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What Is Value Analysis & Value Engineering

Value ANALYSIS is an orderly and creative method to increase the value of an item. Value is how well an item does its function divided by the cost of the item. An item that does its function better than another, has more value.

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Sonali Hora
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123 views5 pages

What Is Value Analysis & Value Engineering

Value ANALYSIS is an orderly and creative method to increase the value of an item. Value is how well an item does its function divided by the cost of the item. An item that does its function better than another, has more value.

Uploaded by

Sonali Hora
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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What is Value Analysis? It is an orderly and creative method to increase the value of an item.

This " item" can be a product, a system, a process, a procedure, a plan, a machine, equipment, tool , a service or a method of working. Value Analysis, also called Functional Analysis was created by L.D. Miles. The value of an item is how well the item does its function divided by the cost of the item (In value analysis value is not just another word for cost):

value of an item = performance of its function / cost

An item, that does its function better than another, has more value. Between two items that perform their function equally well, the one that costs less, is more valuable. The "performance of its function" could include that it is beautiful (where needed). Do not be surprised if as a result of value analysis the cost of an item is less that half of its previous cost.

ValueMethodology(alsocalledValueEngineering,ValueAnalysisorValue Management) is a powerful problem-solving tool that can reduce costs while maintaining or improving performance and quality requirements

ValueAnalysis VAisanstepbystepapproachtoidentifythefunctionsof a product, process, system or service; to establish amonetary value for that function and then provide thedesired function at an overall minimum cost withoutaffecting any of the existing parameters like Quality, Maintainability,Productivity,SafetyandotherPerformance characteristics.

DIFFERNCE BETWEEN VALUE ANALYSIS AND VALUE ENGINEERING VALUE ANALYSIS y Indicates application onthe product that is intomanufacturing. y All factors come togetherincluding workers,subcontractors, engineersto make a team with totalexperience and knowledge VALUE ENGINEERING y Indicates application onthe product at its designstage. y It is always done by aspecific product design(engineers) team. VALUE ANALYSIS y It may change the present stage of the product or operation y It is worked out mostly with help of knowledgeand experience VALUE ENGINEERING y the changes are executed at the initial stages only. y It requires specific technical knowledge. To understand value analysis it is necessary to understand some 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 the object to be analysed could be an existing or a new product or process, and it is usually accomplished by a team following a workplan. Need: something that is necessary or desired by the customer.

Some of the major advantages in using value analysis can be summarized in the following ideas: A high customer orientation, focusing on those aspects of the product/service that better satisfy customer needs. Cost reduction by eliminating functions that do not supply specific advantages to satisfy customer requirements/needs. New ideas that arise from the creativity/innovation phase and may add radical changes and therefore competitive advantages that will be regarded by the market. A new systematic mentality to be taken into account for next designs of new products or to systematically improve the existing ones. The problems that may arise during the application of value analyses can be of different nature. In order to arrive at a successful completion of the process, one has to bear in mind the following rules: Avoid making generalizations and superficial statements it is important to be precise at every moment. Collect, determine and examine all costs involved only when one is cost conscious will it be possible to determine the value of the thing being assessed.

Make use of information from the best possible sources.

Advantages Of Value Chain Analysis


1. A big advantage is that the value chain is a very flexible strategy tool for looking at your business, your competitors and the respective places in the industrys value system. . 2. The value chain can be used to diagnose and create competitive advantages on both cost and differentiation. Ive written about this in Using The Value Chain To Create Competitive Advantage. . 3. The value chain is well known and has been a mainstay of strategy teaching in business schools for the last 20 to 25 years. The book, Competitive Advantagewas published in 1985. . 4. It can be adapted for any type of business manufacturing, retail or service, big or small. . 5. The value chain has developed into an extra model, the industry value chain which lets you get a better understanding of the much broader competitive arena. If youre interested in this aspect of the value chain, watch the Value Chain Videosfor an easy to understand introduction.

Disadvantages Of Value Chain Analysis


1. Its very strengths of flexibility mean that it has to be adapted to a particular business situation and that can be a disadvantage since, to get the best from the value chain, its not plug and play. . 2. The format of the value chain laid out in Porters book Competitive Advantage, is heavily oriented to a manufacturing business and the language can be off-putting for other types of business. . 3. The scale and scope of a value chain analysis can be intimidating. It can take a lot of work to finish a full value chain analysis for your company and for your main competitors so that you can identify and understand the key differences and strategy drivers. . 4. Many people are familiar with the value chain but few are experts in its use. . 5. Michael Porters book is excellent but it is a tough read. Its also dated in its examples which can make some of the ideas more difficult to relate to and understand how things fit together in the Internet age. . 6. The value chain idea has been adopted by supply chain and operations experts and therefore its strategic impact for understanding, analysing and creating competitive

advantage has been reduced. . 7. Business information systems are often not structured in a way to make it easy to get information for value chain analysis.

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