“A PENNY SAVED IS A PENNY EARNED”

I am going to tell you the main aspects of Value Analysis (VA), as it is both the topic I had for my OSS and something a find really interesting. Nowadays, with an extremely competitive market, any small safe can be transformed in huge benefits at the end of the month. This is the basic idea that characterizes Value Analysis.

What is VA?

It can be defined as a process developed to improve the profitability of products. The purpose of the analyze is to keep the functionality of a product whilst reducing it´s cost. It will include a number of improvements that will make possible a reduction of costs keeping it´s quality. So two are the main concepts which are related one with the other:  value and costs. In relation to value, we should difference between use value (functionality) and esteem value (aspect). The difference of price between two products that accomplish the same function will be produced by the esteem value. For example, between two cars with the same engine but different appearance. Secondly, in relation with costs, these can be divided in two main groups: direct costs (related with one product) and indirect costs (related with all the products). While the first ones are easily controlled and managed, the difficult task will be to identify and manage the second ones.

Two are the main considerations when we apply VA: no cost is removed if it reduces the quality of the product or its reliability and saleability can´t be compromised.

A perfect example of a good implementation of VA was explained during the last lesson of Logistics. Mercadona decided to change the format of the oil bottles from a circular shape to an straight one. Quality and reliability were kept and saleability was not affected. At the same time, a reduction of costs took place as they could pack more bottles in the same box.

Different approaches of VA

– For existing products: in order to find gaps or problems that could be solved in the future.

– For new products (value engineering): less certain and poor levels of information.

– For product families: big advantages in terms of financial savings as it affects to a group of products.

– Competitive VA: is made of a competitor´s product.

Advantages for the company

– Reduction of costs. Protection of the profit margins.

– Better understanding of the production process.

– Implementation of new technologies and materials.

– Identifying a problem in it´s early stage allows to apply less aggressive corrective measures. Less costs.

– Review the compliance of the product with the actual legislation and changes that could occur with it.

– Continued improvement of the product. Allows you to be more competitive in the market.

– Avoids designing failures.

As identifying the costs, is one of the main issues of the VA, I post you this video were some basic information related with the types of manufacturing costs is explained.

FONTS: http://value-eng.org/knowledge_bank/attachments/200611.pdf

                 http://www.adi.pt/docs/innoregio_value_analysis.pdf

                http://www.chca.ca/media/pdf-education/ OR_value_analysis.pdf 

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