Value Analysis

Abstract

Value Analysis is a systematic tool which can be used to improve the value of a product or process by analyzing its constituent components and the associated costs . The overall objective is to find improvements to the components by reducing their cost and/or increasing the value of the functions.

This article will describe each step required to perform a Value Analysis as well as suggesting tools that can be used during each step. The Article can be used as a template when performing a Value Analysis.

History of Value Engineering

The origins of the Value Analysis goes back to World War II. During the war, there was a shortage of both labor and materials which resulted in companies had to search for substitutions to their existing products in order to still meet demand.  This value-based approach led to General Electric (GE) noticing that substitutions often resulted in reduced cost, improvement of the product or both. GE took this Value Engineering approach out of necessity but it resulted in a systematic process which still has wide application to today. . The specific process originated in 1947 from Lawrence D. Miles and is known as Value Analysis .

Value Analysis as a tool

In order to understand the how Value Analysis can be used as a tool, it is necessary to define the word “Value”. Value has no clear definition but when used in Value Analysis it is defined as a Function’s performance relative to its cost.

$Value=Function Performance/cost$

,where the function is defined as the effect produced by a product or by one of its elements, in order to satisfy customer needs and the Cost is defined as the resources required to achieve the function.

As can be understood from the equation, value is not only about minimizing the cost. As long as the increase of the function’s performance is relatively higher than the increase of cost, the value of the function will still increase. This differentiates a Value Analysis from typical cost reduction approaches