The Main Features Of Value Functional Analysis

Published Date: 02 Nov 2017

The English dictionary has various meanings of the word "value", like worth, a fair equivalent, relative wroth, that which renders something useful. In the purchasing field, value can be defined as the lowest cost for reliably performing an essential function.

Value Analysis (VA) was established by Lawrence D. Miles of General Electric in America. The basic fundamental of value analysis can be implemented in any product to optimize its value. In more details, value analysis is a systematic, organized process which used to review and applied to existing product designs in order to compare the function of the product required by a customer to meet their needs or requirements at the lowest cost by eliminating unnecessary costs. First of all, value analysis (and value engineering) is not an informal process of evaluation which required management activities including planning, control and coordination. These analysis concerns the function of a product such as utility, guarantee, or safety performance to meet the demands needed or required by a customer. Thus, the review process must include an understanding of the purpose to which the product is used. This implication means that specifications can be created to assess the level of fit among the product and the value derived by the consumer. Furthermore, the formal management process must meet these functional specification and performance standards consistently in order to give value to the customer which indirectly will lead the organization to be success. Finally, to yield a benefit to the organization, the formal review process must result in a process of design improvements that serve to lower the production costs of that particular product whilst maintaining some level of value through function (M.A. & S.P., 2012).

Other than that, various techniques also used in the different industry with the different names which closely resembling value analysis, and these are mentioned further in the following. First of all, value analysis ideas can be applied during engineering and design stage of product before its manufacture, which is known as value engineering. Here are the related techniques which using the same logic including PROFIT, FIRST, FAST, FACTS, and VM/VI. PTOFIT is stands for "product return opportunities by function investigation techniques", followed by FIRST which is stand for "functional idea system techniques", then FAST is stand for "functional analysis system techniques", and FACTS is stand for "functional analysis of components of total system", lastly is VM/VI which is stand for "value management and value improvement". But actually value analysis is the general name for all the above techniques and the differences, if any, are negligible.

On the other hand, the determinants of value require some combinations. Firstly, functional or use value which is based on those properties of the product which enable it to accomplishing or perform a task or service such as nail. Secondly, esteem value which is based on those properties of the product, which contribute to pride of ownership and possession such as gold watch. Thirdly, exchange value which is based on those properties which make a product valuable for exchange such as the barter value like antique furniture. Then following by the cost value which is based on the minimum cost of achieving a useful function and it’s also depends on the commercial value of production cost such as bus fare. Finally, scrap value which means the money that can be only recovered when the items is no longer needed. However, the concept of value is dynamic because it will change with time. For example, an item has functional value for now will then have esteem value after a period of time and finally left only scrap value as time passes.

Items for Value Analysis

The conception, development, growth, maturity and decay are the five phases of the product-life-cycle (PLC) and it’s used to identifying the product for value analysis. The life-cycle time for each phase alter from one product to another. When the product reaches the stage of maturity or also known as stability position, then it will lead to the competitors to enter the market with a better quality of the product. Thus, in order for an organization to survive in this intense competitive situation, the organizations are force to do some modifications of their products. Then these efforts for cost reduction starts from the stage of design and then will be continued in the production system through modification process, materials substitution, tool changes, and etc. Besides that, the product in the maturity stage with decreasing return on investment is also an ideal for value analysis. In addition, products that suffer from overdesign can be chosen for value analysis as well. For example, Apple was a first-mover to launch their iPhone then only Samsung came out its "me too" product, Galaxy S Series.

Organization for Value Analysis

Ideally, value analysis requires interdisciplinary approach and is carry out by a team effect that consists of not more than five individuals who are selected from all major departments such as design, marketing, research, purchasing, cost accounting, quality and etc. The value analysis’s methodology is been exposed to the members by an expert in a workshop for few days like four days. After that, each team selects on a specific project and works it out then finally only prepares a report. Besides that, the value analysis or engineering study may require the assistant and advice of specialists in numerous areas as consultants as well. However, in the opinion of some organization, they will include the representatives of consumers and suppliers in the team because they felt they are able to add a further dimension to value improvement.

Application for Value Analysis

Value analysis also applied by some organizations like private, public, large or small sectors which making sizeable savings every year. As value analysis uses a creative process and confidence building that result in the generation of precious ideas by tapping the mankind’s creativity. This able to makes employees to promote team work and become cost conscious. Furthermore, value analysis studies also emphasize on total system concepts by keeping the interests of employees, consumers, procedures and industries. For example, in India, the value analysis team in one steel plant found that the rigid materials and process specifications in most of the intermediate stages were eliminated, and then the steel products will ultimately expected to perform. Indirectly, this has granted the organization to reduce some of their cost. Besides that, value analysis has also been applied in one engineering firm’s design stage of the machines, it was found that a spring loaded stripper arm can do almost the same function by remaining stationary. This consequently brings in a considerable reduction in the maintenance cost. Other than that, value analysis has been performed by many organizations as a policy for import substitution. On the other hand, in the packaging of consumer goods has also brought a profitability economy to the organization such as body shampoo, biscuits, and etc. Thus, value analysis not only helps the country to maximize the conversation of scarce material resources but also helps to achieve cost reduction in a more effective way.

The Mechanism of the Value & Functional Analysis

Steps for Value Analysis

In order to carrying out a value analysis, there are eight sequential steps need to be consider. Firstly, the "orientation phase" which means the value team leader and manager need to refine the problem such as production costs, and then collect a number of data needed in terms of both tangible and quantitative form which enable the team to understand the problem. After that, they need to develop some alternative solutions by ranking them depend on having cost date, then only prepare logistically for the value study such as distributed of pre-study materials to the participants like the agenda, design documents and etc.

Next, the "information phase" which is to finalize the scope of the problems to be noticed such as re-scope or plans for continuing the effort to reduce the problems at the end of the workshop, then only look for the targets for improvement, and then evaluate the factors while building better or stronger cohesion among team members.

Thirdly, the value team leader and manager need to identify the most beneficial areas for study as it is the establishment of the job plan and it must be executed by the products are inspected, analyzed, and classified. This is known as "function analysis phase". For example, the team inspect about the "maturity" of the item which is to estimate the accuracy of a product cost. Then following by classified the basic and secondary categories that could lend to esteem value such as convenience which are necessary to permit the design to work and sell. In addition, the worth of functions will be develop to compare and assigns the selected function to the simplest method since it has become more and more popular to ascertain the primary material cost associated with the function.

Fourth, the "creative or speculation phase" is referring to the value team leader and manager need to develop a huge number of ideas for alternative ways to solve and perform each function which has been selected for further study. Here are two the approaches to solve a problem which is analytical and creative approaches. Analytical approach means the problem is shown in a very direct form to the solution is taken. However, an analytical problem has only one solution that will work. On the other hand, the creative approach is an idea-producing process specifically to generate as many solutions as possible in order to solve each of the problems at hand. But there is only one optimum solution will be chosen among those available.

By using the synergy effect of combining both experience and expertise of the study team members, some new and fresh ideas were developed for creative problem-solving techniques such as the Gordon Technique, brainstorming, attribute listing and etc.

Fifth, the "evaluation phase" means to refine and choose the best ideas for development into specific-value improvement recommendations. Like the team need to eliminate low potential ideas, group similar ideas, establish idea champions, list down the advantages and drawbacks of each idea, rank the ideas, and select ideas for further development then only decision-maker critically assesses all alternatives and presented with little choices. However, this is not the final chance to defer ideas because the detailed cost-benefit analyses need to be conducted in the "development phase" then only lead to the final set of choices presented to the decision maker. In other word means that make it to become a practical, pragmatic and analytical mode. Each idea are selected and ranked according to their level of importance.

Sixth, it is following by the "development phase" which the purpose is to decide the "best" alternative(s) for presentation to the decision maker and the detailed analysis are made after the eliminating of weaker alternatives. The activities in this phase are described in the following subsections, including conduct a life-cycle cost analysis, determine the most beneficial alternatives, and develop implementation or action plans.

In addition, the cost factor is applied to reality from now.

Seventh, the "presentation phase" is to acquire a commitment to follow a course of action for starting an alternative. This presentation is only an initial step in the approval process to the decision-maker because the implementation of a decision need more time which require some additional steps, including, answering and collecting an additional questions, review of supporting documentation, and also involvement of other decision makers. This phase is only a preparation of presentation to encourage commitment and the keystone to selling a proposal which is also known as the process of winning management and stakeholders support by giving them an opportunity to ensure the written proposal is clearly understood and accurate communication exists between the parties concerned. In other words, any proposed changes are now put in a final form and will be presented to the management decision makers.

Finally, the occurrence of "implementation phase" is to obtain final approval of the proposal and facilitate its implementation. Although value analysis or value engineering techniques is an incredible method for planned and managed change but the process of change will still occur due to differences arise in individual and human interpretation. Ultimately, these will involve and affect the entire organization. One of the approaches to increase the successful chances of the planned change is to let people to participate in the decision making process. Besides that, value analysis or engineering is also ideally suited to meeting the challenges of goal achievement, including awareness, expectation of success, psychological safety, measurability of the change goal, and self-controlled evaluation.

Hence, here are the subsections depict a typical sequence of events, including prepare a written report like shows how performance is not adversely affected, and then attached by a team letter that summarizes the overall recommendation and action plan as well, then finally only send to all stakeholders. Next, following by enhance the probability of approval which involves change to the status quo. Like the manager is expects to receive a periodic progress reports before an ultimate decision is made because they are the one who makes an investment in a value analysis study and such action able to avoid unnecessary risk against the potential reward in advance. After that, the monitor progress is implementing to ensure that there is adequate of implementation funding, expediting their implementation by provides assistance and review all implementation actions which to ensure all the communication channels are open and that approval ideas are not compromised by losing their basis for original selection. Lastly, the value analysis team needs to follow-up all the activities or action plans to foster and promote the success of value analysis efforts such as submit cost savings reports to management, publicize accomplishments and etc.