Value analysis

-Prateek Mishra

VALUE ANALYSIS

CLASSIFICATION OF VALUEValue is the minimum money that has to be expended in purchasing or manufacturing a product to create the appropriate use or esteem factor.

• Utility value (Use or functional value) – how useful / functional the product is seen to be.

• Esteem value – the value that customer / user gives to product attributes (properties, features or attractiveness), not directly contributing to utility but more relating to aesthetic and subjective value.

• Cost value – the sum of Labor, material and various other costs required for producing a product.

• Exchange value – Its properties or qualities, which enable us to exchange it for something else, we want.

Value of a product = Performance of the function / Cost

ORIGINValue Analysis was developed after World War-II in USA at General

Electric (GE). Because of WW-II, there were shortages of skilled labor,

raw materials, and component parts at GE.

Lawrence D. Miles at GE looked for acceptable substitutes. They

noticed that these substitutions often reduced costs, improved

product, or both. This led them to the discovery of a systematic

process for cost reduction without compromising on the desired quality

of products. They named their process as “VALUE ANALYSIS”.

Value Analysis is an effective tool for cost reduction and the results accomplished are far greater. • It improves the effectiveness of work.

• It is an organised approach to a problem.

• It is value applied at the design stage itself.

• It reduces unnecessary costs, obvious and hidden which can be eliminated without adversely affecting quality, efficiency, safety and other customer features.

VALUE ANALYSIS

Cost reduction without

compromising on

quality???

Value Analysis, How???

‘Value Analysis Concept : Low Cost, Best Value’

Best Value = Low Cost + Justified Additions

High Cost

Low Cost

BestValue

Value Analysis- What it does ?

• Analyzes the functionality of a product.• States an estimated cost for each function.• Demonstrates a function as compared with

that of a competitor’s.

When to use value analysis

• To identify needed product improvements.• To lower product costs.• To prioritize product redesign activities.• To determine the real value of each component.

Simple Example

Eraser

Metal bandWooden Case

Paint

Graphite

Component Competitors Design Importance to customer Cost Priority for redesign

Eraser Same Low 0.12 6

Worse Medium 0.07 12

Same Medium 0.08 11

Same Low 0.06 13

Metal Band Better High 0.23 2

Same High 0.04 15

Better High 0.1 8

Wooden Case Same Medium 0.35 1

Paint Same High 0.2 4

Same High 0.15 5

Same Medium 0.05 14

Better High 0.02 17Graphite Better Medium 0.03 16

Better High 0.2 3 Same Medium 0.1 9 Better High 0.11 7

Worse Low 0.09 10

VA WORKABILITYFor many of the world’s leading companies, including Hewlett Packard, Sony, Panasonic, Toyota, Nissan, and Ford, VA process of design review has provided major business returns. The key to realizing these returns is through using knowledge of:

• the customer requirements, • the costs of the product, • manufacturing process & • the costs associated with failures due to poor or

inadequate product design.

All these inputs to VA process are vital if decisions regarding product and process re-design are to yield lower costs and enhanced customer value.

Why Value Analysis is needed ?

• Assessing Customer Needs & Affordability • Capturing Customer Needs and Priorities• Obtaining Customer Feedback on Value • Product Planning• Reduced material use and cost• Reduced distribution costs• Reduced waste• Improved Profit Margins• Increased Customer Satisfaction

Objectives of Value Analysis

Saving in cost

Quality Promotion

Elimination of un-necessary

processes

Maximization of the value of

product

Important Substitution

New product and product design

Company Image

VA process is based on the application of a systematic workplan that may be divided into 7 steps as mentioned below:

PROCEDURE

SELECTION & ORIENTATION

ANALYSIS

RECORDING IDEAS

INNOVATION/CREATIVITY

EVALUATION

RECOMMENDATION

IMPLEMENTATION & MONITORING

Process Description

Value Analysis 15

# Stage Description

1. SELECTION & ORIENTATION

To select those critical areas where a potential for cost reductions is expected.

Use the common Pareto’s ABC analysis. General scope, restrictions and aims of the study is defined.

2. ANALYSIS

Examine the data at a VA group/team meeting. Record the minutes of each brainstorming session. Apply the Tests for Value. Propose further action.

3. RECORDING IDEAS

Write down the minutes of analyses meetings and circulate them to group/team members for further queries.

It includes the agenda for the next meeting.

4. INNOVATION/CREATIVITY

Arrange team meetings in order to discuss the ideas analyzed and any new information obtained.

Think upon practical measures for reducing costs and increasing value.

Value Analysis 16

Process Description

# Stage Description

5. EVALUATION

Investigate suggestions for reducing costs and to make them practical and acceptable to client management.

Obtain definite prices and costs in order to estimate cost reductions accurately.

6. RECOMMENDATIONS

Recommend cost reductions to client management. Present the recommendations in a comprehensive report. Recommend a member to act as an implementation

consultant for VA recommendations.

7. IMPLEMENTATION& MONITORING

Implement the recommendations accepted by the company management. Monitor the results as suggested in VA report.

Jot down the feedback of the management upon completion of VA assignment.

ADVANTAGES

• It leads to improvements in product design so that, most appropriate products are produced .

• High quality (value) is maintained.• All-round efficiency is achieved by eliminating waste of various

types.• New ideas are generated and incorporated. • Teams spirit and morale are improved.• VA improves profitability of products.• VA provides a process to systematically improve the

existing goods and services. It builds value into a product or service.

Thank You.

Value analysis

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