VALUE ANALYSIS

VALUE ANALYSIS
Value analysis is one of the major techniques of cost reduction and control. It is a disciplined approach which ensures the necessary functions for the minimum cost without diminishing quality, reliability, performance and appearance. It is a creative approach to eliminate the unnecessary costs which add neither to quality nor to the appearance of the product. It is a systematic application of techniques to identify the functions of a product or a component and to provide the desired function at the lowest total costs.
What is value analysis?
Value is one of those terms having good many connotations and even contradictory definitions. ‘Value’ is a word that is very often used by individuals without being clearly understood. Even different departments of the same organizations have different opinions of the ‘value’ of the product that the company manufactures. The designer equates value with reliability, purchase people with price paid for them, production personnel with that of cost from the angle of manufacturer, sales people with what customer is willing to pay. In the field of value investigation, value refers to economic value, which itself can be divided into four types as cost value, exchange value, use value and esteem value.
‘Cost value’ is the measure of sum of all costs incurred in producing the product. The cost value, therefore is the sum of raw materials cost, labour cost, tool cost and overhead expenses to produce the product.
‘Exchange value’ is the measure of all the properties, qualities and features of the product which make the product possible of being traded for another product or for money. In a conventional sense, exchange value refers to the price that a purchaser will offer for the product, the price being dependent upon the satisfaction value which derives from the product. Value derived from the product consists of two components namely (a) value due to reliability of performance of the product and (b) the value which the possessions bestow upon the buyer. These are often referred to as ‘value in value’ and ‘esteem in value’
‘Use value’ is the measure of properties, qualities and features which make the product accomplish use, work or service. Use value, therefore, is the price paid by the buyer or the cost incurred by the manufacturer in order to ensure that the product performs its intended function efficiently.
‘Esteem value’ is the measure of properties, features, attractiveness graphic packaging and the like which increases sale appeal or which attracts customers and create in them a strong desire to own the product. Esteem value, therefore, is the price paid by the buyer or the cost incurred by the manufacturer beyond the use value. It is the perception value.
Value analysis is an organized approach to identify unnecessary costs associated with any product, material, part, component, system or service by analysis of function and efficiently eliminating them without impairing the quality functional reliability or its capacity to give service.
According to Society of American Value Engineers (SAVE), “Value Analysis is the systematic application of recognized techniques which identify the function of a product or services establish a monetary value for the function and provide the necessary function reliability at the lowest overall cost.”
According to Lorry D. Miles, Value analysis is the study of the relationship of design, function and cost of any material or service with an object of reducing its cost through modification of design or material specifications, manufacture by more efficient process, changes in sources of supply, elimination or incorporation into another item.
Thus value analysis is a systematic application of established techniques to identify the functions of a product or component and to provide the desired functions at the lowest total cost. It is a creative approach to eliminate unnecessary costs which add neither to quality nor to the appearance of the product. It is a rational and structured process consisting of:
Functional analysis to define the reason for the existence of a product or its component,
Creatively analysis for generating new and better alternatives, and
Measurement for evaluating the value of present and future concepts.
Hence, value analysis is a technique which examines the facts of a function and cost of a product in order to determine whether the cost can be reduced or altogether eliminated while retaining all the features of performance and quality of a product or both. It is an organized approach of exposing and eliminating unnecessary costs.
PHASES OF VALUE ANALYSIS
The phases of value analysis are:
Phase of Origination
In this stage, a value analysis study team is formed. The project is selected and clearly defined. The team examines in detail the product and its components to understand thoroughly their nature.
Phase of Information
A functional analysis is carried out to determine the functions and uses of the product and its components. The cost and importance of each function is identified. A value index is calculated on the basis of cost benefit ratio for each function. A list is being prepared in which the items of functions are arranged in decreasing order of value.
Phase of Innovation
This is the creative phase concerned with the generation of new alternatives to replace or removing the existing ones.
Phase of Evaluation
Each and every alternative is analysed and the most promising alternatives are selected. These alternatives are further examined for economic and technical feasibility. The alternatives finally selected must be capable of performance. They must meet the standard of accuracy, reliability, safety, maintenance and repairs, free from environmental effect etc.
Phase of Choice
In this phase, report is prepared. This report contains a summary of the study, conclusions and specific proposals. The decision makers choose the alternative.
Phase of Implementation
The chosen alternative is put to the actual use with the help of the programs and action plans so developed in advance.
Phase of Review
The progress of analysis changes in continuously monitored and followed up in order to provide assistance, to clarify any misconceptions and to ensure that the desired results are achieved.
MERITS OF VALUE ANALYSIS
Improvement In Product Design
It leads to improvements in the product design so that more useful products are given shape.
Ex. ball point pens do not clog now a days and there is even free flow of ink and along with rubber for smooth writing.
High quality is maintained
High quality means higher value.
Ex. dry cells were earlier leaking, but now a days we have leak proof dry cells. Today even we get rechargeable batteries.
Elimination of wastage.
Value analysis improves the overall efficiency by eliminating the wastages of various types.
Savings in costs
The main aim of value analysis is to cut the unwanted costs by retaining all the features of performance or even bettering the performance.

Building and improving company image
The company’s image or status or personality is built up or improved to a great extent. Improvement in quality and reduction in cost means competitive products and good name in product market; it is a good pay master as sales and profits higher and labour market it enjoys reputation; its capital market, nobody hesitates to invest as it is a quality company.
Wide spectrum of application
The principle and techniques of value analysis can be applied to all areas that may be purchasing, hardware, products, systems, procedures and so on.
Encourages Team spirit and morale
Value analysis is a tool which is not handled by one, but groups or teams and an organization itself is a team of personnel having specifications. A product is the product of all team efforts. Therefore, it fosters team spirit and manures employee morale as they are pulling together for greater success.

LIMITATIONS
Like any other cost reduction technique, value analysis has its own limitation. The most common limitations are:
Lack of motivation
Resistive to change
Inertia
Lack of knowledge and patience
Attitudes like: we are very small or big, if it will not work in India, this has been tried earlier and failed, the change is too big, let our competitor try before we try, etc.
These limitations are however man made and can be overcome once the team decides to implement value analysis.