on top of your company’s core assets in the New Year.
Top 5 Data Quality Blogs of 2016:Read More
As Steven Covey noted in 7 Habits of Highly effective people you should begin with the end in mind. When starting a direct materials data cleansing project, you need to ask yourself, what is the goal of improving the direct materials data? Cost savings? Sourcing efficiency? Improved insight through reporting and analysis? To answer these questions and achieve success, engineering and procurement need to work together to obtain the answers. First you need to know what are the overall company goals? From there all the following questions can be answered.Read More
To develop a product, new parts have to be created. However, sometimes new parts are created which could have been avoided because an existing part could have been used. Several studies have indicated that creating new parts is expensive, with estimates ranging from $4,000 to $27,500. (SD-19 Parts Management Guide, Defense Standardization Program Office, U.S. Defense Logistics Agency, December 2013) Regardless of the cost estimate, it is easy to conclude that creating new parts should be avoided. Creating new parts effects a variety of costs along a product’s lifecycle. Dr. Gwendolyn Galsworth in her book Smart Simple Design provides some insight into the underappreciated consequences of creating unnecessary new parts.Read More
The costs of new and duplicate parts are dispersed over multiple departments and across products’ lifecycles, so it is difficult to identify who should be responsible for preventing part proliferation.
A closer look at a product’s lifecycle and the group responsible for most of the costs suggests engineering should be responsible of governing new part creation and preventing duplicate part creation.Read More