Value Analysis in Production and Operation Management

Value engineering or value analysis had its birth during the World War II Lawrence D. Miles was responsible for developing the technique and naming it. Value analysis is defined as “an organized creative approach which has its objective, the efficient identification of unnecessary cost-cost which provides neither quality nor use nor life nor appearance nor customer features.” Value analysis focuses engineering, manufacturing and purchasing attention to one objective- equivalent performance at a lower cost.

Value analysis is concerned with the costs added due to inefficient or unnecessary specifications and features. It makes its contribution in the last stage of product cycle, namely, the maturity stage. At this stage, research and development no longer make positive contributions in terms of improving the efficiency of the functions of the product or adding new functions to it.

Value is not inherent in a product, it is a relative term, and value can change with time and place. It can be measured only by comparison with other products which perform the same function. Value is the relationship between what someone wants and what he is willing to pay for it. In fact, the heart of value analysis technique is the functional approach. It relates to cost of function whereas others relate cost to product. It is denoted by the ratio between function and cost.

1. Value Analysis Framework

The basic framework for value analysis approach is formed by the following questions, as given by Lawrence D. Miles:

1. What is the item?
2. What does it do?
3. What does it cost?
4. What else would do the job?
5. What would the alternative cost be?

Value analysis requires these questions to be answered for the successful implementation of the technique.

2. Steps in Value Analysis

In order to answer the above questions, three basic steps are necessary:

1. Identifying the function: Any useful product has some primary function which must be identified—a bulb to give light, a refrigerator to preserve food, etc. In addition it may have secondary functions such as withstanding shock, etc. These two must be identified.
2. Evaluation of the function by comparison: Value being a relative term, the comparison approach must be used to evaluate functions. The basic question is, ‘Does the function accomplish reliability at the best cost’ and can be answered only comparison.
3. Develop alternatives: Realistic situations must be faced, objections should overcome and effective engineering manufacturing and other alternatives must be developed. In order to develop effective alternatives and identify unnecessary cost the following thirteen value analysis principles must be used:
   1. Avoid generalities.
   2. Get all available costs.
   3. Use information only from the best source.
   4. Brain-storming sessions.
   5. Blast, create and refine: In the blast stage, alternative productive products, materials, processes or ideas are generated. In the ‘create’ stage the ideas generated in the blast stage are used to generate alternatives which accomplish the function almost totally. In the refining stage the alternatives generated are sifted and refined so as to arrive at the final alternative to be implemented.
   6. Identify and overcome road blocks.
   7. Use industry specialists to extend specialised knowledge.
   8. Key tolerance not to be too light.
   9. Utilise the pay for vendors’ skills techniques.
   10. Utilise vendors’ available functional products.
   11. Utilise speciality processes.
   12. Utilise applicable standards.
   13. Use the criterion ‘Would I spend my money this way?’

Source: KumarAnil, Suresh N. (2009), Production and operations management, New Age International Pvt Ltd; 2nd Ed. edition.