product to create the appropriate use of esteem factors. Value is what customers are demanding- the right combination of product quality, fair price and goods and services.
Use value: The properties, features and qualities which accomplish the use, the work or the service- causing the item to perform or serve an end.
Esteem value (or need value): The properties, features or attractiveness which cause us to yearn to posses it, causing the item to be sold.
Exchange value: The properties or qualities which enable us to exchange an item for something else we want.
Cost value: The total of material, labour and other costs that have to be incurred to produce an item.
Value Analysis is an effective tool for cost reduction and the results accomplished are far greater.
It improves the effectiveness of work.
It is an organised approach to a problem.
It is value applied at the design stage itself.
It reduces unnecessary costs, obvious and hidden which can be eliminated without adversely affecting quality, efficiency, safety and other customer features. Value analysis is the study of the relationship of design, function and cost of any product, material or service with the objective to reduce cost through modifications of design or material or specification or the manufacturing process, changing source of supply (external or internal) or possible elimination of parts or their incorporation into a related item.
1.Capital goods plant, equipment, machinery, tools, etc. 2. Raw and semi-processed material, including fuel. 3. Materials handling and transportation costs. 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, air, steam & other utilities (services). 1. To provide better value to a product/service. 2. To improve the companys competitive position. 3. To ensure that every element of Cost ( Labour, Materials, Suppliers and service ) contribute equally to the Function of the product. 4. To Eliminate unnecessary Cost.
# Stage Description 1. SELECTION & ORIENTATION To select those critical areas where a potential for cost reductions is expected. Use the common Paretos ABC analysis. General scope, restrictions and aims of the study is defined. 2. ANALYSIS Examine the data at a VA group/team meeting. Record the minutes of each brainstorming session. Apply the Tests for Value. Propose further action. 3. RECORDING IDEAS Write down the minutes of analyses meetings and circulate them to group/team members for further queries. It includes the agenda for the next meeting. 4. INNOVATION/ CREATIVITY Arrange team meetings in order to discuss the ideas analyzed and any new information obtained. Think upon practical measures for reducing costs and increasing value. # Stage Description 5. EVALUATION Investigate suggestions for reducing costs and to make them practical and acceptable to client management. Obtain definite prices and costs in order to estimate cost reductions accurately. 6. RECOMMENDATIONS Recommend cost reductions to client management. Present the recommendations in a comprehensive report. Recommend a member to act as an implementation consultant for VA recommendations. 7. IMPLEMENTATION & MONITORING Implement the recommendations accepted by the company management. Monitor the results as suggested in VA report. Jot down the feedback of the management upon completion of VA assignment. Value engineering is a total of management which approaches the question of saving cost from the point of view of value. Requires co-operation of all functional departments. In large organisations, there are value engineering teams having full time jobs.
Value and cost
Value = Function Cost Value: What the product is worth to the customer. Function: Properties and qualities of product. Cost: Money value of materials used, Labour & indirect costs.