This document discusses specifications and standardization in purchasing. It defines specifications as descriptions of what to buy that communicate requirements to suppliers. Specifications can be simple, like brand names, or complex, providing detailed production instructions. Standards promote simplification, mass production and cost reductions. The benefits of developing balanced specifications and standardization programs through cross-functional teams are outlined.

1. McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter 6
Purchasing
Descriptions
and Specifications
6-2

3. Key Concepts
• Specifications and Standardization
• Purposes of Specifications
» Collaborative Development
• Categories of Specifications
» Simple Specifications
» Complex Specifications
» Combination of Methods
• Development of Specifications
» Organizational Approaches
» Supply Management Research
» Writing Specifications
» Common Problems
6-3

4. Key Concepts
• Standardization
» History of Standardization
» Types and Sources of Standardization
» Benefits of Standardization
• Simplification
• Developing a Standardization Program
» Standards Team
» Importance of Supply Management
» Materials Catalog
» Electronic Materials Catalog
6-4

5. Specification, Standards and Strategic Supply
Chain Managers
• Strategic Supply Management requires
supply management professionals and
suppliers to be actively involved in the
tactical and strategic development of
specifications and standards to
proactively reduce total costs of products
and services.
6-5

6. Purposes of Specifications
• Communicate what to buy
• Communicate suppliers what is required
• Establish the tangible goods to be provided
• Establish the intangible services to be provided
• Establish the standards for inspections, tests,
and quality checks
• Balance the specification goals of individual
departments, relevant suppliers, desired product
or service performance and cost
6-6

7. Etc.
Quality Goals
Delivery Goals
Department Goals
Company Goals
Balanced Specifications
Etc.
Cost Goals
Cost Goals
Company Goals
Supplier Goals
Considerations in Developing Balanced
Specifications
Figure 6-1
6-7

8. Specifications
Development
Function & Fit
Market Grades
Commercial
Standards
Brand Names
Performance
Samples
Method
& Material
Engineering
Drawings
Design
Specifications
Qualified
Products
Complex
Specs
Simple
Specs
Categories of Specifications
Figure 6-2
6-8

9. Simple Specifications
• Performance Specifications
» ease of preparing the specifications
» assurance of obtaining the precise
performance desired
• Function and Fit Specifications
• Brand or Trade Names
• Samples
• Market Grades
• Qualified Products
6-9

10. Complex versus Simple Specifications
• Complex or detailed specifications are descriptions that
tell the seller exactly what the buyer wants to purchase
• A simple specification for buying ketchup might be “12
ounce plastic bottle of Heinz tomato ketchup”
• In contrast, ketchup specifications become complex if
the actual recipe is given with ingredients and
production procedures
• A complex specification often goes beyond the design
of a product, to include specifications regarding
methodology, packaging, transport, delivery schedules,
warranty and service
6-10

11. Complex Specifications
• Commercial Standards
• Design Specifications
• Engineering Drawings
• Material and Method-of-Manufacture
6-11

12. Combination of Methods
• Few products are as complex as space
vehicles; nevertheless, an increasing
number of industrial products require two
or more methods of quality descriptions.
6-12

13. Development of Specifications
• Organizational Approaches
• Supply Management Research
• Writing Specifications
• Common Problems
6-13

14. Approaches for Developing Balanced
Specifications
1. Informal Approach
2. Supply Management Coordinator
Approach
3. Early Supply Management Involvement
(EPI)
4. Early Supplier Involvement (ESI)
5. Consensus Development Approach
6. Cross-Functional Approach
6-14

15. Supply Management Research
• Availability of standard products suitable to need
• Terms, conditions, and prices of products
• Applicable trade provisions, restrictions or laws
• Performance characteristics and quality of
available products
• Information on the satisfaction of other users
having similar needs
• Any costs or problems associated with
integration of the item Industry production
practices
• The distribution and support capabilities of
potential suppliers 6-15

16. Writing Specifications
• Design and marketing requirements
• Manufacturing requirements
• Inspection's requirements to test materials
• Stores' requirement to receive, store, issue
material
• Supply management's requirement to procure
material
• Production control's and supply management's
requirement to substitute materials
• The total firm's requirements for suitable quality
at the lowest overall cost
• The total firm's requirement to use commercial
and industrial standard material 6-16

17. Common Problems
• Lack of Clarity
• Limiting Competition
• Unreasonable Tolerances
6-17

18. Standardization
• A uniform identification that is agreed on
is called a standard
• Two types exist:
» Industrial standardization --- the process of
establishing agreement on uniform
identifications for definite characteristics of
quality, design, performance, quantity, service,
and so on
» Managerial standardization --- deals with such
things as operating practices, procedures, and
systems
6-18

19. History of Standardization
• Eli Whitney
» Muskets for the U.S. Government
• Burning of Baltimore
» Lack of standard fire hose couplings
• Henry Ford
» Assembly line production of automobiles
• Dell
» Delayed customization through modules
6-19

20. Types and Sources of Standards
• Types
» International standards
» Industry or national standards
» Company standards
6-20

21. Types and Sources of Standards
• Sources
» International Organization for Standardization
» National Bureau of Standards
» American National Standards Institute
» American Society for Testing and Materials
» American Society for Quality
» Society of Automotive Engineers
» Society of Mechanical Engineers
» American Institute of Electrical Engineers
» Federal Bureau of Specifications
» National Lumber Manufacturers' Association
6-21

22. Standardization
Enables Mass Production
Enables Customization
Improves Supplier Coordination
Improves Quality
Enables Simplification
Enables Delayed Differentiation
…which reduces…
Inventories & Total Cost
Benefits of Standardization
Figure 6-3Figure 6-3
6-22

23. Simplification
• Simplification is a corollary of standardization
• Simplification means reducing the number of standard
items a firm uses in its product design and carries in its
inventory
• Savings result primarily from:
» Reduced inventory investment
» More competitive prices
» Greater quantity discounts
» Reduced clerical costs
» Reduced handling costs
6-23

24. Developing a Standardization Program
• Standards Team
• Importance of Supply Management
• Materials Catalog
» Improved quality
» Reduction in design time
» Reduction of non-standard parts
» Reduction of standard parts
» Reduction of inventory
» Benefits of centralization
• Electronic Materials Catalogs
6-24

25. Concluding Remarks
• Specifications and standardization help
improve quality and value
• They also assist in resolving the design
conflicts
• Balanced specifications contribute to the
viability of the firm’s supply chain
• Standardization helps refine and
streamline systems
• Such refinement should permit the
production of low cost, high quality,
differentiated products that will be
competitive in the global marketplace 6-25