Learn about:
What product standardization is
The uses of product standardization
The benefits of standardization for both businesses and consumers
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Over the past few decades, supply chains have become increasingly globalized and interconnected. Due to this, products have become more standardized, allowing suppliers to maintain continuity through the ever-more-complex logistics web necessary to move items from one side of the globe to another.
Product standardization is the process and method of manufacturing and distributing goods that have little-to-no variation between different markets. Standardized products are typically guaranteed to be the same, no matter if they’re sold in different regions, countries, or continents.
Related Reading: What is Global Logistics Network Optimization?
What Are the Business Benefits of Product Standardization?
There are a number of different ways that product standardization can be useful for suppliers, contributing to the adoption of the practice throughout a wide variety of industries.
Cutting Costs:
Product standardization ensures that production and upkeep costs are kept to a minimum, as companies no longer need to spend money on various raw materials, packaging, and unique marketing methods.
In order to standardize a product, manufacturers need to develop a set of consistent instructions for that item’s production, utilizing identical machines, techniques, and assemblage processes wherever the product is being made. Following an identical process in different locations allows manufacturers and suppliers to lower production expenditures, creating a more efficient approach to manufacturing compared to adapting each process to local conditions.
Suppliers can, for instance, purchase raw materials in bulk, as the same materials could be used in any of the company’s production facilities, rather than purchasing smaller quantities of different raw materials for individualized and market-dependent production processes. Additionally, releasing one product in multiple markets saves costs on training, documentation, inventory management, advertising, and after-sales service, allowing for consistency and centralized control.
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Productivity:
Standardizing a product creates greater efficiency in production because it eliminates the need to spend resources to adapt products to a particular market or region. Additionally, product standardization allows for greater automation, since automation becomes easier to implement in a system with identical manufacturing processes.
The greater productivity engendered by standardization and automation also creates a structure in which companies can scale more efficiently. With product standardization, the fixed costs associated with distribution and marketing are apportioned across a larger volume of products, allowing for a greater market penetration. Additionally, in order to ensure that standardized products are produced identically, fixed components that are a part of the manufacturing process, such as specialized equipment, must be consistent throughout all markets.
Quality Criteria:
Product standardization inherently leads to a more consistent quality of product, as the quality is no longer directly related to the methods by which the items were manufactured. This consistency makes the detection of faults in the production process easier to detect and resolve, since discrepancies in quality between products will be readily apparent and simple to trace.
However, suppliers should be aware that defects in a standardized product will be more noticeable to consumers, making the quick resolution of these issues even more imperative.
Product Modernization:
When companies have standardized products to use as a base, it typically becomes easier to experiment with various innovations on that design. Rather than needing to adapt modernization processes to the individualized design of non-standardized products, the use of standardized products allows for an efficient allocation of resources, reducing development costs. Additionally, manufacturers can often use product standardization to lower the number of iterations during research and development, helping to recover costs and shorten the sales recovery time.
What is the Consumer Value of Product Standardization?
Consumer Comfort:
Consumers tend to prefer standardized products in industries that rely on precision engineering and interchangeability, such as consumer electronics, construction materials, or automotive parts. Product standardization ensures that consumers can find products and parts that meet particular specifications regardless of the consumer’s geographical location.
Reliable Quality:
The quality of standardized products does not differ no matter where the products were purchased, ensuring that consumers can travel overseas and purchase the same items they have back home. This makes it easier for consumers to trust that the item quality will be identical in every location, allowing more conscious consumer choices.
If, for instance, a bottle of Pepsi tastes different if purchased at Target versus Walmart, then consumers will not know the extent to which they can trust their soda purchases, potentially pushing the consumer to abandon the brand.
Global Market:
Nowadays, consumer demand tends to follow more predictable patterns across territorial and cultural boundaries than in past decades, when products were specialized depending on where they were created and which market they were intended for. Product standardization therefore helps to satisfy this demand for reproducible items, reducing the amount of individual product variation and increasing consistency and reliability.
However, significant differences in demand still exist between larger regions and cultural boundaries. To maximize profits, suppliers need to take regional and specific demand into account when determining how to approach product standardization.
To Sum Up
Any shift in product manufacturing is associated with increased costs. Though standardization might offset these costs in the long run, an initial investment of capital is still required. In today’s interconnected global market, it’s important for suppliers to analyze and accurately assess consumer demand to fully understand which products would benefit from standardization and therefore where resources are best spent.
Suppliers can benefit from product standardization through streamlined production processes, bulk purchasing of raw materials, and simplified marketing. Consumers also benefit, primarily from the reliability, consistency, and interchangeability that standardized products provide. As global consumer demand continues to converge, suppliers can use further standardization to help satisfy consumer desire for consistent, high-quality products across geographic and cultural boundaries.
Related Reading: An Introduction to Supply Chain Management
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