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 to perform 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 labour 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.

(indsæt ligning: Value=Function/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 Value Analysis from many other techniques.

The Value Analysis Process

A specific process has been developed when applying Value Analysis on an existing product or element. The process is broken down into six steps each containing its own course of action and goal. An overview of the six steps and applicable techniques for each step is presented in FIGURE ???. The following sections will describe each step in more detail and suggest tools/techniques that can assist when performing a Value Analysis .

Step 1: Orientation/Preparation

The first step is to Identify what is to be analysed. This could for example be a manufactured item or a process. Another step in the preparation is forming the groups that is going to perform the analysis.

Applicable Tools

It can be beneficial to use tools such as Competency mapping, Focus groups and considering the Five Stages of Team Development when forming the teams. When identifying what is to be analyzed Portfolio Management techniques, such as the BCG Matrix, can be used to ensure that the effort is put in the right place.

Step 2: Information

In this step the customers are identified and prioritized and all facts about the identified subject must be collected. This can be in the form of product specifications, drawings, cost breakdown etc. The subject is discussed in detail with stakeholders, in order to get a true appreciation of its function. It is important that every person within the team has a common understanding of the project scope.

Applicable Tools

A Stakeholder analysis can be used to identify the relevant stakeholders and prioritizing them. The prioritization can help perform the Analysis when it comes to describing the most important functions.

Step 3: Analysis

A Functional Analysis is performed to identify the relevant functions. The Functions have an importance as well as a cost. Costs are quantified and functions are sorted by their importance. This phase is considered as the key step of the whole methodology as it represents the translation of customer needs into functions.

The functions can be divided into two categories:

• Basic: The function for which the user or buyer purchases the product and constitutes the real value to the customer. This function is not subject for change.
• Secondary: Secondary functions are the assisting functions that makes it possible to realize the basic function. These functions can be modified to increase the value.

Applicable Tools

• FAST ( Function Analysis System Technique): Technique used to create a graphical representation illustrating the logical relationships between the functions based on the questions “How” and “Why”. How, is answered by the function on the right, and is the method to perform that function. Why, is answered by the function to its left, which expresses the goal of that function.

A good rule to remember in constructing a FAST Model is to build in the How direction and test the logic in the Why direction

• Value Analysis Matrix: The method is derived from the Quality Function Deployment (QFD) methodology. It associates functions back to customer needs or requirements and carries an importance rating based on the original customer needs or requirements. Functions are then related to mechanisms, Mechanisms are related to functions as either strongly, moderately or weakly supporting the given function. The functions presented in the Value Analysis Matrix comes from the FAST diagram.

Step 4: Innovation/Creativity

Generate alternate means of performing the functions. The goal is to generate as many ideas as possible in a short period of time. Starting from the analysis of functions and costs, there is a search for means that allow elimination, change or improvement of components and functions.

Applicable tools

Brainstorming: It is important to include all team members in the brainstorming. Including stakeholders and designers. The focus should be put on creating a positive atmosphere which welcomes the introduction of new ideas and to focus on functions which have the greatest opportunity to improve value. To ensure efficient brainstorming sessions it could be beneficial to use an external facilitator.

Step 5: Evaluation

Examine the feasibility and cost of the identified alternatives and their value.

Two main steps:

• Qualitative analysis of value
• Quantitative analysis using numerical techniques

The most promising ideas are analysed in depth and refined.

Step 6: Implementation and Monitoring

Prepare a report that summarizes the work done and describe the action plans required for implementation Develop a plan to continuously monitor the implementation

Gannt Chart

Strengths and Weaknesses

Some of the largest strengths of Value Analysis are:

• Customer focused development
• Cost Reduction
• Generation of New Ideas
• Measurable and Systematic Process
• Feasible Decision Making

PMBOK® Guide

Both Stakeholder Management and Cost Management play a large role in ensuring an effective Value Analysis. It is important to consider what is Good Practise and the PMBOK guide to Project Cost and Stakeholder Management should be considered .