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Value analysis
1. INTRODUCTION
Worth to you
Value = ------------------
Price you pay
The concept of value analysis was developed
during World War II by Lawrence D. Miles of
General Electric Company.
2. 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.
3. DEFINITION
Value Analysis can be defined as,
A process of systematic review that is
applied to existing product designs in order
to compare the function of the product
required by a customer to meet their
requirements at the lowest cost consistent
with the specified performance and reliability
needed.
4. APPLICATION OF VALUE ANALYSIS
1. Capital goods – plant, equipment, machinery, tools,
etc.
2. Raw and semi-processed material, including fuel.
3. Materials handling and transportation costs.
4. Purchased parts, components, sub-assemblies, etc.
5. Maintenance, repairs, and operational items.
6. Finishing items such as paints, oils, varnishes, etc.
7. Packing materials and packaging.
8. Printing and Stationery items.
9. Miscellaneous items of regular consumptions.
10. Power, water supply, air, steam & other utilities
(services).
5. OBJECTIVES OF VALUE ANALYSIS
1) To provide better value to a product/service.
2) To improve the company’s competitive position.
3) To ensure that every element of Cost (
Labour
Materials
Suppliers and service )
contribute equally to the Function of the
product.
4) To Eliminate unnecessary Cost.
6. STEPS CARRYING VALUE ANALYSIS
• Establish the objectives (eg, cost reduction).
• Consider a team for marketing, sales, production,
purchasing, etc.
• Analyse the production process of the supplier
company.
• Decompose various characteristics of purchased
product.
• Hold a creative brainstorming session to explore all
alternative possibilities.
• Sort the ideas to establish the cost of each.
• Select the best alternative.
• Develop a plan for implementing the change.
7. How Does It
Work?
To understand value analysis it is necessary to understand
some key concepts:
• Value: the ratio between a function for customer
satisfaction and the cost of that function.
• Function: the effect produced by a product or by one of
its elements, in order to satisfy customer needs.
• Value analysis: methodology to increase the value of an
object to be analysed could be an existing or a new
product or process, and it is usually accomplished by a
team following a work plan.
• Need: something that is necessary or desired by the
customer.
8. TECHNIQUES OF VALUE ANALYSIS
• DESIGN ANALYSIS
• CHECKLIST
• BRAINSTORMING
• PRICE ANALYSIS
9. The Value Analysis
Process
Value analysis is based on the application of a systematic
work plan that may be divided into various steps:
• orientation/preparation
• Information
• Analysis
• Innovation/creativity,
• Evaluation and implementation and monitoring.
The application of value analysis only needs to make use of
basic techniques such as matrixes, pareto chart, pert and
gantt diagrams, etc.
10. Why Use Value Analysis
In reality, a complex number of reasons exists that
necessitate the structured approach of value
analysis as a means of logical cost reduction.
These reasons can be divided into two
key sources,
1) those that lie within the business and secondly
1) those that are stimulated by the
market for the product or service.
11. SIX “ WHATs OF VALUE ANALYSIS “
1) What is it ?
2) What does it do ?
3) What does it cost ?
4) What is it worth ?
5) What else will do the job
?
6) What does that cost ?
12. THE PHASES OF VALUE ANALYSIS JOB
PLAN
SELECTION & ORIENTATION
ANALYSIS
RECORDING IDEAS
SPECULATION
INVESTIGATION
RECOMMENDATION
IMPLEMENTATION
13. BENEFITS TO BE ACHIEVED BY VALUE
ANALYSIS
• Better purchasing techniques
• Better suppliers & manufacturing
methods
• Lower operating costs
• Standardisation & re-evaluation
• Substitution & packaging
• Better material handling
• Better inventory control
• Lower maintenance & overhead cost
14. CONCLUSION
Value analysis is a technique with immense possibilities, and
systematically employed, it can achieve great economies and
increased efficiency.
Although good results have been obtained in several individual
cases in some industries, only a large scale and systematic
application of this technique in all industries, and in defence
production, can result in substantial economies on a national
scale.
To conclude, we can say that benefits of value analysis
include,
Reduced production cost,
Materials and distribution cost,
Improved profit margin,
Increased customer satisfaction.
