Paring Down Parts

Dec. 21, 2004
Strategic-component selection creates consistencies, saves costs.

Companies with multiple design facilities share an almost universal problem of parts proliferation. In 1994 IBM Corp. began an initiative called Common Building Blocks, an effort to drive the design community to increase the reuse of parts and components and to select them from preferred vendors -- those whose business, technical, and supply perspectives meet IBM cost and business objectives. Prior to the initiative IBM's hardware division had estimated that part reuse across its development groups was at only about 2%. That was with a total of 540,000 active part numbers in the system. "It costs $10,000 to $15,000 in administrative costs alone just to add a new part to the IBM system in terms of qualification and contracts," says Poughkeepsie, N.Y.-based Johnny Barnes, director, hardware common tools. To guide part and supplier selection IBM established Preferred Parts Councils that map the direction of new and existing technologies and identify preferred suppliers. Councils include those for components such as memory, power and cooling, mechanical cables, and connectors. The councils create consistency by identifying design-to capacities so that worldwide all businesses are geared to 10 GB hard drives, for instance, not 10.0 here and 10.2 there. Access to information on parts is provided by content management applications from Aspect Development Inc., a unit of i2 Technologies Inc., Dallas. "Every part used by IBM is stored in Aspect with its important attributes that describe the component to a level that an engineer can make a design decision on," says Barnes. Every year targets are established for part number reduction, percentage purchase from preferred vendors, and percentage reuse. Today, IBM's hardware group has an 18% reuse profile, including older product sets. New products run at about 50% reuse, and part numbers are now below 240,000. More efficient component selection reverberates throughout the supply chain with inventory turns increased by 40%, inventory carrying costs cut $260 million, and inventory writeoffs reduced by $800 million. Significant savings and improvements also are realized in delivery cycle times, on-time shipments, and material acquisition costs. "We view the supply chain as an integral part of product development, and it must be integrated at the very front end of the product development process to gain value at the back end," says Barnes.

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