Value Analysis
Value Analysis
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What is Value Analysis? SiteMap
Wikipedia defines Value Analysis under Value Engineering. Many of the concepts apply to all types of organizations and all types of processes.

Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost Value can therefore be increased by either improving the function or reducing cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements.

In the United States, value engineering is specifically spelled out in Public Law 104-106, which states Each executive agency shall establish and maintain cost-effective value engineering procedures and processes."

...value of a system's outputs is optimized by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers.

VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of paint has a "function" of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment consisting of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun) and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint.) This is the basis of what value engineering refers to as "function analysis".

Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships.

Value engineering is also referred to as "value management" or "value methodology" (VM), and "value analysis" (VA). VE is above all a structured problem solving process based on function analysis understanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgement. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate.

...looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved the product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique value analysis.

The Job Plan

Value engineering is often done by systematically following a multi-stage job plan.

  1. Preparation
  2. Information
  3. Analysis
  4. Creation
  5. Evaluation
  6. Development
  7. Presentation
  8. Follow-up

Four basic steps in the job plan are:

  • Information gathering - ...
  • Alternative generation (creation) - ...
  • Evaluation - ...
  • Presentation - ...

How it works

VE follows a structured thought process to evaluate options as follows.

Gather information

1.What is being done now?

Who is doing it?
What could it do?
What must it not do?


2.How will the alternatives be measured?

What are the alternate ways of meeting requirements?
What else can perform the desired function?


3.What must be done?

What does it cost?


4.What else will do the job?


5.Which Ideas are the best?

6. Develop and expand ideas

What are the impacts?
What is the cost?
What is the performance?

7.Present ideas

Sell alternatives"

For some organizations and for some processes going through such a formal procedure may be appropriate. For other organizations simply asking the questions concerning value and ROI of all your processes may be sufficient.

For example, some organizations have asked themselves questions about the value of budgeting. They know:

  • budgeting takes a great deal of management and executive results above and beyond the budgeting department

  • budget is often obsolete before the budget year even begins

  • budget comparisons of actual versus budget often don't consider changes in volume

  • managers game the system to ensure their bonus

  • .

  • .

Consequently, some organizations in US and Europe have actually stopped creating a formal annual budget and have replaced the budget with quarterly forecasts.  

Although there is no one right approach to value analysis, all organizations must continually question their processes to determine if they pass value analysis.

Email below or call John Antos, Maurice Greaver, or Steve Peacock at 972-980-7407 to find out about Value Analysis.

Find Out How We Can Help You Increase Organization Value Through Value Analysis.

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