• Value Analysis

and
Value Engineering

• What is Value

• The value is what customers are demanding – the right combination of product quality, fair price
for goods and services

• Value is ultimately defined by the customer

• Value is dynamic

• Traits: speed, cost, quality and flexibility

• What is Value

• Value=performance / cost

• Performance=quality + speed + flexibility

• Offer products that perform

• Give more than the customer expects

• Give guarantees

• Avoid unreasonable pricing

• Give the customer the facts

• Build relationship

• Value analysis

• DEFINITIONS:

• A task to find more economical way of making or buying a product

• A systematic approach to lower the cost keeping same level of performance

• A study of the relationship of design, function and cost of product, material or service with the
objective to reduce cost

• Investigation of performance with respect to function and unit price to develop most effective
spec at lowest cost

• Objectives of Value analysis

• To provide better value to product/service

• To improve the company’s competitive position

• To ensure that every element of cost contributes proportionally to the function of the product
 • To achieve continuous performance/ cost/quality improvement

• Value Engineering

• Value Analysis is applied to existing products which are in the market for continuous
improvement of its value

• Value Engineering is the application of Value analysis techniques during new product design and
development

• Application of value Analysis

This attacks two aspects of the product

• The use function or the ability of the product to perform according to spec

• The aesthetic function, appearance or style of the product

• Analysis: 1. The purpose of the product

2. Basic/ Primary Function

3. Secondary Function

• Checklist – Value Analysis

• Select an item of high annual rupee volume

( annual consumption value)

• Identify the function

• Is the item necessary, does it add value or it can be eliminated

• Can spec be made less stringent to save cost

• Can packaging be made cheaper

• Steps for Value Analysis

• Establish the objective (cost reduction)

• Appoint team of people from different connected functions

• Analyze the mfg process

• Analyze the use

• Decompose and analyze characteristics

• Hold a brainstorming session

• Sort the ideas

• Benefits of Value Analysis

• Better purchasing techniques

• Better suppliers

• Design modification

• Lower operating costs

• Standardization/substitution

• Better packaging

• Better material handling

• Lower cost of maintenance

• Material Requirement Plan (MRP)

• This is one of the inventory control methods for Input material requirement

• This is a computer based information system designed to handle ordering and scheduling of
inventories

• The input for this control is the

“Master Production Schedule”

• This determines when to order and

how much to order

• Process of MRP

• Master Production Schedule is analyzed which is based on customer commitments

• The requirement of all input materials is calculated based on production schedule

• Input materials are ordered on suppliers based on lead time and quantity of each input material
is firmed up

• Delivery schedule is given to suppliers based on MRP output

• Objectives of MRP

• To improve customer satisfaction/service by meeting and improving on delivery schedules

• To reduce inventory costs by reducing inventory levels

• To improve plant operating efficiency

• Benefits of MRP

• Accurate planning of input materials requirement

• Accurate ordering on suppliers based on computation of MRP software

• Accurate Capacity planning

• Highlights spare capacity and overloading of machines

• Alteration of delivery commitments if required

• Accurate inventory control

• MRP System Output

• Order schedule plan for input materials

• Changes in planned orders

• Exception items to draw attention

• System performance report

• Stock out reports

• Delivery promises kept

• Inventory forecasts

• KANBAN

• What is Kanban?

• Kan means visual and ban means a card (signboard)

• This is one of the techniques to control inventory

• This is generally used for sub-components which are required for main assembly of the
component

• Kanban means a “signboard” or “billboard”and is a concept related to JIT system

• This signboard indicates a requirement and is known as “pull” system of requirement (MRP)

• A communication tool in JIT production and control system

• Designates a pull production means of communicating need for product or service

• Kanban
 • It is a system of continuous supply of components, parts and supplies, such that workers have
what they need, where they need it, when they need it

• Kanban is directly associated with JIT delivery

However, Kanban is not another name for JIT delivery

It is a part of larger JIT system

There is more to managing a JIT system than just Kanban and there is more to Kanban than just
inventory management

• Kanban

• Let us take an example of a car assembly line where 100 cars are manufactured everyday

• Hence 100 carburetors are required everyday

• These 100 carburetors come on a pallet from mfg line

• There are two boxes or bins , each can take 100 carburetors , bin A and bin B

• When the empty bin A comes back to mfg line means the assembly line needs the filled box

• While the empty bin A is being filled by mfg 100 new carburetors, the assembly line is using the
carburetors from the bin B in the meantime

• When the bin B gets empty , it is sent to mfg line for a refill, This keeps repeating and assembly
line gets the filled bin as and when they need ( JIT )

• Pull / Kanban Systems

• Pull / Kanban is a method of controlling the flow of production through the factory based on a
customer’s demand.

• Pull Systems control the flow of resources in a production process by replacing only what has
been consumed.

• They are customer order-driven production schedules based on actual demand and
consumption rather than forecasting.

• Implementing Pull Systems can help you eliminate waste in handling, storing, and getting your
product to the customer. Pull Systems are an excellent tool to use in the areas where cellular or
flow manufacturing can not be achieved.

• Benefits of Kanban system

• It reduces inventory in the system by mfg the exact quantity that is required and the quantity is
not based on demand forecast

• It eliminates product obsolescence as the mfg is done only to the extent of the quantity that is
required to execute the orders on hand
 • It ensures implementation of JIT system

• It helps to implement Kaizen system

• Reduces waste and scrap

• It provides flexibility to respond rapidly to changing demand

• Reduces total cost by preventing overproduction

• KAIZEN

It is a system of continuous improvement in

• quality

• technology

• processes

• company culture

• productivity

• safety

• leadership

• KAIZEN

• Kaizen is focused on making small improvements

on a continuous basis and finding creative solutions

instead of capital expenditures

• KAI………to change or modify

• ZEN……..to improve

• =modify to improve

• What is Kaizen

• Kaizen is a system in which every employee is encouraged to come up with small improvement
suggestions in their area of work on a regular basis

• This is a continuous exercise

• 60/70 suggestions per employee per year are written down, shared and implemented

• Process of Kaizen

• Ideas are not for major changes

always improving productivity, safety and effectiveness and reducing waste

• To support the higher standards, Kaizen also involves providing the training, materials and
supervision needed for employees to achieve higher standards

• Elements of Kaizen

• Quality Circles

• Improved Morale

• Teamwork

• Personal discipline

• Suggestions for Improvement

• Happy employee is a Productive Employee

• FIVE “S” Program

• Sort (clean up)

• Systematize (organize)

• Sweep (regular cleaning)

• Standardize (simplify)

• Self Discipline

• Kaizen Problem Solving Tools

• Pick a project (Pareto Principle)

• Gather data (Histogram and control chart)

• Find cause (Process flow diagram and fish bone diagram), Brainstorm

• Pick likely causes, seven deadly wastages

• Try solution (PDCA),” plan do check act”

• Implement solution

• Monitor results

• Standardize on new process

• Kaizen v/s Innovation

• Small improvements
• Fair knowledge

• Personal involvement

• Many people

• Improve the process

• Even in slow economy

• Major improvements

• Technology or equipment

• Money investment

• A few champions

• Improve results

• Mainly in good economy

• Steps to Implement Kaizen

• Discard conventional fixed ideas

• Think how to do it, not why it can’t be done

• Start by questioning current practices

• Do it right way, if you make a mistake, correct it

• Do not spend money for Kaizen, use your wisdom

• Find root cause of the problem

• Seek wisdom of 10 people

• Kaizen ideas are infinite

• Benefits of Kaizen

• Involves every employee in making a change

• Focuses on identifying problems at their source and addresses seven deadly wastages

• Continual small changes add up to major immediate benefits

• Results: Improved productivity, quality, safety, faster delivery, lower costs and greater customer
satisfaction