Value Analysis

Because it is so important that value be designed into products, we should briefly discuss value analysis and value engineering. The purpose of value analysis or value engineering (VA/VE) is to simplify products and processes. Its objective is to achieve equivalent or better performance at a lower cost while maintaining all functional requirements defined by the customer. VA/VE does this by identifying and eliminating unnecessary cost. Technically, VA deals with products already in production and is used to analyze product specifications and requirements as shown in production documents and purchase requests. Typically, purchasing departments use VA as a cost reduction technique. Performed before the production stage, value engineering is considered a cost avoidance method. In practice, however, there is a loping back and forth between the two for a given product. This occurs because new materials, processes and so forth require the application of VA techniques to products that have previously undergone VE. The VA/VE analysis approach involves brainstorming such questions as:

• Does the item have any design features that are not necessary?
• Can two or more parts be combined into one?
• How can we cut down the weight?
• Are there nonstandard parts that can be eliminated?

Value Analysis Approach

Value analysis’s approach is to improve the value of a product or process by understanding its constituent components and their associated costs. It then seeks to find improvements to the components by either reducing their cost or increasing the value of the functions. 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 – the object to be analyzed 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.

Functions may be broken down into a hierarchy, starting with a basic function, for which the customer believes they are paying, followed by secondary functions, which support that basic function. The purpose of functions may be aesthetic or use, and basic functions may be either or both of these.

The product or process may be broken down into components, which can be associated with the functions they support. The value of the product or process then may be increased by improving or replacing individual components. This also applies to the whole item being analyzed, which may be completely replaced with a more functional or lower cost solution.

Although this is a simple-sounding tool, it can be quite difficult in practice, as it requires both deep analysis of the product or process to be improved and also an innovative approach to finding alternatives.

The concept of value can be categorized into four types

• Use value—Represents a property and quality that allows the product to accomplish its intended function
• Cost value—Represents a sum of labor, material, and overhead expenses required to produce the product
• Esteem value—Represents the pride (or prestige) of ownership
• Exchange value—Represents a property or quality of an item that makes it tradable for something else

To maximize the value of the product or service through value analysis, one should ask the following questions

• What comprises a product (or service)?
• What is it for?
• What does it do?
• How much does it cost?
• What else will do the job?
• How important is the function of a product (or service)?
• What if the process changes?

With these questions in mind, value analysis can be conducted for a wide variety of supply chain areas, such as part/material design and specifications, production, assembly, standardization, packaging, transportation, warehousing, purchasing, and disposal of scrap, surplus, waste, or obsolete materials.