1. VALUE ANALYSIS
A Presentation by
N.N.V. Krishna Kanth
I MBA
ALIET

2. Let us explore, how it works???
Value
Analysis,
How???

3. Origin
• Value Analysis was developed after WW-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”.

4. Introduction
Worth to you
• VALUE =
Price you pay

5. DEFINITION
Value Analysis can be defined as,A process of
systematic review that is applied to existing product
designs in order to compare the function of the product
required by a customer to meet their requirements at
the lowest cost consistent with the specified
performance and reliability needed.
A systematic analysis that identifies and selects the best
value alternatives for designs, materials, processes,
and systems. It proceeds by repeatedly asking, "Can
the cost of an object be reduced or eliminated, without
diminishing the effectiveness, required quality,
customer satisfaction or market acceptability?”

6. Techniques of Value Analysis and Engineering
tells you why so much unnecessary cost exists in
everything we do. . . how to identify, clarify, and
separate costs which bear no relationship to
customers' needs or desires. . . how to place a
dollars-and-cents value on different customer
functions. . . how to divide a problem into "mind-
sized" steps, each one of which is solvable and
the sum of which solves the major problem.

7. Value: The ratio between a function for customer
satisfaction and the cost of that function. It is the least
cost that can achieve reliably a function or a service.
Value of a product = Performance of the function /
Cost
Need: Something that is necessary or desired by a
customer
Function: The effect produced by a product or by one
of its elements, in order to satisfy customer needs.
Value Analysis: A systematic process that is used to
increase the value of an object that is achieved by
providing required functions of a product at lowest
overall cost consistent with achieving the required
quality, performance and market acceptance.

8. VA team refers to a team/group/committee of
cross-functional technicians who follow a stated
workplan to accomplish VA objectives.
The object can be a product, a system, a
process, a procedure, a plan, a machine,
equipment, tool , a service or a method of
working.
The aim of VE is to obtain target cost without
compromising on the quality of a product by:
Identifying improved product designs that
reduce product’s cost
Eliminating unnecessary functions that increase
the product’s costs

9. VE requires the use of Functional Analysis (FA).
FA is an analysis of the relationships between
product functions, their perceived value to the
customer and their cost of provision. The process
involves decomposing the product into its many
elements or attributes.
For instance, in the case of automobiles,
functions might be consist of style, comfort,
operability, reliability, quality and attractiveness
etc., etc.

10. What is it? (a pencil)
What is it used for? (writing and making marks)
What is the main function of this product? (making marks, writing)
What is the method, material or procedure that was used to realize
the main function? (a graphite stick & wood)
What are the corresponding secondary functions? (transfer graphite
to paper and facilitate holding the graphite)
What does the item cost and how can we distribute the cost of
realizing the main function into each secondary function?
Comparing these costs to an item of a similar function, how much
should each function cost and what must be the total cost?
Important Note
Focus your VA on the main function, because, during the analysis, the
secondary functions may change. The group/committee/team may
choose different secondary functions to realize the main function.

11. For many of the world’s leading companies, including
names like 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.

12. Functions may be broken down into a hierarchy,
starting with a basic or main function, for which the
customer believes they are paying, and then followed
by secondary functions, which support that basic
function.
For example, a coat may have a use function of
making you warm (i.e. basic or main function) and an
aesthetic function of ‘looking smart, attractive and
charming’.

13. SIX “ WHATs OF VALUE ANALYSIS “
1) What is it ?
2) What does it do ?
3) What does it cost ?
4) What is it worth ?
5) What else will do the job ?
6) What does that cost ?

14. THE PHASES OF VALUE ANALYSIS
SELECTION & ORIENTATION
ANALYSIS
RECORDING IDEAS
SPECULATION
INVESTIGATION
RECOMMENDATION
IMPLEMENTATION

15. # 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/CR
EATIVITY
 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.

16. # 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.

17. 1. A high customer orientation, focusing on those aspects of the
product/service that better satisfy customer needs.
2. Allows enormous cost reductions by eliminating functions that do
not satisfy customer requirements/needs.
3. VA improves profitability of products.
4. New ideas that arise from the creativity/innovation phase, may
add radical changes.
5. VA provides a process to systematically improve the existing
goods and services. It builds value into a product or service.
6. VA process is used to offer a higher performing product or
service to a customer at a minimal cost.

18. 8. VA process is, therefore, one of the key features of a
business that understands and seeks to achieve
TQM in all that it does to satisfy customers.
9. VA process often allows to root out practices that
have grown out of date and can be replaced with
more modern approaches.
10.VA can uncover design flaws that not only operate
inefficiently but also create problems. In the case of
a product, this could mean a high rate of
malfunctioning items, creating customer complaints
and warranty claims that put a strain on personnel
and inventory departments.

19. 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.
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.

20. APPLICATION OF VALUE ANALYSIS
1. Capital goods – plant, equipment, machinery, tools,
etc.
2. Raw and semi-processed material, including fuel.
3. Materials handling and transportation costs.
4. Purchased parts, components, sub-assemblies, etc.
5. Maintenance, repairs, and operational items.
6. Finishing items such as paints, oils, varnishes, etc.
7. Packing materials and packaging.
8. Printing and Stationery items.
9. Miscellaneous items of regular consumptions.
10. Power, water supply, air, steam & other utilities
(services).