Cost model for evaluating component standardization: A case study

As manufacturing industry tries to grapple the often-conflicting objectives of increasing product variety and reducing the production costs, one of the strategies oft contemplated is component standardization or using common components. However, developing and using standard components may sometimes push the overall costs actually higher. This paper proposes an evaluation model for decision making in the context of component standardization. First, it discusses various types of costs to be considered for selecting desired components. Then the paper presents a specific case study in which some purchasing parts are considered for standardization. An evaluation model is developed for the relevant costs of the case. The solution and sensitivity analysis are presented and discussed.