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7 Best Practices for a Parts Classification Project

Posted by Convergence Data Team on Nov 19, 2020 11:35:07 AM

When we talk to companies who are just starting their classification journey, we provide them with the best practice framework focused on obtaining the most value from their classification project. All too often this work is done in only one division or it becomes an “engineering searchability” project which limits the value of the project.

When making an investment in classification, the budget for this program should come from these sources:

  • Person responsible for direct material spend – VP of Operations, CFO, or CPO
  • ERP or PLM Deployment budget

7 Best Practices for a Parts Classification Project

    1. Target high value parts for classification – high spend, proliferation, too many vendors, shared across programs, etc. Start with the 10 top categories using this criterion.
    2. Pull all the parts from each organization for each category – this is the biggest bang for the buck approach.
    3. Assign one (1) Engineering SME and one (1) Purchasing Category owner for each commodity – they will approve structure and data. You don’t want too many cooks in the kitchen.
    4. For each part – provide part number, part description,
      MFG Part Number and MFG Name, drawing or specification.
    5. Obtain the commercial data for each part – provide pricing,
      supplier names, buying org and volumes.
    6. Clustering – once each category is complete, look for clustering opportunities – this will expose cost savings for procurement spend rationalization. Clustering will expose parts with higher prices compared to other similar parts with lower pricing. 
    7. Load classification data to PLM - make sure to validate the data against the PLM systems rules. This saves time dealing with load issues.
The advantage of taking this approach is that you only go into each category once. You don’t want to have to go into each category multiple times. This will allow you to have a much better chance of finding cost savings. Lastly you will be in a better position to prepare the data for your global PLM system. You don’t want to have to keep updating your PLM system with changes. The video below describes the process to prepare your classification data for cost savings and sourcing cost savings.

Here are some useful links and videos:

     • 15 min PLM Classification Process video:

     • 5 min Clustering video
 
     • 1 min Explainer video

     • DVA Case Studies
  
     • CDS Brochure

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Topics: Classification, Product Analytics, PLM, Part cost, convergence data, Part Preparation, DFR, Cost Reduction, Spend Analysis, Loading Data, Cost Savings, Part Standardization, Duplicate Analysis, data normalization, categories, classification structure, reclassify, smartclass

3 Approaches to Complexity Reduction

Posted by Richard Turner on Dec 1, 2018 3:00:00 PM

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:

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Topics: Governance, Classification, Manufacturer Parts, Data Cleansing, Part Cleansing, Part cost, Benchmarking

3 Ways to Attack The #1 Cost Driver

Posted by Richard Turner on Nov 30, 2018 3:01:00 PM

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.

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Topics: Governance, Classification, Duplicate Parts, Manufacturer Parts, Part cost

2016 Top Data Quality Blogs

Posted by Alison Luna on Dec 21, 2016 1:17:00 PM

 

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:

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Topics: Governance, Cleansing Data, Classification, Duplicate Parts, Manufacturer Parts, Data Cleansing, Part Cleansing, 2016 Top Blogs, Part cost, Benchmarking

Effective Price Benchmarking

Posted by Richard Turner on Dec 8, 2016 11:15:00 AM

Everyone is trying to determine what competitors are charging for their products through competitive benchmarking but will that really help you make a bigger profit? Maybe, but the real gold is in your existing purchase parts. Use the data you already have in house and compare purchased part costs that your company has incurred over the past two years. This data will allow you to truly increase your profit regardless of competitor pricing.   Price benchmarking looks outward but for optimal profit you must first look inward.

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Topics: Cleansing Data, Product Analytics, Manufacturer Parts, Part cost, Benchmarking

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