Tiny Parts, Massive Impact: Reducing Total Cost of Ownership (TCO) by Controlling Indirect Costs

Let’s be real — no one walks into a cost-saving meeting ready to wage war on washers or launch a strategy overhaul over screws. But in the world of manufacturing, these tiny items, known as C-parts, can create massive inefficiencies that quietly drain budgets and throttle productivity.

Sure, a bolt might only cost a few cents. But when you factor in procurement labor, admin handling, stockouts, and line delays, that cost can balloon by 20x or even 30x.

Welcome to the world of Total Cost of Ownership (TCO) — where the biggest threats to your margin often wear the smallest price tags.

In this post, we’re going to dig into:

• What C-parts really are (and why they matter)

• How indirect costs sneak into your operations

• Industry-specific benchmarks you should know

• Actionable strategies to take back control of your C-part spend

What Are C-Parts in Manufacturing?

If A-parts are the VIPs of your bill of materials — the engines, circuit boards, or castings — then C-parts are the silent drivers of production. They’re the clips, caps, screws, and seals that quietly hold it all together.

Common C-Parts Include:

• Screws and bolts

• Nuts and washers

• O-rings and seals

• Fasteners and plastic clips

• Fittings, springs, and spacers

  
  

These parts are:

• Low cost (a few cents to a couple of dollars)

• High volume in your inventory

• Critical to final assembly

  
  

You don’t notice them… until one is missing — and then your entire production line might stop.

ABC Classification: Why C-Parts Deserve More Attention

To put it into perspective, most manufacturers use an ABC classification model to prioritize inventory:

Classification	Description	% of Items	% of Value	Examples
A-Parts	High-value, low-quantity	~10–20%	~70–80%	Gearboxes, turbines
B-Parts	Mid-range value & volume	~20–30%	~15–20%	Wiring harnesses, pumps
C-Parts	Low-value, high-volume	~50–70%	~5% or less	Fasteners, gaskets

So why fuss over C-parts if they barely move the spending needle? Because they drive a disproportionate amount of complexity and hidden costs.

Direct vs Indirect Costs: What You're Not Seeing on the Invoice

Let’s break this down simply:

• Direct costs = what you pay for the part itself

• Indirect costs = what it takes to manage that part

  
  

That includes:

• Time spent sourcing and ordering

• Admin labor to check-in and shelve

• Inventory space

• Emergency shipping or stockouts

• Downtime and rework when something goes wrong

  
  

⚠️ A $0.03 washer may end up costing your company $3.00 when all is said and done.

And multiply that by hundreds of thousands of C-parts per year? Now you’re staring at a major drag on your budget.

Why Indirect Costs Are the Real Margin Killers

A Capgemini study revealed that up to 70% of a C-part’s TCO comes from indirect costs.

🔩Real example: One OEM reported a $1 material cost per bolt — but over $30 in indirect costs to manage it.

These hidden costs are often invisible in standard procurement metrics, which means they don’t get flagged until they’ve already hurt your margins.

Industry Insights: What C-Part Costs Look Like Across Sectors

Different industries feel the indirect pain in different ways, but the trend is consistent:

• 🚗 Automotive: $100K+ annually in C-part logistics, despite low per-unit value.

• ✈ Aerospace: 60% of C-part TCO is driven by indirect handling and sourcing costs.

• 📱 Electronics: Frequent SKU changes and fast turnarounds magnify indirect costs like storage and obsolete parts.

  
  

If you’re not measuring it yet, now’s the time. Understanding your industry's cost curve helps you set realistic goals for savings and process improvement.

Why It’s Hard to Cut Indirect Costs

Here’s where most companies get stuck:

• Too many SKUs: Part duplication and lack of standardization drive complexity.

• Supplier fragmentation: Dozens of vendors mean more invoices, freight, and admin time.

• Manual processes: Email orders, spreadsheets, and reactive purchasing slow you down.

• Inventory imbalance: You’re either scrambling for emergency parts or paying to store excess.

  
  

These aren’t just inefficiencies. They’re silent budget leaks.

The Iceberg of Total Cost of Ownership (TCO)

Imagine TCO as an iceberg:

• Top = Direct Costs (visible, small)

• Below = Indirect Costs (massive, often ignored)

  
  

And beneath that waterline lives:

• Labor hours

• Delays

• Rework

• Excess freight

• Lost revenue

• Customer dissatisfaction

  
  

⚠️ A $0.05 fastener should never be the reason a $5M product shipment is delayed. But it happens more than you think.

10 Best Practices to Cut Indirect C-Part Costs

You can’t eliminate C-parts, but you can eliminate the chaos around them. Here’s how:

🔧 Consolidate Suppliers

Fewer vendors = fewer invoices, better terms, lower freight costs.

📦 Standardize Parts

Work with engineering to reduce custom parts and eliminate rarely used SKUs.

🤖 Automate Procurement

Use ERP or purchasing platforms to replace email orders and manual POs.

📈 ABC Inventory Analysis

Focus management effort on the right category at the right scale.

🧰 Adopt Vendor-Managed Inventory (VMI)

Let experts own the process — replenishment, stocking, and performance.

🧪 Rethink Part Design

Encourage cross-functional reviews to reduce over-spec’d or overly unique components.

🕒 Use Min/Max Thresholds

Balance storage with availability, especially for high-risk C-parts.

📊 Leverage IoT Sensors

Track part usage in real-time and avoid guesswork on reorders.

🔄 Lock in Forecasts with Suppliers

Long-term visibility builds trust and reduces variability.

🌍 Source Regionally

Minimize lead time, reduce emissions, and lower freight volatility.

Real Results: How CSG Helped Trane Technologies Cut TCO by Nearly 10%

When Trane Technologies, a global leader in climate solutions, faced costly supply chain disruptions and inventory inefficiencies, they partnered with CSG to implement a smarter, leaner approach to sourcing and inventory management.

🔍 The Challenge:

• $25,000/year in production delays due to unreliable part delivery

• $20,000/year in excess inventory costs tied up in stock

• Quality issues leading to inefficiencies and rework

• $20,000/year per supplier in indirect procurement costs

• Fragmented supplier base complicating operations

  
  

✅ The CSG Solution:

• Reliable supply from ISO-certified partners eliminated downtime, saving $25K/year

• Inventory stored and managed by CSG, reducing costs by $84K annually

• Quality improvements via dedicated equipment and automation options

• Supplier consolidation reduced indirect costs by $15K/year

• Engineering support delivered additional value through VA/VE projects

  
  

💡 The Outcome:

CSG helped Trane reduce its Total Cost of Ownership from $582,000 to $523,000 — a 9.9% annual savings with improved operational stability and fewer supply chain headaches!

Cost Breakdown: Traditional vs. Optimized C-Part Procurement

Managing C-parts the traditional way—manually ordering from multiple vendors, reacting to shortages, and storing excess inventory—can quietly drain your budget. Here’s a breakdown of how indirect costs stack up, and what happens when you switch to a more strategic approach like supplier consolidation, automation, and inventory management support:

Cost Element	Traditional	Optimized
Admin Labor	$15,000	$5,000
Emergency Orders	$10,000	$1,000
Storage Costs	$7,500	$2,000
Total	$32,500	$8,000

Based on estimated annual costs, companies can reduce C-part-related inefficiencies by over $24,000 per year through strategic sourcing and inventory management.

Admin Labor: Most companies underestimate how much time is spent on manual procurement tasks. Placing, tracking, receiving, and filing hundreds of small-parts orders eats up valuable hours from procurement teams. By consolidating suppliers and using automated ordering systems (like ERP integrations or VMI), companies can reduce these efforts by up to 60–70%, saving both time and overhead.

Emergency Orders: Rushed orders due to stockouts or missed forecasts are not just costly in freight—they often come with expediting fees and production downtime. Studies show that emergency orders can cost up to 3–5x more than scheduled deliveries. With proper planning and usage data, emergency purchases can be virtually eliminated.

Storage Costs: C-parts often sit in inventory far longer than necessary due to “just in case” stocking. Not only does this tie up cash flow, but it also drives up warehousing costs and risks parts becoming obsolete. With smarter inventory strategies like min/max levels, bin replenishment, or kanban, storage needs can be reduced by half or more.

How to Calculate ROI on C-Part Optimization

If you're investing in better processes, track the following KPIs:

• Procurement cycle time

• Cost per part handled

• Emergency order frequency

• Inventory turnover rate

• Supplier performance (OTD, fill rate)

  
  

You can’t manage what you don’t measure.

The Long-Term Strategic Payoff

Reducing C-part indirect costs doesn’t just save you money. It gives you:

• More agility in planning

• Higher production uptime

• Better cash flow

• Stronger margins

• Enhanced resilience when markets shift

  
  

This isn’t just operational—it’s strategic.

Think Small to Save Big

C-parts are easy to overlook — until they stall your production line or quietly eat away at your margins.

But with the right strategy, visibility, and systems in place, these small components can go from a cost center to a source of competitive advantage.

At CSG, we specialize in helping OEMs take control of their C-part ecosystem. From consolidating suppliers and streamlining procurement workflows to implementing vendor-managed inventory and real-time digital tools, we’ve helped manufacturers across industries cut TCO, increase uptime, and reclaim budget.

🧠 Want to dive deeper? Download our free resource: The Ultimate Guide to Purchasing C-Parts and learn how CSG can help you build a smarter, leaner, and more resilient supply chain — one bolt at a time.

FAQs

1. What’s the difference between direct and indirect C-part costs? Direct costs are the actual price of the part; indirect costs include everything it takes to procure, manage, and store that part.

   
   

2. Why are indirect costs so high for something so small? Because of the administrative and logistical effort needed to manage thousands of low-cost items.

   
   

3. How can we measure our current indirect costs? Track metrics like procurement time, labor hours, storage fees, and emergency order rates.

   
   

4. Does supplier consolidation really reduce costs that much? Yes—fewer touchpoints, better pricing, stronger relationships.

   
   

5. What makes CSG different in managing C-parts? CSG offers end-to-end support from supplier consolidation to inventory automation, all tailored to reduce your indirect spend and total cost of ownership.