Value Analysis

A short summary of the main ideas

What is Value Analysis?
It is an orderly and creative method to increase the value of an item. This " item" can be a product, a
system, a process, a procedure, a plan, a machine, equipment, tool , a service or a method of working.
Value Analysis, also called Functional Analysis was created by L.D. Miles.
The value of an item is how well the item does its function divided by the cost of the item (In value
analysis value is not just another word for cost):
value of an item = performance of its function / cost
An item, that does its function better than another, has more value. Between two items that perform their
function equally well, the one that costs less, is more valuable.
The "performance of its function" could include that it is beautiful (where needed).
Do not be surprised if as a result of value analysis the cost of an item is less that half of its previous cost.
Select the item to be studied and form a study group
To make a value analysis we form a study group of 4 to 6 persons, preferably each with different
knowledge, with different backgrounds. They meet in a room free from interruptions.
Then we select the item to be studied. The item should be one that gives the impression that its cost is
too high or that it does not do its function well.
Value Analysis
The value analyst should always be aware of functions, not of products, shapes, or processes. The main
function is what the item does, is that which somebody wanted to archive by creating the item. Express
this function (if possible) with just two words, a verb and a noun.
If the item is composed of various parts, it is useful to ask for the function of each part, and how they
contribute to the main function of the item.
Do not be distracted by mere aggregate functions such as the rubber on a pencil's end or the ice
producing part of a refrigerator. These were functions added since it was economical or easy to do so.
They have no relationship with the main function.
Gather information
Find the main function and the secondary functions of an item. Get the cost of realizing each function.
The attitude of a value analyst should be critical, aggressive, nonconformist, never satisfied with what
she/he receives for the money given.
The first action of the group should be to gather all the information about the item. Ask the best
specialist of the field, not the person most accessible. Get a detail of costs. Collect drawings,
specifications, all the written data on the item. Don't be satisfied with verbal information.
For a pencil, for instance:

What is it? (a pencil)

What is it for? (make permanent marks)

What is the main function? (make marks, write lines)

What is the method, material or procedure that was used to realize the main function? (a graphite
stick and 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 and the
total cost?

(This example, the pencil, is already a high value item).

Center the attention of the value analysis group on the main function, because, during the analysis, the
secondary functions may change. The group may choose different secondary functions to realize the
main function.
It is not important that the individual costs assigned are imprecise. Because even an imprecise numerical
value is much better than an expression such as "very costly" or "of low cost".
Measure the value of the way each secondary function is realized, is materialized:

Does it contribute value? (Is there something that does not contribute value?)
Is the cost in proportion to the function realized.
Does it need all its parts, elements, procedures?
Is there something better to do the same function?
Is there a standard part that can do the function?

Investigate the cost of a function. Put a dollar sign on tolerances and strict specifications. See what's
thought to be necessary and which somebody put in, just to be on the safe side. Remember: All that does
not contribute to the main function is waste and should be eliminated.
Creativity (the brainstorming session)
The objective is to find a better way to do the main function. We try to find a different material, or
concept, or process, or design idea, that realizes the main function.
People looked for conditions under which the human mind produces really original ideas, a method that
helped creativity. These conditions and procedures are stated below and need strict adherence:
1- State the main function clearly and shortly on paper or a blackboard (verb and noun), so that the
group can fix their attention on it. State it without mentioning the physical object or the specific process.
(Do not state secondary or aggregate functions).
2- The leader of the group says "We begin now" and when the ideas do not flow so fast anymore (about
15 to 20 min.) The leader says "That's all".
3- Members of the group state loudly any solution to the problem they can think of. It is very important
that they do not analyze their own thoughts or those of others. They should not smile or react when
exotic, improbable or senseless ideas are stated. They should not criticize or speak with others. They
should only let their imagination run wild and state ideas. An idea can be inspired by a previous idea. (If
no rare ideas are stated, then the members are analyzing, not making a brain storm).
4- The leader registers all ideas on paper or a blackboard.

5- When the session has finalized, if there is any doubt what was meant by an idea, the leader clarifies
the idea with the help of members. He does not analyze or discard any idea.
This finalizes the brainstorm.
Evaluation
The evaluation should be done after an interval, at best about two days after the brainstorm, to allow the
group to gain perspective.
Now the group analyzes each idea. They group similar ideas. When evaluating, do not think why the
idea would not work, why it is not possible. Develop each idea, making it more practical, making it
function better. Estimate a very approximate cost for each idea and investigate carefully ideas with an
apparently low cost. When an idea is canceled, that should be based on facts, not opinions.
Identify barriers and eliminate them tactfully.
Barriers are excuses or preconceived ideas that cannot be substantiated with numbers, facts, detailed and
precise information or experimental evidence. Barriers can be honest beliefs. Normally there is gold
behind a barrier. Now select the two to four ideas having the lowest cost.
Obtain information for analyzing and developing an idea. Do not work in isolation. Once the group has
advanced as far as it can on its own, make contact with specialists. This may be necessary in the
selection and also during the development of ideas. The value analyst is a coordinator of specialists, of
groups of experts in other companies (Pay them for their contribution in some manner).
Obtain information from the best source, not the nearest or most accessible one. Do not take into
account an answer by a person or specialist that lies outside his field of expertise. The use of specialists
is a powerful way of tearing down barriers. Avoid generalizations. Do not accept second hand
information. Ask for copies of documents.
Development of the two to four ideas selected.
Make a real effort to develop the ideas of lowest cost that do the main function. Make tests, prototypes,
get quotes of cost. Estimate costs of short term alternatives, of long term alternatives and of any new
ideas produced during the evaluation.
At the end of this process, the idea of least cost should have been identified. Ask yourself: Would I
spend my own money on this solution? If not, modify it.
Recommendation
If you work in an organization or enterprise, be sure that the person really interested in applying the
solution gets to see it. Present the final solution in writing, on a single sheet of paper, to the person that
should implement it. Give a copy to his boss. This sheet should state the savings, costs and a detailed
plan for implementing the idea. It should have all the information needed so that a person that does not
know this subject can understand it and do it.
The value analysis group should not itself implement the idea, if this is outside its normal area of work.
Implementation and Follow Up
Value analysis is not a method of controlling the work of others or of investigating errors.
Normally the amount of work to implement an idea is greater than the amount of work needed to
produce the idea. Therefore it is a good procedure to let the people that implement the idea get most of
the praise and merit. That produces excellent relations.
Obtain that the group that implements the idea informs of the savings produced and, if possible, benefits
from these savings. If needed, help them to establish the way the implementation will be checked and
the savings calculated.

What Are the Benefits of Value

Analysis?
by Tom Gresham, Demand Media
Value analysis is a methodical approach to sharpening the efficiency and effectiveness of any process. Often,
businesses apply it to the processes used in product creation or service delivery. Paramount to the value
analysis is the practice of breaking down a process into each individual component and considering ways to
improve that component's value as measured by cost and importance to the process. General Electric
developed value analysis during the late 1940s.
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Eliminating Costs
A critical advantage to using value analysis is its potential for reducing costs, which is a benefit that permeates
all advantages of the system. Because value analysis breaks down a product or service into components, it
enables you to analyze each component on its own, evaluating its importance and efficiency. A value analysis
correctly implemented and applied allows you to identify components that are not worth the cost they require
and that can be eliminated or replaced with an alternative. In this manner, the process for the product or
service being analyzed is refined to be done at less expense.

Modernizing
The value analysis process often allows users to root out practices that have grown out of date and can be
replaced with more modern approaches. This is particularly beneficial when something has been done the
same way for an extended period of time. Because the old way works and was new when it was instituted, you
have had little impetus to make changes. However, a value analysis, which calls for questioning every step of
a process, can reveal new methods that are cheaper, more efficient and sometimes more effective.

Design Flaws
Value analysis 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. It also can lead to bad publicity and damage to
the product brand and the company producing it. Similarly, in the case of a service, value analysis can help
pinpoint design flaws in the customer support system that causes service to fall short of customer
expectations.

Customer Service
Value analysis is oriented to weigh costs and the benefit to customers of a product or service. It forces you to
consider every aspect of a process in the context of how it serves the customer, which could be a consumer or
another business. This means that each step in the process is scrutinized and questioned from the perspective
of the benefit that it provides the customer. If the benefit to the customer is small and the step is not
necessary for the product or service as a whole, it can be eliminated, allowing you to streamline your operation
and to reduce the use of resources.

Value analysis
An approach to improving the value of an item or process by understanding its constituent components
and their associated costs. It then seeks to find improvements to the components by either reducing their
cost or increasing the value of the functions.

Recent discussion has begun to use the term 'value management' to describe a broad approach including
tools of value analysis.
more information and resources underpinning this approach

Why is it used?
To determine and improve the value of a product or process by first understanding the functions of the
item and their value, then its constituent components and their associated costs, in order to reduce their
costs or increase the functions value.

When is it used?
Value Analysis should be used:

For analysing a product or process, to determine the real value of each component,
When looking for cost savings, to determine components that may be optimised,
Only when the item to be analysed can be broken down into subcomponents and realistic costs
and values allocated to these.

How it works detailed review

To understand Value Analysis it is necessary to understand some key concepts:
Value:
the ratio between a function for customer satisfaction and the cost of that function.
Function:
the effect produced by a product or by one of its elements, in order to satisfy customer needs.
Value analysis:
Methodology to increase the value of an object. The object to be analysed could be an existing or
a new product or process, and it is usually accomplished by a team following a workplan.
Need:
something that is necessary or desired by the customer.

Figure 1
Basic rationale used in Value Analysis

Functions may be broken down into a hierarchy, starting with a basic function, for which the customer
believes they are paying, and then followed by secondary functions, which support that basic function.

The purpose of functions may be aesthetic or use, and basic functions may be either or both of these. For
example, a coat may have a use function of making you warm and an aesthetic function of 'looking
attractive'.
The product or process may be broken down into components, which can be associated with the
functions they support. The value of the product or process may be then increased by improving or
replacing individual components. This also applies at the whole item being analysed, which may be
completely replaced with a more functional or lower cost solution.
Although this is a simple-sounding Tool, it can be quite difficult in practice, as it requires both deep
analysis of the product or process to be improved, and also an innovative approach to finding
alternatives.

Figure 2
Function/component hierarchy

The Value Analysis process

Value Analysis is based on the application of a systematic workplan that may be divided in six steps, as
shown in figure 3.

Figure 3
Steps involved in the application of Value Analysis

1: orientation/preparation
Identify what is to be analysed. This will typically be one of:

A manufactured item. This can be anything from a screw to an engine, although a more complex
item is likely to result in a more complex and time-consuming analysis.
A process or service. Again, all levels can be analysed, from a hand assembly process to a
complete customer service organisation.

2: information
Identify and prioritise the customers of the item from step 1. This may include external customers, such
as 'auto suppliers' and internal customers, such as 'finance manager'.
Note that external customers are usually more important than internal customers, and that seniority does
not necessarily equate with priority. A customer's preference for a product feature should be more
important than the opinion of a senior designer.

3: analysis
In this phase the functions of the product are analysed by Functional Analysis, which is aimed at
identifying functions given by a product or part of it. Functions have an importance (weight) and a cost.
These costs are quantified and this leads to a list of functions ordered by their importance and value.
This means that there is an analysis of how each function satisfies customer needs, and then, an analysis
of what the cost of those functions is.
This phase of Value Analysis may be considered as the key one of the whole methodology as it
represents the translation of needs to functions (see the specific technique).

4: innovation/creativity
For this phase it is necessary to use creative techniques that generate alternatives. Starting from the
analysis of functions and costs, there is a search for means that allow elimination, change or
improvement of components and functions.
It is important to look for different ways of satisfying the basic functions, even if it means rejecting the
current approach and starting again with a clean drawing board. This requires the product or process to
be 'mentally destroyed' and then rebuild a new one.

5: evaluation
It represents a confrontation of ideas, a collection of information about the feasibility and cost of those
ideas, and measures the value of the best alternatives.
This analysis or evaluation uses the same techniques of value measurement that have been used in
previous steps. At this point an examination is done about the grade of functional accomplishment and
the economical analysis of those alternatives that offer the higher value. Some of the techniques are
well-known such as Cash-flow analysis and break-even point.
The team involved in Value Analysis needs an objective analysis of the ideas generated through the
innovation phase. The evaluation phase is carried out in two main steps:

A qualitative analysis of value regarding objectives in design, cost, implementation facilities, etc.
A quantitative analysis using numerical techniques of value measurement that leads to a few
alternatives of high value that will be analysed in depth.

This process usually involves determining the cost and select those ideas that can be practically
implemented. This may include work to develop and refine promising ideas into practical and optimum
solutions.

6: implementation and monitoring

In this phase it is necessary to prepare a report that summarizes the work that has been done, including
conclusions and specific proposals. It will be also necessary to describe actions plans for
implementation, in which project management techniques would be useful.
Finally a plan should be included for monitoring of the actions. This should be based in the
accomplishment of objectives.
The application of Value Analysis only needs to make use of Basic Techniques such as matrixes, pareto
chart, pert and gantt diagrams, etc., in most of the Value Analysis steps.

Table 2
Specific techniques to be applied in Value Analysis
Value analysis step
1 orientation/preparation
2 information
3 analysis

Specific technique
basic techniques
functional analysis, basic techniques

4 innovation/creativity
5 evaluation

basic techniques

6 implementation and monitoring

What Is Value Engineering?

Value Engineering (VE), also known as Value Analysis, is a systematic and function-based approach to
improving the value of products, projects, or processes.
VE involves a team of people following a structured process. The process helps team members
communicate across boundaries, understand different perspectives, innovate, and analyze.

What is value?
Value is a personal perspective of your willingness to pay for the performance delivered by a product,
process or project.
Good value is achieved when the required performance can be accurately defined and delivered at the
lowest life cycle cost.

What does Value Engineering do?

Value Engineering improves value. On highway projects, improvements to value might include reducing
the life cycle cost of an interchange, enhancing safety in a design, or reducing impacts to the public by
shortening the duration of a construction project.
Value Engineering uses a combination of creative and analytical techniques to identify alternative ways
to achieve objectives.
The use of Function Analysis differentiates Value Engineering from other problem solving approaches.
VE focuses on delivering the product or service at the best price by incorporating those value
characteristics deemed most important by the customer.

How does Function Analysis work?

In Function Analysis, an active verb and a measurable noun describe a function. As an example, the
function of this website is to "inform reader".

How does VE work?

VE follows a structured thought process to evaluate options. Every VE session goes through a number of
steps:
1. Gather information
o What is being done now?
2. Measure Performance
o How will the alternatives be measured?
3. Analyse Functions
o What must be done?
o What does it Cost?
4. Generate Ideas (Brainstorming)
o What else will do the job?
5. Evaluate and Rank Ideas
o Which Ideas are the best?
6. Develop and Expand Ideas
o What are the impacts?
o What is the cost?
o What is the performance?
7. Present Ideas
o Sell Alternatives
1.TRACTOR DESIGN
-make the design simple
- easy to use
-reduce COMPLICATED / expensive parts.
--------------------------------------------------------2.TRACTORS RAW MATERIAL / PARTS PROCUREMENT
-establish the demand planning system [ reduce the fluctuations in production]
-establish the inventories of raw materials [ reduce the cost of stock holding]
-establish the economic order quantity [ """"""""""""""""""""""""""""""]
------------------------------------------------------------------------------

3. TRACTORS PRODUCTION PLANNING

-establish an effective / efficient production planning system [ cost savings]
-----------------------------------------------------------------------------4.TRACTORS PRODUCTION
-establish a lean production [ cost effective]
---------------------------------------------------------------------5. TRACTORS TOTAL QUALITY ASSURANCE.
-set up quality assurance system to reduce quality problems/ rejections]
[ cost savings ]
------------------------------------------------------------6.TRACTORS FINISHED GOOD INVENTORY
-match the finished stock inventory to market demand / sales requirements]
[ cost saving in stock holding ]
-------------------------------------------------------------------7.TRACTORS CUSTOMER SERVICE
-provide effective customer order processing/order service/
timely despatch to customers.
[ adds value to customers / reduces distribution cost]
---------------------------------------------------------------------------8.TRACTORS AFTER SALES SERVICE
-offer warranty/ after sales service to customers
[ adds value to the product and increases sales ]
============================================
TRACTORS MANUFACTURER CAN ADD VALUE/ REDUCE COST
BY APPLYING THE VALUE ANALYSIS -JOB PLAN TO EACH
OF THE ABOVE LISTED 8 STAGES OF TRACTORS MANUFACTURING.

Define value Engineering and its objectives Discuss the various

approaches for value engineering and analysis?

Value Engineering is a systematic method to improve the "Value" of goods

and services by using an examination of function. Value, as defined, is
the ratio of Function to Cost. Value can therefore be increased by
either improving the Function or reducing the cost. It is a primary tenet
of Value Engineering that basic functions be preserved and not be
reduced as a consequence of pursuing Value improvements.
Value Engineering is a body of knowledge as a technique in which the
value of a system's outputs is optimized by crafting a mix of
performance (Function) and costs. In most cases this practice
identifies and removes unnecessary expenditures, thereby increasing
the value for the manufacturer and/or their customers.
Value Engineering uses rational logic (a unique "how" - "why"
questioning technique) and the analysis of Function to identify
relationships that increase Value. It is considered a quantitative
method similar to the Scientific Method, which focuses on Hypothesis
- Conclusion to test relationships, and Operations Research, which
uses model building to identify predictive relationships.
VALUE ANALYSIS -- The Job Plan
Value Engineering is often done by systematically following a multistage Job Plan. IT IS a 8-step procedure , called the Value Analysis Job
Plan. Others have varied the Job Plan to fit their constraints. One
modern version has the following eight steps:
PREPARATION
INFORMATION
ANALYSIS
CREATION
EVALUATION
DEVELOPMENT
PRESENTATION
FOLLOW-UP
Four basic steps in the VALUE ANALYSIS Job Plan are:
Information gathering - This asks what the requirements are for the
object. Function analysis, an important technique in value engineering,
is usually done in this initial stage. It tries to determine what functions
or performance characteristics are important. It asks questions like;
What does the object do? What must it do? What should it do? What
could it do? What must it not do?
Alternative generation (Creation) - In this stage value engineers ask;
What are the various alternative ways of meeting requirements? What
else will perform the desired function?
Evaluation - In this stage all the alternatives are assessed by

evaluating how well they meet the required functions and how great
will the cost savings be.
Presentation - In the final stage, the best alternative will be chosen and
presented to the client for final decision.
How it works
VE follows a structured thought process to evaluate options.
Gather information
1. What is being done now?
Who is doing it?
What could it do?
What must not to do?
Measure
2. How will the alternatives be measured?
What are the alternate ways of meeting requirements?
What else can perform the desired function?
Analyze
3. What must be done?
What does it Cost?
Generate
4. What else will do the job?
Evaluate
5. Which Ideas are the best?
6. Develop and Expand Ideas What are the impacts? What is the cost?
What is the performance?
7. Present Ideas Sell Alternatives
VALUE ENGINEERING
Value engineering is an approach to productivity improvement that
attempts to increase the value obtained by a customer of a product by
offering the same level of functionality at a lower cost.
Value engineering is sometimes used to apply to this process of cost
reduction prior to manufacture, while "value analysis" applies the
process to products currently being manufactured.
Both attempt to eliminate costs that do not contribute to the value and
performance of the product (or service, but the approach is more
common in manufacturing).
Value engineering, thus, critically examines the contribution made to
product value by each feature of a design. It then looks to deliver the
same contribution at lower cost.
Different types of value are recognised by the approach :

Use value relates to the attributes of a product which enable it to

perform its function.
Cost value is the total cost of producing the product.
Esteem value is the additional premium price which a product can
attract because of its intrinsic attractiveness to purchasers.
Exchange value is the sum of the attributes which enable the product
to be exchanged or sold.
Although the relative magnitude of these different types of value will
vary between products, and perhaps over the life of a product, VE
attempts to identify the contribution of each feature to each type of
value through systematic analysis and structured creativity enhancing
techniques.
Value engineering programs are best delivered by multi-skilled teams
consisting of designers, purchasing specialists, operations personnel,
and financial analysts.
Pareto analysis is often used to prioritise those parts of the total
design that are most worthy of attention. These are then subject to
rigorous scrutiny. The team analyses the function and cost of those
elements and tries to find any similar components that could do the
same job at lower cost.
Common results are a reduction in the number of components, the use
of cheaper materials, or a simplification of the process