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Supply Chain Secrets #103: Part Names Matter

 

Strategic SourcingApparently, I have upset the powers that be in the universe. I know this because I spend a significant portion of my life looking at manufacturing part descriptions entered into ERP systems. I do this not because I am a masochist, but rather I am trying to save my clients money and I need to know what they are spending it on.  The part descriptions they enter either represent an outpouring of creative expression or they are the result of a poorly thought-out haphazard process deplored by those people chosen to enter the data. 

ERP SystemsTaxonomy for Supply Chain People

The name field is significant and it is used by engineering, operations, supply chain and finance. When developing your part description standards, think big to small. Use the same approach that biologists take when classifying insects, simply skip the Latin.  A screw is part of the fastener family, it’s a screw, it attaches wood or metal, it is made from a specific material, it has a length and thread classification. You get the idea. Develop a name guide for each production commodity and the order of description.  Use commas to delineate the description. 

Don’t Forget About the BrandsProcurement

Often times engineering will specify a specific brand and model number. These parts will be purchased through a distributor. Distributed parts are notoriously difficult to negotiate because distributors work on thin margins, sales regions are protected and manufacturers try to enforce pricing uniformity. The best chance to reduce the cost of these items is by negotiating directly with the manufacturer. To do this successfully, it is helpful to know your spend by manufacturer. You may not want to use the description field to capture this data, but find another searchable field in your system and input the manufacturer, brand and manufacturer’s part number.

Slow and Steady Wins the Race

Developing a logical naming system will save your company money. It is a big effort to straighten out thousands of descriptions, so work on it over the course of a couple of years. In the end it will allow you to negotiate better pricing and spend less of your waking hours on earth trying to discern the meaning of LAP-5-DIS-S00-P009-XR 1/4.

 

Strategic Sourcing ConsultingAbout the Author

Tom Petersen is the Managing Partner of ThreeCore, an operational consulting firm in Beverly, Massachusetts.  Tom consults for multinational companies engaged in the design and manufacture of high-tech products. His team is dedicated to helping companies create competitive advantages using innovative strategies and process-driven improvement. For more information go to www.threecore.com or follow Tom on twitter @3CoreConsulting.

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