Value Analysis

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Value Analysis aims at a systematic identification and elimination of unnecessary costs. It critically investigates and analyses the different aspects of material, purchase, design and production of each and every component of the product. Any thing that doesn’t add value to the product from customer point of view is unnecessary cost. This includes inventory, transportation etc. It is normally applied to existing rather than new products.


Value can be defined as the combination of quality, efficiency, price and service which ensures the ultimate economy and satisfaction of the purchaser. There are four types of economic values. They are

  • Cost value : Sum of all costs to produce the product.
  • Functional Or Use Value : It is the measure of properties, qualities and features which make the product accomplish a function. It is the price paid by the buyer in order to ensure that the product performs the intended functions
  • Esteem Value : It is the measure of properties, features, attractiveness, packaging etc., which increases sales appeal or which attracts persons and creates in them a desire to posses the product. It is the price paid by the buyer beyond the use value.
  • Exchange Value : It refers to the price that a customer will offer for the product, the price being dependent upon the satisfaction (value) which he derives from the product.

Aims & objective of Value Analysis

  • By doing Value Analysis, a firm can maintain the functional objectives of an item at the desired level. The main three Functions of value analysis are Primary, Secondary and Tertiary. It helps us to save money or increase profit.
  • Second objective is time consideration. Ease of manufacture, timely delivery of product etc. If product is to be for a short duration – No quality issues. Ex.Beach wear.
  • Third objective is Quality promotion. It helps us in the analyses of repeated failure of a component or part and inturn improve quality.
  • Standardization : Standardization of material, process, products etc.
  • Increase the utility of the product. Ex Mixer Grinder, Vacuum cleaner for Painting.
  • Improve organisational effectiveness by eliminating wasteful activities.
  • Develop logical and analytical approach to solve problems.
  • Modification and improve product design. Ex. Carburetor cap of bike
Difference between Value Analysis & Value Estimation

Even though the process adopted by both is same, the difference lies in the time and at the stage when the technique is applied. Value Analysis is the application of a set of technique to an existing product with a view to improve its value It is thus a remedial process. Value Estimation is the application of exactly the same set of techniques to a new product right from the design stage so that no unwanted features are added to the product.

When to apply value analysis

We should apply value analysis in the following scenarios

  • In the development of a new product
  • ROI of investment in a product is reducing.
  • Sales of the product is going down
  • The cost of manufacturing / tooling is rising.
  • Competitor’s products are available at low price
  • Cost of raw material is increasing disproportionate to the volume of production.
  • The firm is unable to meet delivery schedule.
  • Customer’s complaints regarding performance of the product.

Stages in Value Analysis & Value Estimation procedure

Orientation Phase : It involves identification of the problem, selection of projects, formation of teams, laying down objectives and targets, and in depth training of all team members.

  • Selection of Project - Carry out ABC analysis ( Pareto Analysis- to identify vital few components, process, parts that contribute to the bulk of product cost)
  • Identify problematic area that may be in production, maintenance, design, etc..
  • Formation of Team - It should be form different departments.

Information Phase : Collection of all relevant information like drawings, manufacturing process, tech. specification, cost brake up etc..

  • Collect data
  • Decision and costs – Ex. location of a m/c on the plant will affect material movement (ex. Dairy plant)
  • Assimilate facts and data into the required form – may be on a standard workbook.

Function phase : This is heart of a value analysis.

  • One tries to answer :- What does it do? , How much does it cost?, What is its worth?
  • Importance of function (ex. Sports shoe)
  • Type of function : Use function and sell function

Functional analysis system technique ( fast)

This technique answer three questions – why, How and When. The steps involved are preparation of a list of all the function of the assembly or system using the verb and noun technique. The functions are Make Mark, Improve aesthetics, Provide grip and Control Flow.

Creation Phase : To identify what else will satisfy the same needed function. Carry out for 35-40 minutes, suspend judgment, freewheeling is allowed, quantify not quality is required. Then modify/combine idea to produce result.

Evaluation Phase : During creation phase, The team focuses only on the generation of idea and not on their relative merits. Some techniques used at this stage are using filters of Safety, Technology and Implementation Manufacturability to prove the product idea. Then segregate ideas into long and short term. Make sure that if short term ideas ( 3 Months may be ) can be implementable. The rank the ideas in terms of best and worst ideas.

Weighted Evaluation : Assign weight to ideas as per their relative importance. During the recommendation phase, if possible, conduct trial before recommending the changes. Present potential savings if the idea is implemented. An in the implementation Phase plan Action, Record Progress, Organize review meetings and Establish feed back systems.

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