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Value analysis

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  • Nice post with basic concepts in Value Analysis
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Value analysis

  1. 1. INTRODUCTION Worth to you Value = ------------------ Price you payThe concept of value analysis was developedduring World War II by Lawrence D. Miles ofGeneral Electric Company.
  2. 2. VALUE ANALYSISValue Analysis is an effective tool for cost reduction and theresults 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. 3. DEFINITIONValue Analysis can be defined as,A process of systematic review that isapplied to existing product designs in orderto compare the function of the productrequired by a customer to meet theirrequirements at the lowest cost consistentwith the specified performance and reliabilityneeded.
  4. 4. APPLICATION OF VALUE ANALYSIS1. 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. 5. OBJECTIVES OF VALUE ANALYSIS1) 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 theproduct.4) To Eliminate unnecessary Cost.
  6. 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. 7. How Does It Work?To understand value analysis it is necessary to understandsome 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. 8. TECHNIQUES OF VALUE ANALYSIS • DESIGN ANALYSIS • CHECKLIST • BRAINSTORMING • PRICE ANALYSIS
  9. 9. The Value Analysis ProcessValue analysis is based on the application of a systematicwork 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 ofbasic techniques such as matrixes, pareto chart, pert andgantt diagrams, etc.
  10. 10. Why Use Value AnalysisIn reality, a complex number of reasons exists thatnecessitate the structured approach of valueanalysis as a means of logical cost reduction. These reasons can be divided into twokey sources,1) those that lie within the business and secondly1) those that are stimulated by themarket for the product or service.
  11. 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. 12. THE PHASES OF VALUE ANALYSIS JOBPLAN SELECTION & ORIENTATION ANALYSIS RECORDING IDEAS SPECULATION INVESTIGATION RECOMMENDATION IMPLEMENTATION
  13. 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. 14. CONCLUSIONValue analysis is a technique with immense possibilities, andsystematically employed, it can achieve great economies andincreased efficiency.Although good results have been obtained in several individualcases in some industries, only a large scale and systematicapplication of this technique in all industries, and in defenceproduction, can result in substantial economies on a nationalscale.To conclude, we can say that benefits of value analysisinclude,Reduced production cost,Materials and distribution cost,Improved profit margin,Increased customer satisfaction.

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