value analysis by jomy mathew

-Jomy Mathew

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

ORIGIN

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

Electric (GE) in 1947. Because of WW-II, there were shortages of

skilled labor, raw materials, and component parts at GE.

Lawrence D. Miles, Jerry Leftow, and Harry Erlicher 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???

AN INTRODUCTION TO VALUE ANALYSIS

• In 1961, Lawrence D Miles in his book 'Techniques of Value Analysis Engineering' defined Value Analysis as “an organized creative approach which has its purpose the efficient identification of unnecessary cost i.e. cost which provides neither quality nor use nor life nor appearance nor customer features.”

• VA is also defined as application of recognized techniques to identify the functions of a product! or service and provide those functions at the lowest possible cost.

• Value Analysis is a standardized, multi - disciplined team approach that identifies the lowest cost way and ensures the highest worth to reliably accomplish the functions of a product, process or service.

‘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 band

Wooden 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 WORKABILITY

For 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• Increased employee morale

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 8 steps as mentioned below:

PROCEDURE

SELECTION & ORIENTATION

INFORMATION

SPECULATION

ANALYSIS

DEVELOPMENT

PRESENTATION

IMPLEMENTATION

EVALUATION

Selection & Orientation

• To make a value analysis a study group of 4 to 6 persons is formed.

• More number of members complicates matters, degenerates

discussions, and delays decisions.

• The team must be incorporating a balance of different backgrounds,

viewpoints and departments.

• The members should be from equivalent levels in the organizational

hierarchy to minimize peer pressure and politics.

• One or more members of the team must be well versed with the VE

process, or else an outside facilitator can be inducted in the team.

• One of the members should be an expert on the subject matter

(product /service / process / etc.) of the VE process.

• The team members must have an open mind and be result oriented.

Information

In the information phase, the main function and the secondary functions of an item are studied.

Accurate marginal cost data is needed because VA aims to reduce costs.

The first action of the group should be to gather all the information about the item.

Get a detail of costs.

Collect drawings, specifications, all the written data on the item.

Don't be satisfied with verbal information.

It is better to collect too much information than collect too little.

Speculation or Creative

In this phase the objective is to find a better way to do the main

function, by finding a different material, or concept, or process, or

design idea, that realizes the main function .

This can be achieved by the application of brain storming and

other creative technique in order to generate large number of

ideas.

They should not criticize or speak with others.

The leader registers all ideas on paper or a blackboard.

Analysis

Now the group analyzes each idea that is generated in the creative

phase.

Good and Bad points of the idea is evaluated.

A very approximate cost for each idea is estimated and ideas with an

apparently low cost are investigated carefully.

When an idea is canceled, that should be based on facts, not opinions.

Development

• This phase attempts a further development of the two to four

ideas selected earlier.

• Tests, prototypes, quotations of cost, costs of short term, long

term alternatives and of any new ideas alternatives, prove to be

useful at this stage.

• At the end of this process, the idea of least cost should have been

identified..

Presentation

• The team must ensure that the person really interested in

applying the solution and the decision maker get to see it.

• Present the final solution in writing, in a concise format, stating

the savings, costs and a detailed plan for implementing the

idea. to the person that should implement it.

Implementation

• Normally the amount of work to implement an idea is

greater than the amount of work needed to produce the

idea.

• Therefore it is good procedure to let the people that

implement the idea get most of the praise and merit.

• This produces excellent work relations.

Evaluation

• Every step of the process is geared toward obtaining a

result that increases the ROI or value for the client .

• Comparison is made between the plans and results.

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.

Avoid making generalizations and superficial statements – it

is important to be precise at every moment.

Collect, determine and examine all costs involved.

Make use of information from the best possible sources.

It is possible that two different VA consultants may give

different sets of recommendations still both be correct. There

can be challenges in the selection of the best alternatives.

DISADVANTAGES

Thank You.

value analysis by jomy mathew

Devices & Hardware

cost value

classification of value

best value best value

functional value

esteem value

exchange value

subjective value

real value