A few points to be taken into consideration while codifying the items in the inventory are given below:
Flexibility: A codification system, should last a long time to derive proper benefits from it. It is not something which we change every quarter or every other year. Therefore, the long term requirements of materials for the organization should be kept in mind while providing the digits or alphabets for the items. Moreover, the codification system should not only have enough of vacant spaces but should be flexible enough to suit the requirements of the long term future.
Precision: The codification system should ensure a unique code for reach item.
A proper dictionary or vocabulary for the decoding should be made while installing a codification system. The number of letters or digits should be the same for all items.
Brevity: The total number of letters or numbers should not be too large so as it lose its immediate meaning to the user of the material. 7-10 digits or spaces are adequate for many of the coding systems. However, with a high degree of computerization one could have more digits.
Comprehensiveness: While classifying and sub classifying the items for coding purposes, the nature of the item, its specifications, its end use and the suppliers etc should all be comprehensively taken into account; and therefore, for the codification system to work, prior consultations with the concerned departments such as the operations department, purchasing department, engineering department and finance department, etc should be absolutely necessary. The basis of classification and sub classification should be understood and be approved by these user departments.
Standardization: A good system of codification helps in the standardization of items in the inventory. Standardization consists of reducing the variety of items stocked in the inventory to a workable minimum, by fixing sizes, shapes, dimensions and other quality characteristics of the item. For instance, paint may be bought from a number of suppliers in different sizes of containers and different shades of color. All of these might blow up the inventory of paints considerably. The same could be reduced if the number of suppliers is cut down, if the variety in the sizes of the containers is reduced and if the number of shades of color is also reduced. There may not be a good reason why the paint should be procured from so many different suppliers and in so many different sizes. With standardization, the amount of inventory on paint can easily be cut down to almost a quarter or even much less. In one of the recent exercises done in an Indian electrical machinery manufacturing company (which mostly does job-shop type of work, i.e. manufactures items on order), it was found that by means of conscious thinking they could standardize their regular items and reduce the amount of inventory to almost 60%. Note that this reduction is being done in a company dealing with make-to-order type of business; the potential for other kinds of business can only be inferred from this experience.
A standardization program consists of examining the items stocked critically for:
1. The use or uses to which the items are put in the organization (i.e. the need of the organization /plant).
2. The performance characteristics and the use characteristics (such as a certain socket could be used for 230V),. By a critical examination one can determine which items in the inventory can be totally eliminated. What specification ranges will satisfy the performance and use characteristics? Which items could be grouped together and a different specification can be arrived at? It is necessary that during this examination the Quality Control, Production, Operations Department, Engineering Department, Purchase Department should all be consulted. Specification ranges, grouping of items etc. is not possible unless all the concerned departments are consulted.
Many a time codification because of its unique identification of the items, suggests a standardization program and helps the latter in the initial data gathering about the number of items, their composition/s the end uses, the performance characteristics of the items, the supply sources, etc. In short, codification makes the exercise of standardization easier.