Value Analysis by Jomy Mathew

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

ORIGIN
Value Analysis was developed after World War-II in USA at General
Electric (GE) in 1947. Because of WW-II, there were shortages of
skilled labor, raw materials, and component parts at GE.
Lawrence D. Miles, Jerry Leftow, and Harry Erlicher 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”.

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

AN INTRODUCTION TO
VALUE ANALYSIS
• In 1961, Lawrence D Miles in his book 'Techniques of Value
Analysis Engineering' defined Value Analysis as “an organized
creative approach which has its purpose the efficient
identification of unnecessary cost i.e. cost which provides
neither quality nor use nor life nor appearance nor customer
features.”
• VA is also defined as application of recognized techniques to
identify the functions of a product! or service and provide those
functions at the lowest possible cost.
• Value Analysis is a standardized, multi - disciplined team
approach that identifies the lowest cost way and ensures the
highest worth to reliably accomplish the functions of a product,
process or service.

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

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.

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.

Simple Example
Eraser
Metal band
Wooden Case
Paint
Graphite

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

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.

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
• Increased employee morale

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

VA process is based on the application of a systematic workplan that
may be divided into 8 steps as mentioned below:
PROCEDURE
SELECTION & ORIENTATION
INFORMATION
SPECULATION
ANALYSIS
DEVELOPMENT
PRESENTATION
IMPLEMENTATION
EVALUATION

Selection & Orientation
• To make a value analysis a study group of 4 to 6 persons is formed.
• More number of members complicates matters, degenerates
discussions, and delays decisions.
• The team must be incorporating a balance of different backgrounds,
viewpoints and departments.
• The members should be from equivalent levels in the organizational
hierarchy to minimize peer pressure and politics.
• One or more members of the team must be well versed with the VE
process, or else an outside facilitator can be inducted in the team.
• One of the members should be an expert on the subject matter
(product /service / process / etc.) of the VE process.
• The team members must have an open mind and be result oriented.

Information
 In the information phase, the main function and the secondary
functions of an item are studied.
 Accurate marginal cost data is needed because VA aims to reduce
costs.
 The first action of the group should be to gather all the information
about the item.
 Get a detail of costs.
 Collect drawings, specifications, all the written data on the item.
 Don't be satisfied with verbal information.
 It is better to collect too much information than collect too little.

Speculation or Creative
 In this phase the objective is to find a better way to do the main
function, by finding a different material, or concept, or process,
or design idea, that realizes the main function .
 This can be achieved by the application of brain storming and
other creative technique in order to generate large number of
ideas.
 They should not criticize or speak with others.
 The leader registers all ideas on paper or a blackboard.

Analysis
 Now the group analyzes each idea that is generated in the creative
phase.
 Good and Bad points of the idea is evaluated.
 A very approximate cost for each idea is estimated and ideas with an
apparently low cost are investigated carefully.
 When an idea is canceled, that should be based on facts, not opinions.

Development
• This phase attempts a further development of the two to four
ideas selected earlier.
• Tests, prototypes, quotations of cost, costs of short term, long
term alternatives and of any new ideas alternatives, prove to be
useful at this stage.
• At the end of this process, the idea of least cost should have
been identified..

Presentation
• The team must ensure that the person really interested in
applying the solution and the decision maker get to see it.
• Present the final solution in writing, in a concise format, stating
the savings, costs and a detailed plan for implementing the
idea. to the person that should implement it.

Implementation
• Normally the amount of work to implement an idea is
greater than the amount of work needed to produce the
idea.
• Therefore it is good procedure to let the people that
implement the idea get most of the praise and merit.
• This produces excellent work relations.

Evaluation
• Every step of the process is geared toward obtaining a
result that increases the ROI or value for the client .
• Comparison is made between the plans and results.

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.

 Avoid making generalizations and superficial statements – it
is important to be precise at every moment.
 Collect, determine and examine all costs involved.
 Make use of information from the best possible sources.
 It is possible that two different VA consultants may give
different sets of recommendations still both be correct. There
can be challenges in the selection of the best alternatives.
DISADVANTAGES

Value Analysis by Jomy Mathew

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