Description
value analysis, what are the uses of value analysis, value analysis vs traditional methods of cost reduction. It also explains when to apply value analysis, it also explains various techniques to arrive at a value. What are the various constituents of the cost of a product
VALUE ANALYSIS
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20.1 WHAT IS VALUE ANALYSIS ?
“VALUE ANALYSIS … IS AN ORGANISED APPROACH TO IDENTIFY UN-NECESSARY COSTS ASSOCIATED WITH ANY EXISTING PRODUCT, MATERIAL, PART, COMPONENT, SYSTEM OR SERVICE BY ANALYSIS OF FUNCTION –
AND EFFICIENTLY ELIMINATING THEM (I.E. UNNECESSARY COSTS) WITHOUT IMPAIRING THE QUALITY, FUNCTIONAL RELIABILITY OR ITS CAPACITY TO GIVE SERVICE RATHER IMPROVING ITS VALUE AT THE SAME TIME”.
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VALUE ANALYSIS THUS • IS A COST REDUCTION & COST PREVENTION TECHNIQUE. • IS IDENTIFICATION OF UNNECESSARY COSTS • AIMS AT COST REDUCTION WITHOUT CHEAPENING OR DEGRADING THE PRODUCT.
• ENSURES BETTER VALUE TO THE CUSTOMERS.
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20.2 USES OF VALUE ANALYSIS
VALUE ANALYSIS – ? REDUCES COST OF PRODUCT ? HELPS EMPLOYEES IN BETTER UNDERSTANDING OF THE JOB ? DETERMINES APPROPRIATE COST FOR RELIABLE PERFORMANCE OF ESSENTIAL FUNCTION ? GENERATES NEW CONCEPTS AND IDEAS FOR THE R & D WORK ? CREATE COST CONSCIOUSNESS AMON THE OPERATING PERSONS OF DIFFERENT DEPARTMENTS. ? PREVENTS OVERSPECIFICATION ? MOTIVATE EMPLOYEES TO COME FORWARD WITH INNOVATIVE IDEAS
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?PROVIDES INFORMATION TO THE MANAGEMENT REGARDING FUNCTIONWISE EXPENDITURE ON THE PRODUCT ?DILUTES RESISTANCE TO CHANGE AND ACCELERATES THE PROCESS OF IMPLEMENTATION ?PROVIDES GOOD TRAINING FOR FUTURE MANAGERS OF THE COMPANY
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20.3 VALUE ANALYSIS VERSUS TRADITIONAL METHODS OF COST REDUCTION
TRADITIONAL METHODS (I.E METHOD STUDY,PRODUCTION ENGINEERING)
1.POST PRODUCTION STAGE 2.ANALYSIS OF MANUFACTURING METHODS (MAN, MATERIALS, MACHINE AND METHODS) • •
VALUE ANALYSIS/VALUE ENGINEERING
3. COST IMPROVEMENT
•
4. GOOD RESULTS OF COST REDUCTION
•
PRE-PRODUCTION AND POST PRODUCTION STAGE ANALYSIS OF FUNCTIONS AND SUBSEQUENT RE-DESIGN OF PRODUCT ( INCLUDING MATERIALS,COMPONENTS ,ETC)SO AS TO PERFORM THE FUNCTION AT MINIMUM COST COST IMPROVEMENT +RELIABILITY, QUALITY, MAINTAINABILITY AND PERFORMANCE IMPROVEMENT +ATTRACTIVE FEATURES EXCELLENT RESULTS (10-20% COST REDUCTION EVEN AFTER APPLICATION OF METHOD 6 STUDY)
20.4 VALUE ANALYSIS VERUS VALUE ENGINEERING
VALUE EFFORTS
CAN BE APPLIED ?
PRE-PRODUCTION STAGE
POST PRODUCTION STAGE
VALUE ENGINEERING
VALUE ANALYSIS
WHICH IS MORE BENEFICIAL ?
VALUE EFFORTS AT THE DESIGN STAGE ARE MORE REWARDING AS-
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- SAVINGS RESULTING FROM LARGE QUANTITIES RIGHT FROM FIRST PRODUCTION UNIT - PREVENTION OF LARGE SUMS OF MONEY REQUIRED FOR MODIFICATION OF PRODUCTION LINE, RETOOLING OF PROCESS SCRAPPING OF PARTS, COST OF ECN’s AND CHANGES - PREVENTION OF COSTLY DRAWING CHANGES - EASE IN IMPLEMENTATION OF CHANGES
VALUE EFFORTS @ DEVELOPMENT STAGE ?
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VALUE EFFORTS AT THE DEVELOPMENT STAGES ARE EQUALLY REWARDING EFFORTS RELATE TO – - SELECTION OF LOW COST MANUFACTURING PROCESS - ECONOMICAL MANUFACTURE OF JIGS /FIXTURES, LOCATING COMPETITIVE AND RELIABLE SOURCES OF SUPPLY
VALUE EFFORTS DURING GROWTH AND MATURITY ?
LESS FRUITFUL UNTIL THE PRODUCTS IS 4 TO 5 YEARS
DECAY STAGE ?
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VALUE ANALYSIS EFFORTS ARE AGAIN REWARDING AS PRODUCT ENTERS DECAY STAGE
RECOMMENDED DISTRIBUTION OF VALUE EFFORTS ?
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STAGE
PROPORTIANATE OF VALUE EFFORTS
PRIOR TO
FINALISATION OF DESIGN BEFORE FINALISATION OF MANUFACTURING PROCESSES,JIGS AND FIXTURES, SOURCES OF SUPPLIERS
DESIGN STAGE
PRE-PRODUCTION STAGE (WITH DETAILED DRAWINGS ON HAND)
50% OF VALUE EFFORTS
40% OF VALUE EFFORTS
DURING PRODUCTION STAGE
PRODCUTION STAGE ON 10% OF REMAINING STAGE COMPLETION OF JIGS & FIXTURES AND PILOT RUNS
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VALUE EFFORTS ARE MORE REWARDING WHEN FOLLOWING SYMPTOMS ARE PRESENT ? COMPANY’S PRODUCTS SHOW DECLINE IN SALES ? COMPANY’S PRICES ARE HIGHER THOSE OF ITS COMPETITORS ? RAW MATERIAL COST HAS GROWN DISPROPORTIONATE TO THE VOLUME OF PRODUCTION ? NEW DESIGNS ARE BEING INTRODUCED ? THE COST OF MANUFACTURING/TOOLING IS RISING IN DISPROPORTIONATE TO THE VOLUME OF PRODUCTION ? RATE OF RETURN ON INVESTMENT HAS A FALLING TREND ? INABILITY OF THE FIRM TO MEET THE DELIVERY COMMITTMENTS 12
20.5 WHEN TO APPLY VALUE ANALYSIS
20.6 TERMINOLOGY OF VALUE ANALYSIS/VALUE ENGINEERING
1. VALUE:
VALUE MEANS ? VALUE MEANS DIFFERENT THINGS TO DIFFERENT PEOPLE MEANING IN VA/VE ? “ECONOMIC VALUE” SUB DIVIDED INTO? ? COST VALUE ? EXCHANGE VALUE ? USE/FUNCTIONAL VALUE ? ESTEEM VALUE
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COST VALUE ? SUM OF ALL COSTS INCURRED IN CREATING A PRODUCT = SUM OF MATERIAL COST, LABOUR COST, TOOL COST AND OVERHEAD EXPENDED TO PRODUCE THE PRODUCT EXCHANGE VALUE ?
PRICE THAT CUSTOMER WILL OFFER FOR THE PRODUCT
COMPONENT OF THE PRICE ?
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PRICE FOR PRICE FOR THE VALUE RELIABLE THAT THE + PERFORMANCE OF POSSESSION BESTOW THE PRODUCT ON THE OWNER (USE/FUNCTIONAL (ESTEEEM VALUE) VALUE) I.E PRICE = Vf +Ve PROFIT EQUATION ? PROFIT= PRICE- COST = (Vf +Ve)-C THREE WAYS OF INCREASING PROFIT ?
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? INCREASE FUNCTIONCAL VALUE OR ESTEEM VALUE OR BOTH KEEPING COST SAME ? REDUCE COST KEEPING FUNCTIONAL VALUE OR ESTEEM VALUE OR BOTH ? INCREASE FUNCTIONAL VALUE AND ESTEEM VALUE AND REDUCE COST
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CASE PROBLEMS :
WHICH IS MORE IMPORTANT : FUNCTIONAL OR ESTEEM VALUE ?
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MEASUREMENT OF VALUE
VALUE IS ALWAYS RELATIVE AND IS MEASURED IN COMPARISON WITH PREDETERMINED VALUE STANDARD CALLED “WORTH”
WORTH ?
WORTH IS THE LOWEST COST OF THE PRODUCT
EXAMPLE
VALUE OF A TIE PIN ? COST OF HOLD FUNCTION COST OF APPEARANCE FUNCTION
+
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COST OF CHEAPEST ALTERNATIVE
+
ESTEEM VALUE IN THE EYE OF THE BEHOLDER
WHILE DESIGNING A PRODUCT, ESTEEM FEATURES ARE HELD IN ABEYANCE UNTIL VALUE ALTERNATIVES TO ACHIEVE BASIC FUNCTIONS ARE EVOLVED
VALUE AND WORTH ?
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VALUE AND WORTH ARE THOUGH DISTINCT BUT INTER-RELATED ASPECTS. ? VALUE REPRESENTS THE RELATIONSHIP BETWEEN WORTH OF A PRODUCT AND CURRENT COST OF THE PRODUCT I.E VALUE = WORTH ` COST MAXIMUM VALUE OF A PRODUCT EQUALS 100% . 100 % VALUE IS REACHED WHEN COST OF AN ITEM EQUALS WORTH (I.E COST OF CHEAPEST 20 ALTERNATIVE)
= COST ACHIEVED BY ELIMINATING - COMPLICATED CONFIGURATION THAT MAKE THE PRODUCT DIFFICULT TO PRODUCE - UNECONOMICAL SIZES - COSTLY SPECIFICATION - INCORRECT TOLERANCES AND FINISH - USING LESSER EXPENSIVE
MATERIAL
ESSENCE OF VA/VE ?
ELIMINATION OF UNNECESSARY COST
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HOW TO IMPROVE VALUE ?
FUNCTIONAL VALUE
? CHEAPER MATERIALS ? SIMPLIFYING DESIGN ? PROCURING MATERIAL CLOSE TO REQUIRED SIZES ? ALTERNATIVE METHODS TO PRODUCE THE PRODUCT ? STANDARD USE OF PRDOUCT IN PLACE OF NON-STANDARD ? BUYING STANDARD PRODUCT TO MAKE IT NONSTANDARD ? REMOVING UNNECESSARY CLOSER TOLERANCE/FINISH ? PROVIDING ONLY ESSENTIAL FEATURES ? BENCHMARKING
ESTEEM VALUE
? BETTER SURFACE FINISH ? SURFACE COATING ?ANNODISING ?ELECTROPLATING AND ?POWDER COATING ? STYLING ? PACKING
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2. FUNCTION
• FUNCTION REPRESENT THE PROPERTY / PROPERTIES WHICH MAKE THE PRODUCT WORK OR SELL. • WORK FUNCTIONS LEND PERFORMANCE WHILE SELL FUNCTIONS PROVIDE ESTEEM VALUE.
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WORK FUNCTIONS • • • • • • SUPPORT HOLD TRANSMIT PROTECT EXHIBIT CONTROL
SELL FUNCTIONS • ATTRACT • ENHANCE • IMPROVE
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RULES CONCERNING FUNCTION (1) FUNCTION(S) SHOULD BE IDENTIFIED AND CLEARLY DEFINED USING “ONE VERB AND ONE NOUN”. (2) ALL FUNCTIONS MUST BE IDENTIFIED (3) FUNCTIONS MUST BE IDENTIFIED TO THEIR LOWEST CLASSIFICATION. (4) FUNCTIONS SHOULD BE CLASSIFIED INTO – - PRIMARY CATEGORY - SECONDARY CATEGORY - AUXILIARY CATEGORY.
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CASE PROBLEMS :
FUNCTIONS AND THEIR CLASSIFICATIONS
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3. UN-NECESSARY COSTS
UNNECESSARY COST
MEANING ?
UN-NECESSARY COSTS ARE THE COSTS WHICH NEITHER CONTRIBUTE TO FUNCTION NOR TO ESTEEM VALUE. COST OF A PRODUCT ?
COST OF A PRODUCT
=
BASIC COST
+ UN-NECESSARY COST
BASIC COST ?
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• BASIC COST IS THE IRREDUCIBLE MINIMUM COST THAT WOULD BE EXPENDED IF THE – PRODUCT DESIGN WAS PERFECT, MANUFACTURING METHODS WERE IDEAL PROCUREMENT & DISTRIBUTION WERE EXCELLENT ALL OTHER FUNCTIONS WERE PERFORMED IN THE MOST EFFICIENT MANNER. EXTRA COSTS ?
• UN-NECESSARY COSTS ARE THE EXTRA COSTS THAT ARE INCURRED DUE TO IMPERFECTIONS IN DIFFERENT STAGES. CAUSES OF UNNCESSARY COST ?
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CONSTITUENTS OF COST OF A PRODUCT
BASIC COST OF A PRODUCT AND/OR COMPONENT
A
COST ADDED DUE TO DEFECTS IN DESIGN OR SPECIFICATIONS OF PRODUCT COST ADDED DUE TO INEFFICIENT METHODS OF MANUFACTURE COST ADDED DUE TO INEFFICIENT PROCUREMENT FUNCTION COST ADDED DUE TO SHORT COMINGS OF MANAGEMENT COST ADDED DUE TO SHORT COMINGS OF EMPLOYEES
B
C D E F
COSTS THAT BECOME UNNECESSARY OVER THE PERIOD
APPLICATION OF VALUE ANALYSIS ?
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VALUE ANALYSIS IS APPLIED TO ELIMINATE UN-NECESSARY COST DUE TO? COST ADDED DUE TO DEFECTS IN DESIGN OR SPECIFICATIONS OF PRODUCT ? COST ADDED DUE TO INEFFICIENT PROCUREMENT FUNCTION ? COST ADDED DUE TO CERTAIN SHORT COMING OF THE MANAGEMENT ? COSTS THAT BECOME UNNECESSARY OVER THE PERIOD ? COST DUE TO DISCOURAGING REMARKS AND ATTITUDE OF SENIORS
UN-NECESSARY COST ATTRIBUTABLE TO MANUFACTURING AND WORKMEN CAN BE ATTACKED USING METHOD STUDY
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A. EXTRA COST DUE TO DEFICIENT DESIGN
A1 BAD DESIGN OF THE PRODUCT PREVENTING USE OF THE MOST ECONOMICAL PROCESS LACK OF STANDARDISATION PREVENTING USE OF HIGH PRODUCTION PROCESSES INCORRECT DESIGN OF THE COMPONENTS CAUSING REMOVAL OF EXCESS MATERIAL
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A2
A3
A4
INAPPROPRIATE QUALITY STANDARDS CAUSING UNNECESSARY REWORK AND REJECTION GOLD PLATING PROVIDING EXTRA FEATURES / OVER SAFE DESIGN INCORRECT USERS’ SPECIFICATIONS LACK OF DATA FROM FIELD
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A5 A6 A7
C. COST ADDED DUE TO DEFICIENCIES OF PROCUREMENT FUNCTION
C1 C2 C3
C4
INCORRECT “MAKE-OR-BUY” DECISIONS FAILURE TO TAP THE RIGHT SOURCE PURCHASE OF ITEMS IN UNECONOMICAL QUANTITIES
POOR NEGOTIATIONS
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C5
ERRORS IN COST ESTIMATION
C6
SUPPLIERS’ BARGAINING STRENGTHS
VESTED INTERESTS SUPPLIER OVER GROWN IN SIZE
C7 C8
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D. COST ADDED DUE TO SHORT COMINGS OF THE MANAGEMENT
D1
D2
EXPEDIENCY IN IDEAS ACCEPTANCE
POOR PRODUCTION PLANNING AND CONTROL LACK OF COMMUNICATION INABILITY TO UTILISE THE AVAILABLE TALENT
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D3 D4
D5
FAILURE TO UTILISE SPECIALISTS’ KNOWLEDGE OLD PRACTICES PERPETUATED ROAD BLOCKS • HONEST WRONG BELIEFS • HABITUAL THINKING POOR LEADERSHIP
D6 D7
D8
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F. COSTS THAT BECOME UN-NECESSARY OVER THE PERIOD
F1 CHANGE IN TECHNOLOGY
F2 EMERGENCE OF NEW SUPPLIERS F3 CHANGE IN CIRCUMSTANCES
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G. COST DUE TO DISCOURAGING REMARKS AND ATTITUDES OF SENIORS
• • • • • • • • • • “WE DON’T DO THING THAT WAY” “WE HAVE THE BEST SYSTEM ALREADY” “EVERYBODY DOES IT THIS WAY” “I KNOW ALL THIS” “IT IS NOT IN THE BUDGET” “IT WILL NOT APPLY TO OUR PROBLEM” “NOT CONVINCING” “STRETCHES IMAGINATION TOO MUCH” “LET US WAIT AND SEE LATER. MAY BE LATER” “THAT IS NOT OUR RESPONSIBILITY”.
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II. HOLLOW JUSTIFICATION
• • • • • • “WE DO NOT HAVE ENOUGH VOLUME” “IT IS AGAINST THE COMPANY POLICY” “PROCEDURE WON’T PERMIT” “TOO BIG (OR TOO SMALL) FOR US” “ENGINEERING WON’T APPROVE OF IT” “CUSTOMERS WON’T ACCEPT IT”
III. RIDICULING
• • • • • “DO NOT BE RIDICULOUS” “TOO ACADEMIC IN ITS APPROACH” “IMPRACTICABLE” “TOO THEORETICAL” “PLAIN STUPID”
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20.7 VALUE ANALYSIS JOB PLAN 1. ORIENTATION PHASE
• SELECT • ESTABLISH ANDPLAN • APPOINT • BRIEF • REVIEW • PREPARE • FIX PROJECTS* TO BE HANDLED BY THE VALUE TEAM PRIORITIES A SPECIFIC PROJECT TEAM* MEMBERS REGARDING THE PROJECT TO BE HANDLED METHODOLOGY TO BE FOLLOWED TERMS OF REFERENCE* RESPONSIBILITY FOR DATA COLLECTION
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SELECTION OF THE PROJECT
1. JOB LIFE AND JOB QUANTITY 2. VALUE STANDARD (VS) VS = ACTUAL COST THEORITICAL MATERIAL COST 3. COST PARAMETERS 4. ABC ANALYSIS 5. COMPETITIVE PRODUCTS 6. CONTRIBUTION ANALYSIS 7. STAGE IN THE PRODUCT LIFE CYCLE
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VALUE ANALYSIS TEAM
CHAIRMAN (HEAD OF THE ORGANISATION) TEAM LEADAER
MEMBERS OF THE TEAM FROM ? ? ? ? ? ? ? ? DESIGN PURCHASE MARKETING PRODUCTION CONTROL QUALITY CONTROL MAINTENANCE (CO-OPTED) SERVICING (CO-OPTED) 2-3 NON SPECIALISTS (E.G. HR,TRAINEE, SECURITY)
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TERMS OF REFERENCE
TERMS OF REFERENCE
MEANING ?
TERMS OF REFERENCE DEFINE SCOPE OF VALUE ANALYSIS/VALUE ENGINEERING PROJECT
?
?
?
?
WHY REQUIRED ? PROVIDES BASIS OF EVALUATION OF THE RECOMMENDATIONS CRYSTALLISES THE IDEAS GENERATED DURING SPECULATION PHASE ENLIST AREAS WHERE SPECIALIST HELP IS REQUIRED IDENTIFY AREAS REQUIRING DETAILED INFORMATION WHAT DOES IT INCLUDE 43 ?
?FUNCTIONAL REQUIREMENTS ?SAFETY, RELIABILITY AND MAINTAINABILITY REQUIREMENTS ?DURABILITY REQUIREMENTS ?ESTEEM REQUIREMENTS ?COST LIMITS
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CASE PROBLEM :
TERMS OF REFERENCE OF REGULATOR
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?THE REGULATOR MUST CONTROL THE SPEED OF 60 WALL FAN ?THE REGULATOR MUST BE SAFE OPERATION ?THE UNIT SHOULD BE EASY TO MAINTAIN ?THE UNIT SHOULD GIVE TROUBLE FREE SERVICE OVER 10 YEARS ?THE UNIT SHOULD HAVE PLEASING APPEARANCE ?THE VALUE EFFORTS SHOULD REDUCE ITS COSTS BY 20%
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CASE PROBLEM :
TERMS OF REFERENCE OF A MATCH BOX
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? THE BOX SHOULD ACCOMMODATE 50 MATCH STICKS ? IT MUST PROTECT CONTENTS FROM MOISTURE ? THE BOX SHOULD BE EASY TO CARRY ? IT SHOULD EXHIBIT NECESSARY DETAILS ? IT SHOULD BE GOOD TO LOOK AT ? THE STRIP SHOULD ENABLE TO IGNITE ALL STICKS ? IT SHOULD PROTECT CONTENTS IN TRANSIST ? IT SHOULD NOT COST MORE THAN 2% OF THE CONTENT
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2. INFORMATION PHASE
• COLLECT • IDENTIFY • ASSIMILATE • LIST • PREPARE DATA FROM DIFFERENT SOURCES FACTS FACTS INTO REQUIRED FORM COMPONENTS OF THE HARDWARE VERB-NOUN DESCRIPTION OF THE FUNCTIONS FOR EACH ASSEMBLY AND COMPONENT FUNCTIONS COST OF BASIC FUNCTIONS WORTH OF EACH BASIC FUNCTION VALUE IMPROVEMENT POTENTIAL (VIP) 49
3. FUNCTIONAL ANALYSIS PHASE
• • • •
CLASSIFY ESTABLISH ESTIMATE CALCULATE
STEPS IN FUNCTIONAL PHASE ANALYSIS
• SPLIT THE PRODUCT INTO CONSTITUENT PARTS • CLASSIFY PARTS INTO “PURCHASED” & “WORKS MADE”. • DETERMINE COST OF EACH PART • PARETO’S ANALYSIS TO DECIDE PRIORITIES • IDENTIFY FUNCTIONS OF EACH PART • CLASSIFY FUNCTIONS INTO BASIC, SECONDARY & AUXILIARY • ASSIGN ITEM COSTS TO FUNCTIONS • PARETO’S ANALYSIS OF COSTS OF FUNCTIONS • DETERMINE WORTH OF EACH BASIC FUNCTION • CALCULATE VALUE IMPR. POTENTIAL OF EACH BASIC FUNCTIONS • RANK FUNCTIONS IN THE DESCENDING ORDER OF 50 THEIR VIPS.
DETERMINING WORTH OF A FUNCTION
WORTH OF A FUNCTION IS MEASURED BY COMPARISON
WITH KNOWN COSTS OF THE PRODUCTS PERFORMING THE SAME FUNCTION. WITH KNOWN COSTS OF THE STANDARD PRODUCTS PERFORMING A SIMILAR FUNCTION. WITH KNOWN COSTS OF THE PRODUCTS SIMILAR IN APPEARANCE AND SIZE.
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WITH COSTS OF PRODUCTS REQUIRING SIMILAR PROCESSES TO PRODUCE. WITH THE COMPETITOR'S SELLING PRICES OF THE ITEMS PERFORMING THE SAME FUNCTION. WITH THE ESTIMATED COSTS OF SIMPLEST ALTERNATIVE. BY APPORTIONING TOTAL WORTH. BY SETTING TARGET COSTS TO THE FUNCTION.
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4. SPECULATION OR CREATIVE PHASE • CONDUCT CREATIVE PROBLEM SOLVING (BRAIN STORMING) SESSIONS IDEAS TO PROVIDE DIFFERENT WAYS TO ACCOMPLISH BASIC FUNCTIONS SOME BASIC RULES
• GENERATE
• “QUANTITY BREEDS QUALITY”. • “CREATIVE IDEAS EMERGE FROM UNCONVENTIONAL THINKING”.
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• “HITCH-HIKING ON IDEAS OFTEN LEAD TO BETTER IDEAS” • “SPONTANEOUS EVALUATION OF THE IDEAS CURBS IMAGINATIVE AND ORIGINAL THINKING” • “CREATIVITY IS A REGENERATIVE PROCESS ; RECORDING OF IDEAS AS THEY EMERGE SERVES AS CATALYST” • “SELF DISCIPLINE AND DETERMINATION NECESSARY FOR QUANTITY” • “SHORT DIVERSIONS WHEN IDEAS CEASE TO FLOW ENABLE MIND TO REBOUND WITH NEW IDEAS”.
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TECHNIQUES OF VALUE ANALYSIS (LAWRENCE MILES)
1. 2. 3. 4. 5. 6. 7. AVOID GENERALITIES GET ALL AVAILABLE COSTS USE INFORMATION FROM ONLY THE BEST SOURCE BLAST, CREATE, REFINE USE REAL CREATIVITY IDENTIFY AND OVERCOME ROADBLOCKS USE INDUSTRY SPECIALISTS TO EXTEND SPECIALISED KNOWLEDGE UTILISE VENDORS AVAILABLE FUNCTIONAL PRODUCTS UTILISE SPECIALITY PROCESSES
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8.
9.
10. UTILSIE AND PAY FOR VENDORS SKILLS AND KNOWLEDGE 11. GET A DOLLAR SIGN ON KEY TOLERANCES 12. UTILISE APPLICABLE STANDARDS 13. USE THE CRITERION “WOULD I SPEND MY MONEY THIS WAY?” 14. CRITICAL ANALYSIS OF EXISITING CONFIGURATION
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A SAMPLE CHECK-LIST TO SPECULATE CREATIVE IDEAS
S.NO. 1 AREA BASIC DESIGN 1. 2. 3. QUESTIONS CAN THE PART/ASSEMBLY BE ELIMINATED ? CAN THE ITEM BE SEPARATED INTO SIMPLER PARTS ? CAN THE ITEM BE COMBINED WITH OTHER PARTS CAN THE DESIGN BE CHANGED TO SIMPLIFY THE PART ? CAN ANOTHER ITEM ALREADY IN STOCK AND INCORPORATED INTO ANOTHER DESIGN BE USED ? DOES THE ITEM HAVE GREATER CAPACITY THAN REQUIRED ? CAN IT BE MADE SMALLER ? CAN THE WEIGHT OF THE PART BE REDUCED ? 57
4.
5.
6.
7.
S.NO. 2
AREA FUNCTION 1. 2. 3.
QUESTIONS IS THE FUNCTION NECESSARY ? CAN IT BE ELIMINATED ? CAN THE FUNCTION BE ACHIEVED MORE EASILY ? CAN ANOTHER ITEM SERVE THE SAME FUNCTION ? CAN ANY TOLERANCE BE RELAXED WITHOUT EFFECTING FUNCTION ? CAN THE ITEM BE REDESIGNED TO REDUCE THE NEED FOR TIGHTER TOLERANCE ? IS THE FINE FINISH NECESSARY ? CAN A COARSER FINISH BE USED ? CAN AN ALTERNATE METHOD OF APPLYING THE FINISH BE USED ?
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3
LIMITS
1.
2.
4
FINISH
1. 2.
S.NO. 5
AREA SPECIFICATIONS 1. & STANDARDS 2. 3.
QUESTIONS CAN A STANDARD PART BE USED IN PLACE OF A MANUFACTURED / NONSTANDARD PART ? CAN THE SPECIFICATION BE CHANGED TO EFFECT COST REDUCTION ? ARE ALL HARDWARE ITEMS – BOLTS, NUTS, WASHERS, SCREWS, STUDS, STANDARD ? ARE ALL THREADS STANDARD ? CAN STANDARD CUTTING TOOLS BE USED ? CAN RAW MATERIALS BE STANDARDISED ?
4. 5. 6.
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S.NO.
6
AREA
MATERIALS 1. SPECIFICATIONS
QUESTIONS
CAN THE MATERIAL SPECIFICATION BE REVISED ? OR CAN THE LESS EXPENSIVE MATERIAL SERVE THE SAME FUNCTION ? CAN A MORE EXPENSIVE MATERIAL HAVING EASIER MACHINING PROPERTIES BE USED WITH AN ADVANTAGE ? ARE THERE NEWLY DEVELOPED MATERIALS THAT CAN BE USED ? IF SEVERAL MATERIALS ARE INVOLVED, CAN ANY STANDARDISATION BE DONE ? CAN MATERIALS BE BOUGHT TO TOLERANCE AND FINISH THAT WILL ELIMINATE MACHINING ?
2.
3. 4. 5.
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S.NO.
7
AREA
MATERIAL 1. CONTENT 2.
QUESTIONS
CAN ANY DIMENSION OF THE PART / COMPONENT BE REDUCED ? IS THE PART OVERSIZE BY – (I) CALCULATION (II) COMPARISON WITH THE COMPETITOR’S PRODUCT CAN SUBSTITUTE MATERIALS BE USED WHICH ARE CHEAPER BUT MEET THE FUNCTIONAL REQUIREMENTS ? CAN MACHINING ALLOWANCES – CUT OFF TOOL ALLOWANCE, SQUARE END ALLOWANCE AND TURNING ALLOWANCE BE REDUCED TO REDUCE PER UNIT CONSUMPTION OF MATERIALS ?
8
MATERIAL 1. VALUE 2.
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S.NO.
8
AREA
MATERIAL 3. VALUE (CONTD.)
QUESTIONS
CAN END PIECES BE REDUCED BY PROCURING BAR-STOCKS IN MULTIPLE OF THE BASIC MACHINING LENGTH (BASIC MACHINING LENGTH EQUALS FINISH LENGTH OF THE PART PLUS SQUARE END ALLOWANCE PLUS CUT OFF TOOL ALLOWANCE) OF THE PART TO REDUCE PER UNIT CONSUMPTION OF MATERIAL ? CAN WASTE BE REDUCED BY MAKING BLANK NEARER TO THE FINISH SIZE ? CAN THE JOB CURRENTLY BEING MODE OUT OF BAR-STOCK BE PROCESSED MOST ECONOMICALLY FROM FORGINGS OR VICEVERSA ? OR CAN THE RAW MATERIALS BE PROVIDED IN A DIFFERENT FORM TO ELIMINATE ONE OR MORE OPERATIONS ?
4. 5.
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S.NO. 8
AREA MATERIAL 6. VALUE (CONTD.) 7.
QUESTIONS CAN MATERIAL LAYOUT AND METHOD OF CUTTING BE CHANGED TO MINIMISE PROCESS WASTE AND REDUCE PER UNIT CONSUMPTION OF MATERIAL ? WILL REDUCTION IN LABOUR COST AND MATERIAL COST RESULT IF FABRICATED PARTS ARE REPLACED BY CASTINGS OR VICE-VERSA ? CAN THE COMPONENT BE CONSTRUCTED FROM MORE THAN ONE PART TO AVOID WASTAGE OF MATERIAL ? CAN THE MANUFACTURING PROCESS BE CHANGED TO REDUCE PER UNIT CONSUMPTION OF MATERIAL ?
8.
9.
63
S.NO. 9
AREA BUYING 1. 2.
QUESTIONS CAN THE ITEM BE MADE CHEAPER FROM ALTERNATE MATERIALS ? DOES THE PRICE SEEM REASONABLE ? CAN IT BE BOUGHT CHEAPLY FROM ALTERNATE SOURCES ? CAN THE QUANTITIES BE ALTERED TO MAKE IT CHEAPER ? CAN THE COST OF PACKING OR TRANSPORT BE REDUCED ? CAN THE SUPPLIER REDUCE THE PRICE BY A CO-OPERATIVE REDESIGN OR REVISED SPECIFICATIONS ?
3. 4.
5.
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S.NO. 10
AREA MANUFACTURING 1.
QUESTIONS CAN A DIFFERENT MANUFACTURING PROCESS BE USED TO ECONOMISE ON COST ? ARE ALL OPERATIONS NECESSARY ? CAN AN ALTERNATIVE OPERATION BE USED TO REDUCE COST ? CAN THE DUPLICATION OR OPERATIONS BE AVOIDED ? CAN TWO OR MORE OPERATIONS BE GROUPED INTO A SINGLE OPERATION ? CAN THE OPERATION SEQUENCE BE ALTERED TO ACHIEVE ECONOMY IN MANUFACTURE ? CAN ANOTHER EQUIPMENT WITH THE RIGHT PROCESS CAPABILITY BE SELECTED ?
2. 3. 4. 5. 6.
7.
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S.NO.
AREA MANUFACTURING (CONTD.) 8.
QUESTIONS IS THE USE OF SPECIAL PURPOSE MACHINE JUSTIFIED CONSIDERING JOB LIFE AND JOB QUANTITY ? 9. IS THE TOOL COST REASONABLE ? CAN IT BE REDUCED ? 10. CAN INDIVIDUAL TOOLS BE COMBINED INTO A SINGLE TOOL TO REDUCE MANUFACTURING COST ? 11. CAN TOOL DIMENSIONS BE MODIFIED TO OBTAIN GREATER LIFE ? 12. CAN TOOL LIFE BE IMPROVED ?
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S.NO. 11
AREA GENERAL 1.
QUESTIONS CAN THE ITEM BE MADE CHEAPER AT THE HOME PLANT AND IF IT IS ALREADY BEING MADE CAN IT BE BOUGHT FOR LESS ? DOES THE PRESENT DESIGN INCORPORATE ALL FEATURES OF THE COMPETITOR’S PRODUCTS ? CAN THE PRODUCT BE REDESIGNED TO REDUCE SERVICE DIFFICULTIES ? ARE TRANSPORTATION, PACKING AND HANDLING COSTS EXAMINED ? ARE ECONOMICAL BULK BUYING AND DISCOUNTS ON PACKING MATERIALS SCRUTINISED ? ARE SUPPLIERS ASKED TO GIVE SUGGESTIONS TO REDUCE COST ?
2.
3. 4. 5.
6.
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5. EVALUATION PHASE
• SHORTLIST CREATIVE IDEAS - SCRUTINY - COMBINATION - TESTING AGAINST SPECIFICATIONS - COST ESTIMATION IDEAS FUNCTIONALLY IDEAS ACCORDING TO THE PRE-FIXED CRITERIA ALTERNATIVES ACCORDING TO THEIR RELATIVE COST REDUCTION POTENTIAL ONE OR MORE ALTERNATIVES FOR DEVELOPMENT
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• DEVELOP • EVALUATE • RANK • SELECT
6. INVESTIGATION/DEVELOPMENT PHASE • ANALYSE ALTERNATIVES FOR TECHNICAL ADEQUACY ECONOMIC FEASIBILITY OF THE ALTERNATIVES PROTOTYPE NECESSARY TEST RUNS ONE OR TWO ALTERNATIVES FOR RECOMMENDATIONS
• ASCERTAIN
• MANUFACTURE • ARRANGE • SELECT
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7. RECOMMENDATION PHASE • PREPARE • MAKE • SUBMIT • SECURE REPORT OF VA PROPOSAL PRESENTATION TO THE DECISION MAKER DEFINITE PLAN FOR ACTION APPROVAL FOR IMPLEMENTATION
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8. IMPLEMENTATION PHASE
• OBTAIN • FIX • AUTHORISE • EXPEDITE • CLEAR • RESOLVE APPROVAL TO THE PROPOSAL RESPONSIBILITY FOR IMPLEMENTATION CHANGES TO CONVERT RECOMMENDATIONS INTO ACTIONS IMPLEMENTATION MISCONCEPTIONS & OVERCOME ROAD BLOCKS PROBLEMS IDENTIFIED DURING IMPLEMENTATION DELAYS AND AVOID HOLDS UP WORKMEN JOBS
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• MINIMISE • TRAIN • RETIME
9. FOLLOW UP PHASE
• AUDIT • COMPARE • SUBMIT • EVALUATE • RECOMMEND • RECOMMEND • PUBLICISE SAVINGS RESULTS WITH ORIGINAL EXPECTATIONS COST SAVING ACHIEVEMENT REPORTS TO THE MANAGEMENT EFFECTIVENESS OF THE APPROACH CHANGES IN THE APPROACH FOR THE NEXT PROJECT AWARDS FOR THE CONTRIBUTORS TO THE VA PROPOSALS RESULTS
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doc_515108208.pptx
value analysis, what are the uses of value analysis, value analysis vs traditional methods of cost reduction. It also explains when to apply value analysis, it also explains various techniques to arrive at a value. What are the various constituents of the cost of a product
VALUE ANALYSIS
1
20.1 WHAT IS VALUE ANALYSIS ?
“VALUE ANALYSIS … IS AN ORGANISED APPROACH TO IDENTIFY UN-NECESSARY COSTS ASSOCIATED WITH ANY EXISTING PRODUCT, MATERIAL, PART, COMPONENT, SYSTEM OR SERVICE BY ANALYSIS OF FUNCTION –
AND EFFICIENTLY ELIMINATING THEM (I.E. UNNECESSARY COSTS) WITHOUT IMPAIRING THE QUALITY, FUNCTIONAL RELIABILITY OR ITS CAPACITY TO GIVE SERVICE RATHER IMPROVING ITS VALUE AT THE SAME TIME”.
2
VALUE ANALYSIS THUS • IS A COST REDUCTION & COST PREVENTION TECHNIQUE. • IS IDENTIFICATION OF UNNECESSARY COSTS • AIMS AT COST REDUCTION WITHOUT CHEAPENING OR DEGRADING THE PRODUCT.
• ENSURES BETTER VALUE TO THE CUSTOMERS.
3
20.2 USES OF VALUE ANALYSIS
VALUE ANALYSIS – ? REDUCES COST OF PRODUCT ? HELPS EMPLOYEES IN BETTER UNDERSTANDING OF THE JOB ? DETERMINES APPROPRIATE COST FOR RELIABLE PERFORMANCE OF ESSENTIAL FUNCTION ? GENERATES NEW CONCEPTS AND IDEAS FOR THE R & D WORK ? CREATE COST CONSCIOUSNESS AMON THE OPERATING PERSONS OF DIFFERENT DEPARTMENTS. ? PREVENTS OVERSPECIFICATION ? MOTIVATE EMPLOYEES TO COME FORWARD WITH INNOVATIVE IDEAS
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?PROVIDES INFORMATION TO THE MANAGEMENT REGARDING FUNCTIONWISE EXPENDITURE ON THE PRODUCT ?DILUTES RESISTANCE TO CHANGE AND ACCELERATES THE PROCESS OF IMPLEMENTATION ?PROVIDES GOOD TRAINING FOR FUTURE MANAGERS OF THE COMPANY
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20.3 VALUE ANALYSIS VERSUS TRADITIONAL METHODS OF COST REDUCTION
TRADITIONAL METHODS (I.E METHOD STUDY,PRODUCTION ENGINEERING)
1.POST PRODUCTION STAGE 2.ANALYSIS OF MANUFACTURING METHODS (MAN, MATERIALS, MACHINE AND METHODS) • •
VALUE ANALYSIS/VALUE ENGINEERING
3. COST IMPROVEMENT
•
4. GOOD RESULTS OF COST REDUCTION
•
PRE-PRODUCTION AND POST PRODUCTION STAGE ANALYSIS OF FUNCTIONS AND SUBSEQUENT RE-DESIGN OF PRODUCT ( INCLUDING MATERIALS,COMPONENTS ,ETC)SO AS TO PERFORM THE FUNCTION AT MINIMUM COST COST IMPROVEMENT +RELIABILITY, QUALITY, MAINTAINABILITY AND PERFORMANCE IMPROVEMENT +ATTRACTIVE FEATURES EXCELLENT RESULTS (10-20% COST REDUCTION EVEN AFTER APPLICATION OF METHOD 6 STUDY)
20.4 VALUE ANALYSIS VERUS VALUE ENGINEERING
VALUE EFFORTS
CAN BE APPLIED ?
PRE-PRODUCTION STAGE
POST PRODUCTION STAGE
VALUE ENGINEERING
VALUE ANALYSIS
WHICH IS MORE BENEFICIAL ?
VALUE EFFORTS AT THE DESIGN STAGE ARE MORE REWARDING AS-
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- SAVINGS RESULTING FROM LARGE QUANTITIES RIGHT FROM FIRST PRODUCTION UNIT - PREVENTION OF LARGE SUMS OF MONEY REQUIRED FOR MODIFICATION OF PRODUCTION LINE, RETOOLING OF PROCESS SCRAPPING OF PARTS, COST OF ECN’s AND CHANGES - PREVENTION OF COSTLY DRAWING CHANGES - EASE IN IMPLEMENTATION OF CHANGES
VALUE EFFORTS @ DEVELOPMENT STAGE ?
8
VALUE EFFORTS AT THE DEVELOPMENT STAGES ARE EQUALLY REWARDING EFFORTS RELATE TO – - SELECTION OF LOW COST MANUFACTURING PROCESS - ECONOMICAL MANUFACTURE OF JIGS /FIXTURES, LOCATING COMPETITIVE AND RELIABLE SOURCES OF SUPPLY
VALUE EFFORTS DURING GROWTH AND MATURITY ?
LESS FRUITFUL UNTIL THE PRODUCTS IS 4 TO 5 YEARS
DECAY STAGE ?
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VALUE ANALYSIS EFFORTS ARE AGAIN REWARDING AS PRODUCT ENTERS DECAY STAGE
RECOMMENDED DISTRIBUTION OF VALUE EFFORTS ?
10
STAGE
PROPORTIANATE OF VALUE EFFORTS
PRIOR TO
FINALISATION OF DESIGN BEFORE FINALISATION OF MANUFACTURING PROCESSES,JIGS AND FIXTURES, SOURCES OF SUPPLIERS
DESIGN STAGE
PRE-PRODUCTION STAGE (WITH DETAILED DRAWINGS ON HAND)
50% OF VALUE EFFORTS
40% OF VALUE EFFORTS
DURING PRODUCTION STAGE
PRODCUTION STAGE ON 10% OF REMAINING STAGE COMPLETION OF JIGS & FIXTURES AND PILOT RUNS
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VALUE EFFORTS ARE MORE REWARDING WHEN FOLLOWING SYMPTOMS ARE PRESENT ? COMPANY’S PRODUCTS SHOW DECLINE IN SALES ? COMPANY’S PRICES ARE HIGHER THOSE OF ITS COMPETITORS ? RAW MATERIAL COST HAS GROWN DISPROPORTIONATE TO THE VOLUME OF PRODUCTION ? NEW DESIGNS ARE BEING INTRODUCED ? THE COST OF MANUFACTURING/TOOLING IS RISING IN DISPROPORTIONATE TO THE VOLUME OF PRODUCTION ? RATE OF RETURN ON INVESTMENT HAS A FALLING TREND ? INABILITY OF THE FIRM TO MEET THE DELIVERY COMMITTMENTS 12
20.5 WHEN TO APPLY VALUE ANALYSIS
20.6 TERMINOLOGY OF VALUE ANALYSIS/VALUE ENGINEERING
1. VALUE:
VALUE MEANS ? VALUE MEANS DIFFERENT THINGS TO DIFFERENT PEOPLE MEANING IN VA/VE ? “ECONOMIC VALUE” SUB DIVIDED INTO? ? COST VALUE ? EXCHANGE VALUE ? USE/FUNCTIONAL VALUE ? ESTEEM VALUE
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COST VALUE ? SUM OF ALL COSTS INCURRED IN CREATING A PRODUCT = SUM OF MATERIAL COST, LABOUR COST, TOOL COST AND OVERHEAD EXPENDED TO PRODUCE THE PRODUCT EXCHANGE VALUE ?
PRICE THAT CUSTOMER WILL OFFER FOR THE PRODUCT
COMPONENT OF THE PRICE ?
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PRICE FOR PRICE FOR THE VALUE RELIABLE THAT THE + PERFORMANCE OF POSSESSION BESTOW THE PRODUCT ON THE OWNER (USE/FUNCTIONAL (ESTEEEM VALUE) VALUE) I.E PRICE = Vf +Ve PROFIT EQUATION ? PROFIT= PRICE- COST = (Vf +Ve)-C THREE WAYS OF INCREASING PROFIT ?
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? INCREASE FUNCTIONCAL VALUE OR ESTEEM VALUE OR BOTH KEEPING COST SAME ? REDUCE COST KEEPING FUNCTIONAL VALUE OR ESTEEM VALUE OR BOTH ? INCREASE FUNCTIONAL VALUE AND ESTEEM VALUE AND REDUCE COST
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CASE PROBLEMS :
WHICH IS MORE IMPORTANT : FUNCTIONAL OR ESTEEM VALUE ?
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MEASUREMENT OF VALUE
VALUE IS ALWAYS RELATIVE AND IS MEASURED IN COMPARISON WITH PREDETERMINED VALUE STANDARD CALLED “WORTH”
WORTH ?
WORTH IS THE LOWEST COST OF THE PRODUCT
EXAMPLE
VALUE OF A TIE PIN ? COST OF HOLD FUNCTION COST OF APPEARANCE FUNCTION
+
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COST OF CHEAPEST ALTERNATIVE
+
ESTEEM VALUE IN THE EYE OF THE BEHOLDER
WHILE DESIGNING A PRODUCT, ESTEEM FEATURES ARE HELD IN ABEYANCE UNTIL VALUE ALTERNATIVES TO ACHIEVE BASIC FUNCTIONS ARE EVOLVED
VALUE AND WORTH ?
19
VALUE AND WORTH ARE THOUGH DISTINCT BUT INTER-RELATED ASPECTS. ? VALUE REPRESENTS THE RELATIONSHIP BETWEEN WORTH OF A PRODUCT AND CURRENT COST OF THE PRODUCT I.E VALUE = WORTH ` COST MAXIMUM VALUE OF A PRODUCT EQUALS 100% . 100 % VALUE IS REACHED WHEN COST OF AN ITEM EQUALS WORTH (I.E COST OF CHEAPEST 20 ALTERNATIVE)
= COST ACHIEVED BY ELIMINATING - COMPLICATED CONFIGURATION THAT MAKE THE PRODUCT DIFFICULT TO PRODUCE - UNECONOMICAL SIZES - COSTLY SPECIFICATION - INCORRECT TOLERANCES AND FINISH - USING LESSER EXPENSIVE
MATERIAL
ESSENCE OF VA/VE ?
ELIMINATION OF UNNECESSARY COST
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HOW TO IMPROVE VALUE ?
FUNCTIONAL VALUE
? CHEAPER MATERIALS ? SIMPLIFYING DESIGN ? PROCURING MATERIAL CLOSE TO REQUIRED SIZES ? ALTERNATIVE METHODS TO PRODUCE THE PRODUCT ? STANDARD USE OF PRDOUCT IN PLACE OF NON-STANDARD ? BUYING STANDARD PRODUCT TO MAKE IT NONSTANDARD ? REMOVING UNNECESSARY CLOSER TOLERANCE/FINISH ? PROVIDING ONLY ESSENTIAL FEATURES ? BENCHMARKING
ESTEEM VALUE
? BETTER SURFACE FINISH ? SURFACE COATING ?ANNODISING ?ELECTROPLATING AND ?POWDER COATING ? STYLING ? PACKING
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2. FUNCTION
• FUNCTION REPRESENT THE PROPERTY / PROPERTIES WHICH MAKE THE PRODUCT WORK OR SELL. • WORK FUNCTIONS LEND PERFORMANCE WHILE SELL FUNCTIONS PROVIDE ESTEEM VALUE.
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WORK FUNCTIONS • • • • • • SUPPORT HOLD TRANSMIT PROTECT EXHIBIT CONTROL
SELL FUNCTIONS • ATTRACT • ENHANCE • IMPROVE
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RULES CONCERNING FUNCTION (1) FUNCTION(S) SHOULD BE IDENTIFIED AND CLEARLY DEFINED USING “ONE VERB AND ONE NOUN”. (2) ALL FUNCTIONS MUST BE IDENTIFIED (3) FUNCTIONS MUST BE IDENTIFIED TO THEIR LOWEST CLASSIFICATION. (4) FUNCTIONS SHOULD BE CLASSIFIED INTO – - PRIMARY CATEGORY - SECONDARY CATEGORY - AUXILIARY CATEGORY.
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CASE PROBLEMS :
FUNCTIONS AND THEIR CLASSIFICATIONS
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3. UN-NECESSARY COSTS
UNNECESSARY COST
MEANING ?
UN-NECESSARY COSTS ARE THE COSTS WHICH NEITHER CONTRIBUTE TO FUNCTION NOR TO ESTEEM VALUE. COST OF A PRODUCT ?
COST OF A PRODUCT
=
BASIC COST
+ UN-NECESSARY COST
BASIC COST ?
27
• BASIC COST IS THE IRREDUCIBLE MINIMUM COST THAT WOULD BE EXPENDED IF THE – PRODUCT DESIGN WAS PERFECT, MANUFACTURING METHODS WERE IDEAL PROCUREMENT & DISTRIBUTION WERE EXCELLENT ALL OTHER FUNCTIONS WERE PERFORMED IN THE MOST EFFICIENT MANNER. EXTRA COSTS ?
• UN-NECESSARY COSTS ARE THE EXTRA COSTS THAT ARE INCURRED DUE TO IMPERFECTIONS IN DIFFERENT STAGES. CAUSES OF UNNCESSARY COST ?
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CONSTITUENTS OF COST OF A PRODUCT
BASIC COST OF A PRODUCT AND/OR COMPONENT
A
COST ADDED DUE TO DEFECTS IN DESIGN OR SPECIFICATIONS OF PRODUCT COST ADDED DUE TO INEFFICIENT METHODS OF MANUFACTURE COST ADDED DUE TO INEFFICIENT PROCUREMENT FUNCTION COST ADDED DUE TO SHORT COMINGS OF MANAGEMENT COST ADDED DUE TO SHORT COMINGS OF EMPLOYEES
B
C D E F
COSTS THAT BECOME UNNECESSARY OVER THE PERIOD
APPLICATION OF VALUE ANALYSIS ?
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VALUE ANALYSIS IS APPLIED TO ELIMINATE UN-NECESSARY COST DUE TO? COST ADDED DUE TO DEFECTS IN DESIGN OR SPECIFICATIONS OF PRODUCT ? COST ADDED DUE TO INEFFICIENT PROCUREMENT FUNCTION ? COST ADDED DUE TO CERTAIN SHORT COMING OF THE MANAGEMENT ? COSTS THAT BECOME UNNECESSARY OVER THE PERIOD ? COST DUE TO DISCOURAGING REMARKS AND ATTITUDE OF SENIORS
UN-NECESSARY COST ATTRIBUTABLE TO MANUFACTURING AND WORKMEN CAN BE ATTACKED USING METHOD STUDY
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A. EXTRA COST DUE TO DEFICIENT DESIGN
A1 BAD DESIGN OF THE PRODUCT PREVENTING USE OF THE MOST ECONOMICAL PROCESS LACK OF STANDARDISATION PREVENTING USE OF HIGH PRODUCTION PROCESSES INCORRECT DESIGN OF THE COMPONENTS CAUSING REMOVAL OF EXCESS MATERIAL
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A2
A3
A4
INAPPROPRIATE QUALITY STANDARDS CAUSING UNNECESSARY REWORK AND REJECTION GOLD PLATING PROVIDING EXTRA FEATURES / OVER SAFE DESIGN INCORRECT USERS’ SPECIFICATIONS LACK OF DATA FROM FIELD
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A5 A6 A7
C. COST ADDED DUE TO DEFICIENCIES OF PROCUREMENT FUNCTION
C1 C2 C3
C4
INCORRECT “MAKE-OR-BUY” DECISIONS FAILURE TO TAP THE RIGHT SOURCE PURCHASE OF ITEMS IN UNECONOMICAL QUANTITIES
POOR NEGOTIATIONS
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C5
ERRORS IN COST ESTIMATION
C6
SUPPLIERS’ BARGAINING STRENGTHS
VESTED INTERESTS SUPPLIER OVER GROWN IN SIZE
C7 C8
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D. COST ADDED DUE TO SHORT COMINGS OF THE MANAGEMENT
D1
D2
EXPEDIENCY IN IDEAS ACCEPTANCE
POOR PRODUCTION PLANNING AND CONTROL LACK OF COMMUNICATION INABILITY TO UTILISE THE AVAILABLE TALENT
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D3 D4
D5
FAILURE TO UTILISE SPECIALISTS’ KNOWLEDGE OLD PRACTICES PERPETUATED ROAD BLOCKS • HONEST WRONG BELIEFS • HABITUAL THINKING POOR LEADERSHIP
D6 D7
D8
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F. COSTS THAT BECOME UN-NECESSARY OVER THE PERIOD
F1 CHANGE IN TECHNOLOGY
F2 EMERGENCE OF NEW SUPPLIERS F3 CHANGE IN CIRCUMSTANCES
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G. COST DUE TO DISCOURAGING REMARKS AND ATTITUDES OF SENIORS
• • • • • • • • • • “WE DON’T DO THING THAT WAY” “WE HAVE THE BEST SYSTEM ALREADY” “EVERYBODY DOES IT THIS WAY” “I KNOW ALL THIS” “IT IS NOT IN THE BUDGET” “IT WILL NOT APPLY TO OUR PROBLEM” “NOT CONVINCING” “STRETCHES IMAGINATION TOO MUCH” “LET US WAIT AND SEE LATER. MAY BE LATER” “THAT IS NOT OUR RESPONSIBILITY”.
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II. HOLLOW JUSTIFICATION
• • • • • • “WE DO NOT HAVE ENOUGH VOLUME” “IT IS AGAINST THE COMPANY POLICY” “PROCEDURE WON’T PERMIT” “TOO BIG (OR TOO SMALL) FOR US” “ENGINEERING WON’T APPROVE OF IT” “CUSTOMERS WON’T ACCEPT IT”
III. RIDICULING
• • • • • “DO NOT BE RIDICULOUS” “TOO ACADEMIC IN ITS APPROACH” “IMPRACTICABLE” “TOO THEORETICAL” “PLAIN STUPID”
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20.7 VALUE ANALYSIS JOB PLAN 1. ORIENTATION PHASE
• SELECT • ESTABLISH ANDPLAN • APPOINT • BRIEF • REVIEW • PREPARE • FIX PROJECTS* TO BE HANDLED BY THE VALUE TEAM PRIORITIES A SPECIFIC PROJECT TEAM* MEMBERS REGARDING THE PROJECT TO BE HANDLED METHODOLOGY TO BE FOLLOWED TERMS OF REFERENCE* RESPONSIBILITY FOR DATA COLLECTION
40
SELECTION OF THE PROJECT
1. JOB LIFE AND JOB QUANTITY 2. VALUE STANDARD (VS) VS = ACTUAL COST THEORITICAL MATERIAL COST 3. COST PARAMETERS 4. ABC ANALYSIS 5. COMPETITIVE PRODUCTS 6. CONTRIBUTION ANALYSIS 7. STAGE IN THE PRODUCT LIFE CYCLE
41
VALUE ANALYSIS TEAM
CHAIRMAN (HEAD OF THE ORGANISATION) TEAM LEADAER
MEMBERS OF THE TEAM FROM ? ? ? ? ? ? ? ? DESIGN PURCHASE MARKETING PRODUCTION CONTROL QUALITY CONTROL MAINTENANCE (CO-OPTED) SERVICING (CO-OPTED) 2-3 NON SPECIALISTS (E.G. HR,TRAINEE, SECURITY)
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TERMS OF REFERENCE
TERMS OF REFERENCE
MEANING ?
TERMS OF REFERENCE DEFINE SCOPE OF VALUE ANALYSIS/VALUE ENGINEERING PROJECT
?
?
?
?
WHY REQUIRED ? PROVIDES BASIS OF EVALUATION OF THE RECOMMENDATIONS CRYSTALLISES THE IDEAS GENERATED DURING SPECULATION PHASE ENLIST AREAS WHERE SPECIALIST HELP IS REQUIRED IDENTIFY AREAS REQUIRING DETAILED INFORMATION WHAT DOES IT INCLUDE 43 ?
?FUNCTIONAL REQUIREMENTS ?SAFETY, RELIABILITY AND MAINTAINABILITY REQUIREMENTS ?DURABILITY REQUIREMENTS ?ESTEEM REQUIREMENTS ?COST LIMITS
44
CASE PROBLEM :
TERMS OF REFERENCE OF REGULATOR
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?THE REGULATOR MUST CONTROL THE SPEED OF 60 WALL FAN ?THE REGULATOR MUST BE SAFE OPERATION ?THE UNIT SHOULD BE EASY TO MAINTAIN ?THE UNIT SHOULD GIVE TROUBLE FREE SERVICE OVER 10 YEARS ?THE UNIT SHOULD HAVE PLEASING APPEARANCE ?THE VALUE EFFORTS SHOULD REDUCE ITS COSTS BY 20%
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CASE PROBLEM :
TERMS OF REFERENCE OF A MATCH BOX
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? THE BOX SHOULD ACCOMMODATE 50 MATCH STICKS ? IT MUST PROTECT CONTENTS FROM MOISTURE ? THE BOX SHOULD BE EASY TO CARRY ? IT SHOULD EXHIBIT NECESSARY DETAILS ? IT SHOULD BE GOOD TO LOOK AT ? THE STRIP SHOULD ENABLE TO IGNITE ALL STICKS ? IT SHOULD PROTECT CONTENTS IN TRANSIST ? IT SHOULD NOT COST MORE THAN 2% OF THE CONTENT
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2. INFORMATION PHASE
• COLLECT • IDENTIFY • ASSIMILATE • LIST • PREPARE DATA FROM DIFFERENT SOURCES FACTS FACTS INTO REQUIRED FORM COMPONENTS OF THE HARDWARE VERB-NOUN DESCRIPTION OF THE FUNCTIONS FOR EACH ASSEMBLY AND COMPONENT FUNCTIONS COST OF BASIC FUNCTIONS WORTH OF EACH BASIC FUNCTION VALUE IMPROVEMENT POTENTIAL (VIP) 49
3. FUNCTIONAL ANALYSIS PHASE
• • • •
CLASSIFY ESTABLISH ESTIMATE CALCULATE
STEPS IN FUNCTIONAL PHASE ANALYSIS
• SPLIT THE PRODUCT INTO CONSTITUENT PARTS • CLASSIFY PARTS INTO “PURCHASED” & “WORKS MADE”. • DETERMINE COST OF EACH PART • PARETO’S ANALYSIS TO DECIDE PRIORITIES • IDENTIFY FUNCTIONS OF EACH PART • CLASSIFY FUNCTIONS INTO BASIC, SECONDARY & AUXILIARY • ASSIGN ITEM COSTS TO FUNCTIONS • PARETO’S ANALYSIS OF COSTS OF FUNCTIONS • DETERMINE WORTH OF EACH BASIC FUNCTION • CALCULATE VALUE IMPR. POTENTIAL OF EACH BASIC FUNCTIONS • RANK FUNCTIONS IN THE DESCENDING ORDER OF 50 THEIR VIPS.
DETERMINING WORTH OF A FUNCTION
WORTH OF A FUNCTION IS MEASURED BY COMPARISON
WITH KNOWN COSTS OF THE PRODUCTS PERFORMING THE SAME FUNCTION. WITH KNOWN COSTS OF THE STANDARD PRODUCTS PERFORMING A SIMILAR FUNCTION. WITH KNOWN COSTS OF THE PRODUCTS SIMILAR IN APPEARANCE AND SIZE.
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WITH COSTS OF PRODUCTS REQUIRING SIMILAR PROCESSES TO PRODUCE. WITH THE COMPETITOR'S SELLING PRICES OF THE ITEMS PERFORMING THE SAME FUNCTION. WITH THE ESTIMATED COSTS OF SIMPLEST ALTERNATIVE. BY APPORTIONING TOTAL WORTH. BY SETTING TARGET COSTS TO THE FUNCTION.
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4. SPECULATION OR CREATIVE PHASE • CONDUCT CREATIVE PROBLEM SOLVING (BRAIN STORMING) SESSIONS IDEAS TO PROVIDE DIFFERENT WAYS TO ACCOMPLISH BASIC FUNCTIONS SOME BASIC RULES
• GENERATE
• “QUANTITY BREEDS QUALITY”. • “CREATIVE IDEAS EMERGE FROM UNCONVENTIONAL THINKING”.
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• “HITCH-HIKING ON IDEAS OFTEN LEAD TO BETTER IDEAS” • “SPONTANEOUS EVALUATION OF THE IDEAS CURBS IMAGINATIVE AND ORIGINAL THINKING” • “CREATIVITY IS A REGENERATIVE PROCESS ; RECORDING OF IDEAS AS THEY EMERGE SERVES AS CATALYST” • “SELF DISCIPLINE AND DETERMINATION NECESSARY FOR QUANTITY” • “SHORT DIVERSIONS WHEN IDEAS CEASE TO FLOW ENABLE MIND TO REBOUND WITH NEW IDEAS”.
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TECHNIQUES OF VALUE ANALYSIS (LAWRENCE MILES)
1. 2. 3. 4. 5. 6. 7. AVOID GENERALITIES GET ALL AVAILABLE COSTS USE INFORMATION FROM ONLY THE BEST SOURCE BLAST, CREATE, REFINE USE REAL CREATIVITY IDENTIFY AND OVERCOME ROADBLOCKS USE INDUSTRY SPECIALISTS TO EXTEND SPECIALISED KNOWLEDGE UTILISE VENDORS AVAILABLE FUNCTIONAL PRODUCTS UTILISE SPECIALITY PROCESSES
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8.
9.
10. UTILSIE AND PAY FOR VENDORS SKILLS AND KNOWLEDGE 11. GET A DOLLAR SIGN ON KEY TOLERANCES 12. UTILISE APPLICABLE STANDARDS 13. USE THE CRITERION “WOULD I SPEND MY MONEY THIS WAY?” 14. CRITICAL ANALYSIS OF EXISITING CONFIGURATION
56
A SAMPLE CHECK-LIST TO SPECULATE CREATIVE IDEAS
S.NO. 1 AREA BASIC DESIGN 1. 2. 3. QUESTIONS CAN THE PART/ASSEMBLY BE ELIMINATED ? CAN THE ITEM BE SEPARATED INTO SIMPLER PARTS ? CAN THE ITEM BE COMBINED WITH OTHER PARTS CAN THE DESIGN BE CHANGED TO SIMPLIFY THE PART ? CAN ANOTHER ITEM ALREADY IN STOCK AND INCORPORATED INTO ANOTHER DESIGN BE USED ? DOES THE ITEM HAVE GREATER CAPACITY THAN REQUIRED ? CAN IT BE MADE SMALLER ? CAN THE WEIGHT OF THE PART BE REDUCED ? 57
4.
5.
6.
7.
S.NO. 2
AREA FUNCTION 1. 2. 3.
QUESTIONS IS THE FUNCTION NECESSARY ? CAN IT BE ELIMINATED ? CAN THE FUNCTION BE ACHIEVED MORE EASILY ? CAN ANOTHER ITEM SERVE THE SAME FUNCTION ? CAN ANY TOLERANCE BE RELAXED WITHOUT EFFECTING FUNCTION ? CAN THE ITEM BE REDESIGNED TO REDUCE THE NEED FOR TIGHTER TOLERANCE ? IS THE FINE FINISH NECESSARY ? CAN A COARSER FINISH BE USED ? CAN AN ALTERNATE METHOD OF APPLYING THE FINISH BE USED ?
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3
LIMITS
1.
2.
4
FINISH
1. 2.
S.NO. 5
AREA SPECIFICATIONS 1. & STANDARDS 2. 3.
QUESTIONS CAN A STANDARD PART BE USED IN PLACE OF A MANUFACTURED / NONSTANDARD PART ? CAN THE SPECIFICATION BE CHANGED TO EFFECT COST REDUCTION ? ARE ALL HARDWARE ITEMS – BOLTS, NUTS, WASHERS, SCREWS, STUDS, STANDARD ? ARE ALL THREADS STANDARD ? CAN STANDARD CUTTING TOOLS BE USED ? CAN RAW MATERIALS BE STANDARDISED ?
4. 5. 6.
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S.NO.
6
AREA
MATERIALS 1. SPECIFICATIONS
QUESTIONS
CAN THE MATERIAL SPECIFICATION BE REVISED ? OR CAN THE LESS EXPENSIVE MATERIAL SERVE THE SAME FUNCTION ? CAN A MORE EXPENSIVE MATERIAL HAVING EASIER MACHINING PROPERTIES BE USED WITH AN ADVANTAGE ? ARE THERE NEWLY DEVELOPED MATERIALS THAT CAN BE USED ? IF SEVERAL MATERIALS ARE INVOLVED, CAN ANY STANDARDISATION BE DONE ? CAN MATERIALS BE BOUGHT TO TOLERANCE AND FINISH THAT WILL ELIMINATE MACHINING ?
2.
3. 4. 5.
60
S.NO.
7
AREA
MATERIAL 1. CONTENT 2.
QUESTIONS
CAN ANY DIMENSION OF THE PART / COMPONENT BE REDUCED ? IS THE PART OVERSIZE BY – (I) CALCULATION (II) COMPARISON WITH THE COMPETITOR’S PRODUCT CAN SUBSTITUTE MATERIALS BE USED WHICH ARE CHEAPER BUT MEET THE FUNCTIONAL REQUIREMENTS ? CAN MACHINING ALLOWANCES – CUT OFF TOOL ALLOWANCE, SQUARE END ALLOWANCE AND TURNING ALLOWANCE BE REDUCED TO REDUCE PER UNIT CONSUMPTION OF MATERIALS ?
8
MATERIAL 1. VALUE 2.
61
S.NO.
8
AREA
MATERIAL 3. VALUE (CONTD.)
QUESTIONS
CAN END PIECES BE REDUCED BY PROCURING BAR-STOCKS IN MULTIPLE OF THE BASIC MACHINING LENGTH (BASIC MACHINING LENGTH EQUALS FINISH LENGTH OF THE PART PLUS SQUARE END ALLOWANCE PLUS CUT OFF TOOL ALLOWANCE) OF THE PART TO REDUCE PER UNIT CONSUMPTION OF MATERIAL ? CAN WASTE BE REDUCED BY MAKING BLANK NEARER TO THE FINISH SIZE ? CAN THE JOB CURRENTLY BEING MODE OUT OF BAR-STOCK BE PROCESSED MOST ECONOMICALLY FROM FORGINGS OR VICEVERSA ? OR CAN THE RAW MATERIALS BE PROVIDED IN A DIFFERENT FORM TO ELIMINATE ONE OR MORE OPERATIONS ?
4. 5.
62
S.NO. 8
AREA MATERIAL 6. VALUE (CONTD.) 7.
QUESTIONS CAN MATERIAL LAYOUT AND METHOD OF CUTTING BE CHANGED TO MINIMISE PROCESS WASTE AND REDUCE PER UNIT CONSUMPTION OF MATERIAL ? WILL REDUCTION IN LABOUR COST AND MATERIAL COST RESULT IF FABRICATED PARTS ARE REPLACED BY CASTINGS OR VICE-VERSA ? CAN THE COMPONENT BE CONSTRUCTED FROM MORE THAN ONE PART TO AVOID WASTAGE OF MATERIAL ? CAN THE MANUFACTURING PROCESS BE CHANGED TO REDUCE PER UNIT CONSUMPTION OF MATERIAL ?
8.
9.
63
S.NO. 9
AREA BUYING 1. 2.
QUESTIONS CAN THE ITEM BE MADE CHEAPER FROM ALTERNATE MATERIALS ? DOES THE PRICE SEEM REASONABLE ? CAN IT BE BOUGHT CHEAPLY FROM ALTERNATE SOURCES ? CAN THE QUANTITIES BE ALTERED TO MAKE IT CHEAPER ? CAN THE COST OF PACKING OR TRANSPORT BE REDUCED ? CAN THE SUPPLIER REDUCE THE PRICE BY A CO-OPERATIVE REDESIGN OR REVISED SPECIFICATIONS ?
3. 4.
5.
64
S.NO. 10
AREA MANUFACTURING 1.
QUESTIONS CAN A DIFFERENT MANUFACTURING PROCESS BE USED TO ECONOMISE ON COST ? ARE ALL OPERATIONS NECESSARY ? CAN AN ALTERNATIVE OPERATION BE USED TO REDUCE COST ? CAN THE DUPLICATION OR OPERATIONS BE AVOIDED ? CAN TWO OR MORE OPERATIONS BE GROUPED INTO A SINGLE OPERATION ? CAN THE OPERATION SEQUENCE BE ALTERED TO ACHIEVE ECONOMY IN MANUFACTURE ? CAN ANOTHER EQUIPMENT WITH THE RIGHT PROCESS CAPABILITY BE SELECTED ?
2. 3. 4. 5. 6.
7.
65
S.NO.
AREA MANUFACTURING (CONTD.) 8.
QUESTIONS IS THE USE OF SPECIAL PURPOSE MACHINE JUSTIFIED CONSIDERING JOB LIFE AND JOB QUANTITY ? 9. IS THE TOOL COST REASONABLE ? CAN IT BE REDUCED ? 10. CAN INDIVIDUAL TOOLS BE COMBINED INTO A SINGLE TOOL TO REDUCE MANUFACTURING COST ? 11. CAN TOOL DIMENSIONS BE MODIFIED TO OBTAIN GREATER LIFE ? 12. CAN TOOL LIFE BE IMPROVED ?
66
S.NO. 11
AREA GENERAL 1.
QUESTIONS CAN THE ITEM BE MADE CHEAPER AT THE HOME PLANT AND IF IT IS ALREADY BEING MADE CAN IT BE BOUGHT FOR LESS ? DOES THE PRESENT DESIGN INCORPORATE ALL FEATURES OF THE COMPETITOR’S PRODUCTS ? CAN THE PRODUCT BE REDESIGNED TO REDUCE SERVICE DIFFICULTIES ? ARE TRANSPORTATION, PACKING AND HANDLING COSTS EXAMINED ? ARE ECONOMICAL BULK BUYING AND DISCOUNTS ON PACKING MATERIALS SCRUTINISED ? ARE SUPPLIERS ASKED TO GIVE SUGGESTIONS TO REDUCE COST ?
2.
3. 4. 5.
6.
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5. EVALUATION PHASE
• SHORTLIST CREATIVE IDEAS - SCRUTINY - COMBINATION - TESTING AGAINST SPECIFICATIONS - COST ESTIMATION IDEAS FUNCTIONALLY IDEAS ACCORDING TO THE PRE-FIXED CRITERIA ALTERNATIVES ACCORDING TO THEIR RELATIVE COST REDUCTION POTENTIAL ONE OR MORE ALTERNATIVES FOR DEVELOPMENT
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• DEVELOP • EVALUATE • RANK • SELECT
6. INVESTIGATION/DEVELOPMENT PHASE • ANALYSE ALTERNATIVES FOR TECHNICAL ADEQUACY ECONOMIC FEASIBILITY OF THE ALTERNATIVES PROTOTYPE NECESSARY TEST RUNS ONE OR TWO ALTERNATIVES FOR RECOMMENDATIONS
• ASCERTAIN
• MANUFACTURE • ARRANGE • SELECT
69
7. RECOMMENDATION PHASE • PREPARE • MAKE • SUBMIT • SECURE REPORT OF VA PROPOSAL PRESENTATION TO THE DECISION MAKER DEFINITE PLAN FOR ACTION APPROVAL FOR IMPLEMENTATION
70
8. IMPLEMENTATION PHASE
• OBTAIN • FIX • AUTHORISE • EXPEDITE • CLEAR • RESOLVE APPROVAL TO THE PROPOSAL RESPONSIBILITY FOR IMPLEMENTATION CHANGES TO CONVERT RECOMMENDATIONS INTO ACTIONS IMPLEMENTATION MISCONCEPTIONS & OVERCOME ROAD BLOCKS PROBLEMS IDENTIFIED DURING IMPLEMENTATION DELAYS AND AVOID HOLDS UP WORKMEN JOBS
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• MINIMISE • TRAIN • RETIME
9. FOLLOW UP PHASE
• AUDIT • COMPARE • SUBMIT • EVALUATE • RECOMMEND • RECOMMEND • PUBLICISE SAVINGS RESULTS WITH ORIGINAL EXPECTATIONS COST SAVING ACHIEVEMENT REPORTS TO THE MANAGEMENT EFFECTIVENESS OF THE APPROACH CHANGES IN THE APPROACH FOR THE NEXT PROJECT AWARDS FOR THE CONTRIBUTORS TO THE VA PROPOSALS RESULTS
72
73
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