Value Analysis

The purchasing manager conducts value analysis that aims mainly at achieving cost effectiveness and maintaining the required level of quality. Value analysis is an organized effort that studies in detail the 'value' of the material. Value analysis reviews the design changes with the objective of eliminating high-cost materials and the materials that are technically obsolete and reducing the number of parts. Here, the purchasing manager looks for information such as cost, manufacturing process, performance characteristics, etc. relating to raw materials and finished products. Then the basic and secondary functions that are performed by the materials are listed for each type of material. After analyzing the functions and costs of the material, the purchasing manager evaluates the possibilities of using other materials.

Value analysis evaluates the materials by seeking answers to the following questions:

• What is the function of the item?

• Is it possible to run the system without the item?

• Can the item be substituted with a standard part?

• How much does the item cost?

• How much does the substitute, if any, cost?

• Can the functions performed by two or three materials be clubbed together and replaced by any other material?

Value analysis involves the coordinated efforts of the engineering, production, and purchasing personnel, and helps in reviewing purchase activities to ensure that expenditures result in the receipt of appropriate value.

The step-by-step procedure of value analysis is given below:

• Examine all the products/materials that are being reordered and identify each product/material that needs an improvement.

• Gather all possible information about the designs, costs, scrap rates, and so forth of the product.

• Form a team that includes experts from various functional areas that are related to the functions performed by that material.

• Generate alternatives by generating new ideas and evaluate different ways of accomplishing the tasks.

• Evaluate the alternatives on criteria like cost and feasibility and eliminate the non-feasible alternatives.

• Refine the feasible alternatives and select the optimal alternative.

Value analysis not only reduces expenditure significantly, but also improves reliability, maintainability, quality and performance of the material.              

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