| What is it? |
Value analysis is a systematic effort to improve upon cost and/or performance of products (services), either purchased or produced. It examines the materials, processes, information systems, and the flow of materials involved. Value Analysis efforts began in earnest during WW II. GE, concerned with the difficulties in obtaining critical listed materails to produce war material, assigned an engineer, Lawrence D Miles to the Purchasing department. His mission was to find adequate material and component substitutes for critical listed material to manufacture needed war equipment. In his search, Miles found that each material has unique properties that could enhance the product if the design was modified to take advantage of those properties.
Miles discovered that he could meet or improve product performance and reduce its production cost by understanding and addressing the intended function of the product. His method was - Blast (dissecting products to discern key competitive advantages), Create (detailed analysis of the disassembled products, identifying those functions of concern and soliciting ideas for improving), Refine (selecting the most value adding, cost-effective ideas and preparing a business case for the implementation of the proposals) - the VA Tear Down Analysis. The key element in Miles' work is that he separated Function (what it must do) from the characteristics of the design (how it does it). Value = Function/Cost (esteem value - want, exchange value - worth, utility value - need).
US Navy adopted this in 1945 as Value Engineering. The Defense Department described Value Engineering as a "before the fact" activity applying the value methodology during the product design phase and Value Analysis as "after the fact" activity, practicing the value process following design release, during the production of the product. |
| Why is it important? |
Implemented dligently, value analysis
can result in -
reduced material use and cost
reduced distribution costs
reduced waste
improved profit margins
increased customer satisfaction
increased employee morale |
| When to use it? |
| Value analysis should be part of a continuous improvement effort. |
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| How to use it? |
Start by asking these questions:
| 1 |
What is the function of the item? |
| 2 |
Is the function necessary? |
| 3 |
Can a lower cost standard part that serves the purpose be identified? |
| 4 |
To achieve a lower price, can the item be simplified, or its specifications relaxed? |
| 5 |
Can the item be designed so it can be produced more efficiently or more quickly? |
| 6 |
Can features that the customer values highly be added to the item? |
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Hint
An off-shoot of this is Value Stream
Mapping (VSM) - a tool used to document the flow of products of services through a system. This tool allows companies to map the flow of products from raw material state, through all processing steps, and off the shipping dock as finished product Value Stream Mapping consists of Current & Future State Maps. |
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| Food for Thought ! |
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