Fasteners and Class C Component Supply

Falcon supplies fasteners and inventory management services to manufacturers in North and South Carolina, Kentucky, and the surrounding areas.

Charlotte Office

10715 John Price Road
Charlotte, NC 28273

Phone: 800.438.0332

Mobile: 704.588.4740

Mailing Address

P.O. Box 7429 | Charlotte, NC 28241-7429

Phone: 704.588.4740

Fax: 704.588.5753

Kentucky Office

11536 Commonwealth Drive
Louisville, KY 40299

Phone: 502.266.6292

Fax: 502.526.5567

3 ways OEMs can apply the Pareto Principle for leaner operations

  • Let's look at a few examples of how the Pareto Principle could be applied to OEM operations.

We’ve spoken about the Pareto Principle in past blog posts, how it states 80 percent of consequences stem from 20 percent of causes. While these aren’t hard-and-fast figures, the philosophy behind what’s being said rings true: Sometimes, minor changes to targeted elements of a given operation can have incredible impact on how smoothly things run. Let’s look at a few examples of how the Pareto Principle could be applied to OEM operations.

The Pareto Principle helps OEMs innovate in many different ways.The Pareto Principle helps OEMs innovate in many different ways.

1. Unit and logistics costs for certain components
Original equipment manufacturers (OEMs) may need to purchase certain parts through separate suppliers because of their rarity or price point. Depending on the kinds of builds OEMs must perform, procurement can be further decentralized because of these factors. When OEMs finally decide to consolidate suppliers or standardize parts, the Pareto Principle can offer valuable insight. For example, which 20 percent of an OEM’s procurement orders constitute 80 percent of its upfront expenditures? Knowing this could help companies incorporate lean manufacturing initiatives that intelligently isolate the biggest expenses.

2. Smarter SKU rationalization
Building a leaner manufacturing plant may mean cutting back on a number of products in a company’s portfolio. By reducing stockkeeping units (SKUs), OEMs can limit resources like parts, as well as inventory space and the labor that goes into maintaining it. However, what products should be eliminated in order to make the biggest difference? The Pareto Principle should have the answer – the items in the bottommost 20 percent in terms of market performance will most likely create 80 percent of the waste in the stockroom and the sales floor.

3. Addressing the biggest perpetrators of downtime
In a manufacturing facility, it can be argued anything that goes against standard operating procedures generates downtime in one way or another. That said, focusing company resources on certain once-in-a-blue-moon downtime issues won’t nearly have the same benefits as eliminating recurring problems. Once again, the Pareto Principle would say 20 percent of downtime causes create 80 percent of the time spent out-of-order. Discovering which activities hurt uptime the most will offer the greatest reward.

Get the Guide!

Prioritizing with Pareto - White Paper

Smart manufacturers know Pareto! Do You?

Which of the the following scenarios would you rather focus most of your time and effort on?

(a)The vital few suppliers to save 5% on 80% of your spend.

(b) The many suppliers to save 20% on 20% of your spend.

The savings may be equivalent, but (a) is far more achievable and efficient than scenario (b).

Learn More...

Get the Guide!
2018-01-15T09:51:51+00:00 January 29th, 2016|Categories: Lean Manufacturing|

About the Author:

Aaron is the Marketing Director at Falcon Fastening Solutions, Inc. He is focused on sharing Falcon's unique approach to fastening and class C production component supply chain solutions with equipment manufacturers.