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Cost Reduction Through Standardization

One of the aims of standardization is simplification or reduction of unnecessary variety. Variety costs money. If the customer wants reliable goods at the cheapest price he or she should be prepared to sacrifice some part of their individual desires. Too much limitation of variety however, will lead to a very dull and drab existence, so some compromises are necessary. Three examples as to how variety can be reduced and still provide customers what they want are shown, namely complete products, small components and materials.

Complete products

Products such as motor vehicles, TV sets, stoves, etc. are assembled from a large number of sub-assemblies and an even larger number of components. Many of these sub-assemblies and components can be standardized, i.e. the variety reduced, hence production and inventory costs reduced. The manufacturer will still be able to produce an assortment of complete products from different combinations of the standardized sub-assemblies and components to satisfy the multiplicity of needs of the market place.

Small components

A large number of standards are concerned with small components, such as bolts and nuts, resistors, plugs and sockets, etc. The standards for such products often include a range of preferred sizes, which suppliers of such components will be able to provide at far lower costs than special sizes that fall outside the standardized range. As a manufacturer it is therefore important to design your products in such a way that it makes use of the preferred sizes of small components in order to minimize costs.


New materials are constantly developed as technology advances. Unfortunately old standards for materials are seldom withdrawn. Hence suppliers of materials such as steel, plastics, cement, to name but a few have to provide a bewildering number of different materials, some only marginally different from others. In many cases the bulk of their sales come from a few materials which they can then provide at lower prices. By designing products with such "common", standard materials in mind, the input costs can often be substantially reduced.
see also
Check also from the consumers protection chapter;
Economic Development

East African Business Council