Question 3. Please read the article titled Become standard and reach extraordinary supply management performance Download Become standard and reach extraordinary supply management performance . (a) Discuss three (out of six) benefits of standardization for procurement teams; (b) In bullet-point format, discuss how supply management organizations can exploit the standardization of procured products and services; (Hint: there should be six bullet points. And don't just list the bullets, elaborate on the bullet points) (c) The article discusses a Canadian electric utility company. What was the problem and what was the solution?

Category management A surprising number of procurement leaders fail to understand significant benefits that result from "standardizing" the products and services for which they are responsible. But, there are at least six ways that supply management organizations can exploit standardization to capture cost reductions and improve supply chain performance. I n the realm of supply management, too many last minute for maintenance, the fleet is totally inter- procurement leaders fail to challenge their inter chargeable all our on-board crews and ground crews nal Line-of-Business (LOB) customers to simplify and are alreadly familiar with it. And there are no chal- standardize the selection of products and services that lenges in how and where we can park our planes on the they require. As a result, organizations may source/ ground because they're all the same shape and size." bid identical items in a spend category time after time Southwest Airlines is not the only organization to real- without substantively improwing Category performance in the benefits of this approach to its operations. Stan In this article, we'll discuss the operational effi- dardization is a hallmark of most successful organizations ciencies your supply chain can gain from standardize that lead their industry sectors. Consider the highly stan tion in category management that can help compa dardized product offerings of Apple and its long practice nies and even governmental agencies to become of rolling out a limited selection of mobile phones, note extraordinary. And then we'll expand the discussion to books and desktop computers while allowing a dedicated demonstrate six ways that supply management or aftermarket to fill and expand the accessory options for nizations can exploit the standardization of procured the loyal constituency of the Apple world. products and services to capture cost reductions and Or consider successful retailers like Starbucks, improve supply chain performance. By becoming stan Subway, McDonalds or Tim Hortons, whose stores dard, your procurement organization and your sup are mirror images of each other, with standard colors, ply chain-can deliver extraordinary performance, corporate branding, Nipruge, a common layout look and feel, equipment, uniforms, supplies and ingredients. Operational benefits of standardization The idea is that a manager or associate who has worked During the last decades, one U.S. domestie airline has at one of the retailers' facilities could walk in the door often cutperformed its many rivals: Southwest Airlines. In at another facility almost anywhere in the world and fact, for the 25th consecutive year, Southwest was named understand the operations as could anyone maintain to Fortunes 2019 list of World's Most Admired Comp ing the equipment to supplying a restaurant nies. What makes Southwest sa prod? Among other smart For procurement teams, standardization creates ben practices, Southwest Airlines is credited with significant elits that allow prester sourcing efficiency and leveraging benefits resulting from standardizing its aircraft fleet. The opportunity. Consider the following airline operates just one type of aircraft, the Boeing 737 yreiter stratele spend influence with fewer suppliers Indeed, industry experts regularly note that fleet ability to leverage and consolidate freight and Logistics standardization is core to Southwest Airlines suc escalation of negotiations within the category verti- cess. And, so does the airline. Several years ago, Chris cal hierarchy (procuring from manufacturers rather than Wahlenmaier, Sauthwest's then vice president of resellers or distributors) ground operations, commented on how standardization simplified employee and technical training for fewer facilitates all manners of cost saving efficiencies "We supported vehicle/equipment models only need to train our mechanies on the type of air- reduced spare parts required in inventories, and plane. We only need extra parts inventory for that one ability to negotiate lifetime Total Cost of Ownership type of airplane. If we have to swap a plane out at the (TCO) programs. If the glovefits The definition of insanity is doing the same thing over and Several years, myrion was being a Canadian over again while expecting a different result." But in this case, tricity company reduce its ocurement expenditures. When Candidation made the difference in positioning the supply we anabond the imentary baldings in more than 30 wchoses chain team to make significant improvements located sound a very large province, we noticed that the company was buying 16 different styles of puitecte gloves eaching What if your organization has standards? in five different SKL de to small, medium, luand enlarge The procurement team Southwest has benefitted from sizing. It turned out that are the years, diferent company daisies decades log comiteney following the initial standardization of had expanded the list based upon the preferences of is employees caftbysenice management. But not every management team Now admittedly, afferent types of gloves are needed ina is foute manifest, have inherited non standard milts facesed electrical utili The employees who support byde ved fless and operating exisonments. This is especially true of power plants anivers may need one type of gloves while these organizations sur has grown through mergers and acquisition working in liquid natural gas facilities ochen. Smil the Ther, the procurement team is ten trying to supporta non Dechnicians who do foreight of way and who singer andarded infrastructure embedded with variant versions of lines need others. And the workers in a nuclear power plant met, vehicles, adware, software and all the associated have their own speciale med But types of a pc.com corticals, preventative and remedial main ludicrous degree of non-standardization. We begle these tenance pas, to name a few. Too often, this is the situation we the vice president of supply chain, who was scunned by the lack find when fisten with a new organization of standardization. She requested the list and said it would be For comple, I spoke with a chef procurement officer the e-mailed out to all of the head of maintenance and investery he eher day whese fim produces complex medical diagnostic would be told to come the list. en forma around the world. The form prides itself I suggested a afferent approach to the vice presidente on saling highly engineered equipment for its clients. One brought the heads of maintenance and investoy penis is most expensive mubi million dollar products has many Dopether for a nice breakfast a local hotel. The conference options and by the sales organization to hospital administra room's walls were decided with a sample of each par mes, resulting in over 4.000 possible permutations. The variabil gloves, along with the name of the manufacturer, the debt by in the final products has created a very difficult procurement and the utility's purchase cost.We had barely nem challenge for this firme, thing they hope to simplify signments before creativecomensations began to sake place. deceg sandation in the future. In situation like these Engineers were painting to the different pairs of genes and we afersi tips for beginning a standardization journey saying things such as: "These all look and feel the same but this pair is $3.50(CDN) less than that one and $2.75 less I. Lise standardi marketplace offerings to the greatest extesat than that one. Why don't we just standardizean the lowes.cat pille for the products and serices you acguire. The more one" Now, the technical name for this is an event, bet you way from indussy standards, the higher will be your emas. the truth was that a nice breakfast was the seal sick What was the result The client organization med nyfiom 2. Look at related domstream costs. For example, a typi a non standarduod product selection incling Cylis egeves calpice of electromechanical production or office equipment in five different sizes that's 150 different son mes 20% of its cenal purchase price to operate and maintain pairs-produced by four manufacturers and purchased the each year when you include operator compensation, encres these different distributors her the standardition process consumabile supplies and maintenance. That means that it the clity fimms future state scape was aly 11 different les ces as much to operate equipment over five years as the origi Bloes, produced by two manufactures and acquired heghe mal purchase or lease cont Failure to address all the elements of contracted distribute This enabled the unde cape the sales of operation at the beginning of the selection pro mately 30% of its overall cost by leveraging is spend, and to secure ces will result in the inability to control these cones later on. special pricing at a manufacturer level, seduce de mariage seduce inventary SKL's and dece nesteytums and sendes 3. Latime unership analysis. Apply total cost of owner Note that if we had jusz gone back to the market and dp (100) salvalue of ownership (TV) analysis when the old scope of gloves, very linked significance would have desemising and sourcing new standards. The fomer of these occurred. As Albert Einstein is reported to have once seed consides all costs cated with the acquisto, se and Cr.com SET CU MEREXT SEPTEMBER OCTOBER 2019 45 Category management disposition of a product or sence. The later also incorporate actly a great savings and second, as part of the contract nego the revenue aspects of a standardization decision. For example, Sition for the purchase of the new fire engines, drafted a cluse if one manufacturer medel of material handlingen met chat poided ice pactection on any replacement parts procured COSES $250,000 while a competitie's bandes $275.000 (105 from the fire engine company in the future, capping the city's price mare), the decision seems fairly simple. But what if the faepes 10 cover the manufacturer's own en The best part brand can process 30mete volume, thus facilitating.com het his case was that the price capplied to all purchases mensurate increase in revenue and higher output per operator of replacement parts for the operational lifcime of all the man labor unit? A me analysis cannot be made with considering fe's fee engines, wherever purchased. These two stepsret the additional revenue impact from the standaatin decan actively made a great difference in the city's fleet operating cos because it has 300 of the manufacturer's vehicles in its fleet 4. Make descriptionssamfarm. Especially if you have intemel inventy listing or te splicercataleg details in your pho 6. Build standards into regairements for engineered curement tool, inconsistent naming commentices will complicate Cap projects. When companies and governmental agencies de procurement activities and make standardne ve difficult major pasien peces. Es common to have an engineering ce Years ago, a major cruise ship company had separate architectural contractor run major projects. These might include warehouses that supported different ships in is flee. Each faktycom, factory expansion, the sevamping of a pro . inventory had been built by sepante seams, and the idential duction line ar platumsund projects. Too often, the people items in se separate was mighe descrip who wpport the completed infrastructure or solution aren't tions and part numbers, for example, Targe white Tshwich ced in the initial design and selection of components. It is blue company logs," white Tshit, lung, belgeland much better to involve procurement and maintenance employ white Tshit. "Based on our recommendation, the fimulad ces in the peojects that standands for equipment and vehicles a catalog cleansing technology service to sexise all of is part can be built into the initial requirements documentation and descriptices. These tekstila Boolean search engine schnele designs and the larger centon is positioned for commeality gies, similar to what Google miglis debe ser product wichocherfleet clements and location. That way, they dont end description in inventory listings at all location Standard sepporting different versions or configurations of production of the descriptions was done in less than a week and lowed line equipment, vehicles, computer hardware, HVAC equip the procurement team to better use and manage a much less ment des point of sale hardware, conveyor and making complex listing of product items systems and s. Advance involvement can ensure that con stency is maintained across the entire con 5. Consider alteratise products. The lifetime contes ship for vehicles and equipment can often be greatly seduced by Get standard carefully selecting standards that utile marke seandai seplace Sandton is not just a methodology used to reduced cos, ment parts, consumabile supplies and accessories I recently betapallar of many top performing organisaties. Standardization helped a large city plan the purchase of selfees ako es in the impunement of peces eficiency and quality. including multiple book and ladder and pumper engines. The Quality management methodologies such as ISO 9001 issued city had been standardued on a particular and of fue engine by the Intemtional Organisation of Standardation ISO. Six for the decades, but as we had the lifetimecode Sigma and LEAN incorporate Sandaction work pro we becept some interesting finding to the women cesses into their methodology as critical elements. The Tryca It tumed out that the vehicle manufacturer desery packaged Production System, from which LEAN originated, relies heaily replacement parts in their own cartons with labek Bus deeper on sanded work process, yet according to some experts research showed that many of the pets were e labeled and sandardization is one of the last applied LEAN methodologies parts from chassis and the drivetrain manufacture Facilities It's a logical conclusion that was processes cannot be uniformly and engine manufacturer Cummins Getting the permet standardized unless a variety of equipment, velicles, Team imoved, we found that the fire engine manufacturer supplies and socke being utilized across an enterprise. changing as much as a -40% markup on these components Sewe Classement and operates side, standardition of did nothing Fies, the procurement and let team aggressively pred products and services is integral in scanding results in identified preventive and remedial pass that could be cons Codecim, imestay consolidation and operating efficiency referenced to the base manufacturer's original parts and pued Ty becoming candandi ender to achieve extraordinary.com 46 SUPPLY CHAIN MANAGEMENT STOC 219