Reduction in Variety of Products

It is a common knowledge that larger is the variety of Products more is the cost involved. A large variety of products means more investment in terms of equipment in both fixed and working capital and larger sales efforts which all push up the cost of production and sales. The reduction in variety of products will lead to cost reduction because of the following reasons:

(i) Standardization: Reduction in variety of production will lead to standardization of products. The term standardization means that the product should be a standard one i.e. made of standard materials and components having a standard design and a standard cost. The standard in each of the above cases has to be determined by the management. The standardization of products will have the following advantages:

(a) It will reduce investment in inventories since only few standard products will have to be kept in stock.

(b) The products can be manufactured in larger quantities in each process as a result of increase in the size of each batch.

(c) The products will be improved quality, greater reliability and of less cost.

(ii) Simplification: Reduction in variety of products will lead to simplification of the production process. A simplification of production process involves less of machine setting time, longer runs, increased productivity and lower cost of inspection. As matter of fact, standardization will automatically lead to simplification of the production process.

(iii) Quality control: It has already been stated above that standardization involves giving a standard product to the consumer. This means that quality of the product will not be allowed to get deteriorated but rather it will continuously be retained and, if possible, improved. This will require inspection of the product at different stages of production so that defects may be remedied at the earliest stage. It will bring economy in reducing the cost in terms of reduction in the number of defective units.

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