There are two types of standardization that save a significant amount of time spent buying. The first is standardization of products purchased.

Limiting the number of approved products for purchase within the organization has multiple advantages. Inventory is reduced because safety-stock is only necessary on fewer items. The need for repair parts for multiple products is eliminated.

Product standardization pinpoints responsibility to a particular supplier. It increases the quantity of the selected specification and therefore enhances the opportunity of volume discounts. It reduces warehousing cost by limiting the amount of storage necessary. It reduces accounting workload by reducing the number of suppliers and the number of invoices to process.

Because standard products mean fewer suppliers, responsibility for errors or quality failure of any particular product is easier to ascertain. For example, there is no need to keep fifteen different brands of computers to satisfy every employee’s preferences.

A higher volume of one item means there are economies of scale. Negotiations are easier for higher volumes. Quantity discounts are often almost automatic.

The second type of standardization is in the administrative area and conducting transactions. Having well defined policies and procedures is a form of standardization. Using particular ways to submit a requisition is a standard. For example, requiring requests to be submitted on a well designed form, either electronically or by using hard copy, is far better than accepting any type of paper message.

Having standard terms and conditions eliminates rethinking every transaction. For example, some firms place purchase orders with a standard F.O.B. delivered term. Standard payment terms can be stated as Net 30 or 1%, 10, Net 30. Many firms place their standard terms on the back of the purchase order form, but suppliers will pay more attention if they are on the front of the form. The buyer should point out unusual buyer standards to the seller.