Value Analysis
Value Analysis
According to Society of American Value
Engineers “Value analysis is the systematic application of recognized
techniques which identify the function of a product or service, establish a
monetary value for the function and provide the necessary function reliability
at the lowest overall cost”.
It is a creative approach to eliminate
the unnecessary costs which add neither to quality nor to the appearance of the
product.
Value analysis applied, when
- Company’s products show decline in sales.
- Company’s prices are higher than those of its competitors.
- Raw materials cost has grown disproportionate to the volume of production.
- New designs are being introduced.
- The cost of manufacture is rising disproportionate to the volume of production.
- Rate of return on investment has a falling trend.
- Inability of the firm to meet its delivery commitments.
Value
The term ‘value’ is used in different
ways. The designer equates value with reliability; purchase people with price
paid for them; production personnel with that of cost from the angle of
manufacture; sales people with what customer is willing to pay.
In the field of value investigation, value refers to economic value, which itself can be sub-divided into four types.
“Cost
Value” is the measure of sum of all costs incurred in producing the
product. The ‘cost value’, therefore is the sum of raw-material cost, labour
cost, tool cost and overheads expended to produce the product.
“Exchange
Value” is the measure of all the properties, qualities and features of
the product which make the product possible of being traded for another product
or for money. In a conventional sense, ‘exchange value’ refers to the price
that a purchaser will offer for the product, the price being dependent upon the
satisfaction value which derives from the product.
“Use
Value” is the measure of properties, qualities and features which make
the product accomplish a use, work or service. Use value, therefore, is the
price paid by the buyer or the cost incurred by the manufacturer in order to
ensure that the product performs its intended function efficiently.
“Esteem Value” is the measure of properties, features,
attractiveness graphic packaging and the like which increases sales appeal or
which attracts customers and create in them a strong desire to own the product.
