Applications of Value Analysis

Applications of Value Analysis[/b]

By Pratik Nayak[/b]

Value analysis can be applied universally, i.e to everything:

Materials

Methods

Processes

Services

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The objective is to bring about economics

Items that should receive top priority during the application of value engineering are as follows:

1) Items whose annual consumption in rupees is high.

2) Scarce or difficult to obtain materials.

3) Imported materials.

Bearing this in mind, Value Analysis can be systematically applied to categories of items, such as those listed below:

1. Capital goods – plant, equipment, machinery, tools and appliances;

2. Raw and semi-processed material, including fuel;

3. Sub-contracted parts, components, sub-assemblies, etc;

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, compressed air, steam and other utilities

(services)

11. Materials handling and transportation costs.

Even if Value Analysis does not lead to any better economy in the immediate effect, The item should be taken up again for value analysis after six months or a year, the period being dictated by the findings of the investigations because:

1) Conditions of the market keep changing fast.

2) New Materials, new processes and new suppliers come into existence rapidly.

ORGANISATION FOR VALUE ANALYSIS[/b]

It is a staff function and should be directly under a high ranking officer because value analysis concerns all departments, and the analyst must have access to them and to their records, performance and costs. It is a team effort because what items are to be taken up and what actions are to be taken is decided by a small committee.

The purchase managers role is important because:

1) It is his responsibility to seek the maximum value when a product requirement comes up to the point of purchase.

2) It is his duty to challenge wasteful and avoidable costs inherent in the items he is asked to buy.

VALUE ENGINEERING[/b]

• It is the term applied to Value analysis done at the design and prototype stage of a model.

• Any changes at this stage are less costly than to effect the same at a latter stage.

• Potentials of saving are a more in case value analysis is done at design stage.

LIMITATIONS OF VALUE ENGINEERING[/b]

• At design and prototype stage value engineering will have a very short time to apply their techniques.

• Evaluation of the value at this stage becomes difficult in absence of any customer reaction and opinion.

WHEN VALUE ANALYSIS[/b]

• Value analysis is applied at the maturity stage of a product because it still can enhance the value by cost reduction and lengthen the Maturity period of a product.

• Thus when the design effort is diverted to other products, it is the time for value analysis to be undertaken.

• The success of value analysis for one product of course be made use of in the design of other products by development wing.

Thus Value analysis is a technique with immense possibilities, and systematically employed.

It can achieve great economies and increased efficiency.

Promises rich dividends.

Enables greater use of indigenous raw materials and equipment by import substitution.

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[Dhruv Bindhani]

This article, authored by Pratik Nayak, provides a concise yet comprehensive overview of Value Analysis (VA) and Value Engineering (VE), effectively distinguishing between their applications and highlighting their immense potential for cost reduction and efficiency enhancement in businesses. The piece serves as an excellent introduction for anyone seeking to understand these critical cost-management methodologies.

Universal Applicability and Strategic Prioritization​

Nayak effectively establishes the universal applicability of Value Analysis, asserting its relevance across a broad spectrum of business elements including "Materials, Methods, Processes, and Services." This broad scope immediately underscores the versatility of VA as a tool for "economic" improvements. The article then judiciously prioritizes items that should receive top attention, such as those with high annual consumption in rupees, scarce/difficult-to-obtain materials, and imported materials. This strategic focus helps organizations direct their VA efforts where they are likely to yield the most significant returns, demonstrating a practical understanding of resource allocation. The detailed list of categories for systematic application, ranging from capital goods to power and water supply, further reinforces its pervasive utility across an organization's expenditures.

Organizational Structure and Continuous Improvement​

The section on "ORGANISATION FOR VALUE ANALYSIS" offers valuable insights into the practical implementation of VA. By identifying it as a "staff function" directly under a "high ranking officer," the article highlights the need for organizational authority and cross-departmental access for effective analysis. The emphasis on VA as a "team effort" driven by a "small committee" underscores its collaborative nature. The critical role of the purchase manager is well-articulated, stressing their responsibility to "seek the maximum value" and "challenge wasteful and avoidable costs." This clarifies the integral part purchasing plays in the success of VA initiatives. Furthermore, the advice to re-evaluate items for VA after six months or a year, even if immediate economies aren't realized, reflects a sophisticated understanding of market dynamics—recognizing that "Conditions of the market keep changing fast" and "New Materials, new processes and new suppliers come into existence rapidly."

Differentiating Value Analysis and Value Engineering​

Nayak clearly differentiates between Value Engineering (VE) and Value Analysis (VA), a crucial distinction for proper application. VE is rightly defined as the application of "Value analysis done at the design and prototype stage of a model." The article effectively argues for the cost-effectiveness of making changes at this early stage, where "Potentials of saving are a more." This contrasts sharply with VA's application at the "maturity stage of a product," where its purpose is to "enhance the value by cost reduction and lengthen the Maturity period." The discussion on the limitations of VE at the design stage—namely, short application time and difficulty in evaluating value without customer feedback—provides a balanced perspective. The strategic insight that the success of VA for one product can inform the design of others by the development wing highlights the iterative learning process inherent in these methodologies.

Conclusion: Immense Potential and Practical Benefits​

The article's conclusion effectively synthesizes the core message: "Value analysis is a technique with immense possibilities, and systematically employed." It promises "great economies and increased efficiency," "rich dividends," and importantly, the ability to enable "greater use of indigenous raw materials and equipment by import substitution." These final points underscore not just the financial benefits but also the strategic advantages of VA/VE, including fostering local sourcing. Pratik Nayak’s article is a well-informed and practical guide, making a strong case for the systematic application of these powerful cost-optimization techniques within any business.