Benefits of value analysis


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Benefits of value analysis

  1. 1. BYMANISHA VAGHELA vaghela_manisha13@yahoo.c BY:MANISHA VAGHELA om 1
  2. 2. Flow of presentation• Meaning of value• Origin of value analysis• Introduction of value analysis• Meaning of value analysis• Definition of value analysis• Purpose of value analysis• Benefits of value analysis• Limitation of value analysis• Review of the topic• Conclusion• Bibliographyvaghela_manisha13@y BY:MANISHA VAGHELA
  3. 3. Meaning of value Value is a broad term often used to denote cost and Price. However, we would go a step further and introduce the concept of function as well into the definition of value. Value can be divided into the following classifications :-Use or Functional Value:- the properties and qualities which accomplish a use, work or service.vaghela_manisha13@y BY:MANISHA VAGHELA
  4. 4.  Esteem Value :- The properties, features or attractiveness which cause us to want to own it. Cost Value :- The sum of labour, material and various other costs required to produce it. Exchange Value :- Its properties or qualities which enable us to exchange it for something else we want.vaghela_manisha13@y BY:MANISHA VAGHELA
  5. 5. Origin of value analysis• Value engineering or value analysis had its birth during the Second World War. Needless to say, this was a fertile period for its growth due to world-wide shortage of essential materials.• Lawrence D. Miles was responsible for developing the technique and naming it.vaghela_manisha13@y BY:MANISHA VAGHELA
  6. 6. • Through its application, G.E.C saved nearly 70 million dollars and after that it was a question of time before the technique caught on and spread like wild fire.• In recent years, it has also been known as “Molecular engineering” or “Vertical thinking”.vaghela_manisha13@y BY:MANISHA VAGHELA
  7. 7. Introduction of value analysis• value analysis aims at a systematic identification and elimination of unnecessary costs resulting in the increased use of alternatives, less expensive material, cheaper designs, less costly methods of manufacturing etc. to provide the same performance, quality and in a decrease of overall unit costs and consequntly greater profits.• For example:- We can convert a stainless steel part into steel or even fiber-glass and thus save cost. Tvs Suzuki‟s choice of fiber-glass for spectra scooter has reduced its product-cost.vaghela_manisha13@y BY:MANISHA VAGHELA
  8. 8. Example of value analysis• Suppose a housewife is out shopping for vegetables. There are four varieties of tomatoes to choose from, costing Rs.15 ,Rs.20,Rs.25 and Rs.30 respectively. Which will she buy? Quality? All are of good “quality.” price ? Obviously not. Then the vegetable vendor won‟t be able to sell the other three qualities.vaghela_manisha13@y BY:MANISHA VAGHELA
  9. 9. • The answer is simple. she will buy that quality which serves her purpose. for example, if her husband‟s boss is coming for dinner and tomatoes are required for the salad, the Rs.30 variety will be the obvious choice. If she wants to make tomato- rasam , then she will purchase the Rs.15 quality. In other words, her choice will depend on the function the tomato is to perform. Each of the four varieties has a value and his value depends on the function it is expected to accomplish. This small example illustrates the approach of value analysis.vaghela_manisha13@y BY:MANISHA VAGHELA
  10. 10. Meaning of value analysis• Value analysis is a study of character-wise cost of an items such as quality, design, method of manufacture, consumption aspect, etc., with a view to reducing the ultimate cost of the item. Value analysis also refers to the determination of the value of items proposed to be bought so as to examine the worth of money to be spent in buying those items.• Value analysis takes into consideration the quality of the material in relation to its functional value and price. Value analysis helps in taking decision about what is actually required and what should be payed so as to derive the maximum benefits but pay the maximum for the same function.vaghela_manisha13@y BY:MANISHA VAGHELA
  11. 11. • Value analysis is, in essence, a study of function. The function of a part, or material, or service is the job it does. Value is a price we pay for a product process, material or service required to perform a specific function in an efficient way.• Value analysis is a technique which goes into systematic and complete investigation of combinations like quality, service, price etc. with a view to determine the functional utility of the item.vaghela_manisha13@y BY:MANISHA VAGHELA
  12. 12. Definition of value analysis1. Value analysis can be defined as an organized approach to the identification and elimination of unnecessary cost. Unnecessary cost is Cost which provides neither use, nor life, nor quality, nor appearance, nor customer features.2. Value analysis is an organized procedure for efficient identification of unnecessary cost.3. value analysis is the study of the relationship of design, function and cost of any project, material or manufactured by more efficient process, change in source of supply(external or internal), or possible elimination or incorporation in a related item.vaghela_manisha13@y BY:MANISHA VAGHELA
  13. 13. 4. Value analysis is the organized and systematic study of every element of cost in a part, material or service to make certain it fulfils its function at the lowest possible cost; it employs techniques which identify the function the user wants from a product or service; it establishes by comparison the appropriate cost for each function; then it causes the required knowledge, creativity and initiative to be used to provide each function for the lowest cost.vaghela_manisha13@y BY:MANISHA VAGHELA
  14. 14. 5) Value analysis is an organized creative approach which has for its purpose the efficient identification of unnecessary cost;i.e., cost which provides neither quality, nor use, nor life, nor appearance, nor customer features.vaghela_manisha13@y BY:MANISHA VAGHELA
  15. 15. Purpose of value analysis• Elimination of an item altogether i.e. identifying its unnecessary costs .• Utilization of standard components of cost reduction.• Examination of all features of an item.• Examination of cheaper quality materials for their advantageous use in the organization.vaghela_manisha13@y BY:MANISHA VAGHELA
  16. 16. • Examination of costlier quality in relation to its functional value and life.• Examination of alternative source & price in relation to the money spent and realization of its worth in due course. Making them simpler, there can be three purposes of value analysis;• The objective of „ best buy‟• The objective of „ saving in cost‟• The objective of enhancing the worth.vaghela_manisha13@y BY:MANISHA VAGHELA
  17. 17. Benefits from value analysis There are several direct and indirect benefits which can accrue from the introduction and practice of value analysis. Some of these are:1]. A reduction in cost of existing products or systems.2]. Prevention of unnecessary cost in new products or systems. These two are quantifiable and can be easily measured.3]. The introduction of value analysis leads to overall cost consciousness and a general attitude change toward costs.vaghela_manisha13@y BY:MANISHA VAGHELA
  18. 18. 4]. Product value gets improved and the quest for new materials and processes get encouraged; it provides a great boost for import substitution.5]. Systems relating to cost and estimating usually benefit from reorganization necessitated by the wider use of cost information.6]. Finally, a greater return of investment results. in other words, greater profits accrue.7]. Value analysis is a very important tool in contracts, and it is good to have a VE incentive clause to encourage a contractor to reduce the costs. There could be sharing of resultant benefits in a fair manner.vaghela_manisha13@y BY:MANISHA VAGHELA
  19. 19. • Here are some organizational benefits also which are as follows:• The concept of value is usually divided into the following classification for better control: Use or functional value signifies the properties and qualities which primarily accomplish the use, work or service. The properties, features or attractiveness which create a desire to own are known as esteem value. Cost value is a sum of labour, materials overheads, taxes and other cost required to produce it.vaghela_manisha13@y BY:MANISHA VAGHELA
  20. 20. Exchange value implies the properties or qualities which enable us to exchange it for something else we want. Value is a relative term and changes with place or time. Value analysis strives to achieve the said benefits in the long run and for the entire community at large.vaghela_manisha13@y BY:MANISHA VAGHELA
  21. 21. Improve quality and effectiveness of product. Examination of cheaper quality materials for their advantageous use in the organization. Examination of alternative source & price in relation to the money spent and realization of its worth in due course.vaghela_manisha13@y BY:MANISHA VAGHELA
  22. 22. LIMITATIONS• As each coin has two sides, VA also suffers from various limitations. They are as under; Value analysis, if applied to all the materials and products, will prove very time consuming and expensive too. Hence, it is generally adopted on a selective approach basis. Value analysis technique should be used only, under the supervision of a senior officer, by the analysts who should be an expert and an experienced person well versed in their job otherwise the likely remain a distant illusion and the technique may only prove an added burden for the concerning unit.vaghela_manisha13@y BY:MANISHA VAGHELA
  23. 23. • Value analysis does not have any refined theoretical basis. It is simply a technique grown out of experience in the assembly line of a factory, field of construction works or out of the spot observations in the activities of industrial and business units and in their different divisions.vaghela_manisha13@y BY:MANISHA VAGHELA
  24. 24. conclusion• Value analysis investigates whether the buyer is obtaining the most economical material or equipment suitable for the end product or end use. The approach is concerned less with price negotiating and bargaining, than with the right quality, design , specification , standards and methods of manufacture.vaghela_manisha13@y BY:MANISHA VAGHELA
  25. 25. • The main objective of value analysis is to reduce cost so it is useful but there are certain disadvantages of its like time consuming etc so it has two effect positive and negative also.vaghela_manisha13@y BY:MANISHA VAGHELA
  26. 26. Review of the topic• Meaning of value• Origin of value analysis• Introduction of value analysis• Example of value analysis• Meaning of value analysis• Definition of value analysis• Purpose of value analysis• Benefits of value analysis• Limitation of value analysis• Review of the topic• Conclusionvaghela_manisha13@y BY:MANISHA VAGHELA
  27. 27. Bibliography• Production and operation management By :- S.A. Chunawala & Dr. Patel• Material management and integrated approach By :- Gopal krishnan• Material management By :- M.M Varma.vaghela_manisha13@y BY:MANISHA VAGHELA
  28. 28. • Material management procedures text and cases By :- A.K. Datta.• Production and Operation management By: - N.G.NAIRvaghela_manisha13@y BY:MANISHA VAGHELA
  29. 29. vaghela_manisha13@y BY:MANISHA VAGHELA