This document provides an overview of value analysis, including: - Classifying value into utility value, esteem value, cost value, and exchange value. - Origins of value analysis at General Electric after WWII to find acceptable substitutes and reduce costs while maintaining quality. - Value analysis is a systematic process to reduce costs without compromising quality by analyzing a product's functionality and costs. - Key steps in the value analysis process include selection and orientation, analysis, recording ideas, innovation/creativity, evaluation, recommendation, and implementation/monitoring.

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-Prateek Mishra

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CLASSIFICATION OF VALUE
Value 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

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ORIGIN
Value Analysis was developed after World War-II in USA at General
Electric (GE). Because of WW-II, there were shortages of skilled labor,
raw materials, and component parts at GE.
Lawrence D. Miles 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”.

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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

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Value
Analysis,
How???

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‘Value Analysis Concept : Low Cost, Best Value’
Best Value = Low Cost + Justified Additions
High
Cost
Low
Cost
Best
Value

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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.

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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.

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Simple Example
Eraser
Metal band
Wooden Case
Paint
Graphite

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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 17
Graphite 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

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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.

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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

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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

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VA process is based on the application of a systematic workplan that
may be divided into 7 steps as mentioned below:
PROCEDURE
SELECTION & ORIENTATION
ANALYSIS
RECORDING IDEAS
INNOVATION/CREATIVITY
EVALUATION
RECOMMENDATION
IMPLEMENTATION & MONITORING

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# Stage Description
1.
SELECTION &
ORIENTATION
 To select those critical areas where a potential for cost
reductions is expected.
 Use the common Pareto’s ABC analysis.
 General scope, restrictions and aims of the study is defined.
2. ANALYSIS
 Examine the data at a VA group/team meeting.
 Record the minutes of each brainstorming session.
 Apply the Tests for Value.
 Propose further action.
3.
RECORDING
IDEAS
 Write down the minutes of analyses meetings and circulate
them to group/team members for further queries.
 It includes the agenda for the next meeting.
4.
INNOVATION/
CREATIVITY
 Arrange team meetings in order to discuss the ideas
analyzed and any new information obtained.
 Think upon practical measures for reducing costs and
increasing value.

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# Stage Description
5. EVALUATION
 Investigate suggestions for reducing costs and to make
them practical and acceptable to client management.
 Obtain definite prices and costs in order to estimate cost
reductions accurately.
6. RECOMMENDATIONS
 Recommend cost reductions to client management.
 Present the recommendations in a comprehensive report.
 Recommend a member to act as an implementation
consultant for VA recommendations.
7.
IMPLEMENTATION
& MONITORING
 Implement the recommendations accepted by the
company management. Monitor the results as suggested
in VA report.
 Jot down the feedback of the management upon
completion of VA assignment.

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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.

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Thank You.