Prepare for Value Analysis

Prepare for Value Analysis Richard Sievert, Jr., Ph.D. “Most printers have not taken the time to learn how to make themselves valuable to their clien...
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Prepare for Value Analysis Richard Sievert, Jr., Ph.D.

“Most printers have not taken the time to learn how to make themselves valuable to their clients.” (GATFWorld, August 2005). The value management method provides a way. If a prospective customer does not perceive the value of a product or service, it will not sell, regardless of its quality or how efficiently it was produced. In a resource-constrained competitive environment, businesses need a method to expedite a team consensus on ways to fulfill the functional needs of customers for the best price. Products, services, processes, and facilities must be evaluated periodically to identify new ways to better serve customers and maximize return on investment. It is only through constant evaluation that things can be improved. Businesses can apply the systematic multidisciplinary team value management method to challenge the status quo, identify opportunities for improvement, and rapidly reach consensus decisions regarding changes necessary to increase sales and profits. Value management studThe value management ies are performed with the objective of developing method works because a plan to maximize value and minimize costs. Busiit is a team effort. nesses short on resources can use the value management method presented in this article to develop a plan to meet customer needs and wants while still maintaining desired profits. Proper application of the value management method provides a way for businesses to make optimum use of available resources and exploit changes as profitable business opportunities. the

Value Management Method,


Why Is It Important?

Sometimes called value engineering, value analysis, function analysis, or value planning, the value methodology is both a financial management and marketing problem-solving method. Value management is not another program or this month’s fad. It is a powerful multidisciplinary team Your Commitment method to improve overall competitiveness and increase Time investment: profits by evaluating the functions and related costs of prod8–40 hours ucts, processes, services, systems, and facilities. Staff involvement: 5–7 team members Program scope: 6-phase process

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What Is

Prepare for Value Analysis


of the


Value Management Method

The value management method was invented during the World War II era by Larry Miles at General Electric Company (GE). While working in the purchasing department of GE, Miles was forced to find substitutes for parts and materials that were needed to fulfill GE’s contracts because they were either expensive or impossible to obtain due to rationing during the war. Miles discovered by specifying performance requirements in terms of functions, rather than parts or methods, GE could fulfill its contractual obligations at reduced costs and oftentimes at improved performance.

What Is Value? Lots of managers talk about value without really understanding what is involved with achieving optimum value. People may know the price of something but often do not know its value. Many managers, salespeople, and prospective customers talk about value. Lip service is paid to terms such as “value,” “value-added services,” and “value-added partnerships.” Like beauty, value is determined through the eyes of the beholder. Each customer will have a unique definition of value. It is an opinion based on a comparison to do something that will meet the customer’s requirements for less money. Neither the producer nor the supplier determines the value of products and services. Customers determine value. Customers buy value. In a value management study, the term value is synonymous with worth. Value is defined as the lowest-cost way to achieve the essential functions desired by the customer without sacrificing quality and performance. Determining value involves a comparison of what else will do the job and at what cost. Value management studies help businesses understand what functions the customer needs and is willing to pay for and then uncovers new ways to satisfy those requirements profitably. Establishing value from the customer’s perspective (market-oriented approach) provides businesses with a competitive advantage that will improve profitability and customer satisfaction. A value study examines how functions can be improved or added to support a price increase while at the same time evaluating how business expenses can be reduced. The result is improved profit margins, sales, and market share. versus

Traditional Cost Reduction

Analysis of those functions that make a product or service work and sell differentiates the value method from traditional cost avoidance or cost reduction efforts. Traditional cost reduction simply asks “What is it, and how can I make the same thing cheaper?” Value management asks “What does it do, and what else will do the job?” Value management focuses first on the functions performed by something under study and determines the optimum form, means, or methods at the conclusion of the study. Value studies focus on achieving the best cost-to-price ratio rather than concentrating only on cost reduction.

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Value Management

Prepare for Value Analysis


The Six-Step Value Management Job Plan A value management study is accomplished by following a six-phase job plan. The following are the job plan phases. Phase 1: Information Gathering. Defining the problem and collecting data about it. Phase 2: Function Analysis. Identifying and classifying functions and their costs. Phase 3: Creativity. Generating potential alternate solutions as a group. Phase 4: Evaluation. Further study of ideas and their costs. Phase 5: Development. Developing the proposal to management. Phase 6: Presentation. Summarizing your study results and recommendations.

The Team Commitment The value study team is typically comprised of five to seven people who must deal with the problem under study and have the ability to identify it and solve it. The value study team works under the direction of an experienced value specialist who facilitates the study/ workshop by following the value engineering job plan. Studies typically involve forty hours of intense team interaction. A forty-hour study can be completed within five consecutive days or spread out over a period of weeks or months. The level of difficulty of the problem will determine the actual time required to conduct a complete value study.

The Basics

During the function analysis phase, production operating costs such as material, labor, equipment, utilities, and facilities should be identified and translated in terms of functions. For example, the prepress department functions might include the following: supply plates, scan images, and make proofs.

Procure Materials Transport Materials Prepare Materials Print Product Finish Product Package Product Store Material Distribute Product

After the functions and cost of performing each function are identified, they are classified as “bask” or “supporting” on a F.A.S.T. (Function Analysis System Technique) diagram (see the sample diagram on page 4). Basic functions relate to the customer’s fundamental needs and are called work functions. Supporting functions help sell the product or service and increase customer acceptance by meeting the emotional, aesthet-

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During a value study, the functions and costs of a selected product, process, service, or facility are defined, classified, and evaluated carefully in terms of the internal or external customer’s actual needs. A fundamental rule of value engineering is that all functions are defined in just two Examples of Functions words: an active verb and a measurable noun. Functions describe required performance actions without Task = “Produce Product” describing specifically how each function is performed Sell Product (see sidebar at right). Furnish Workplace

Prepare for Value Analysis


F.A.S.T. Diagram

Customer-Oriented (Task Fast) Installation of Production Equipment

NEEDS Support Weight Basic Functions


Furnish Power Furnish Space


Support Functions

Install Equipment


Improve Workflow

Assure Convenience

Minimize Maintenance

Improve Workflow

Assure Dependability

Control Environment

Improve Workflow

Satisfy User

Attract User

Meet Codes

Improve Workflow

Save Energy Reduce Costs

ic, subjective needs of the customer. They are not necessary to accomplish the task, but they do influence the customer’s decision to fund the product or service. Next, members of the value study team look for value mismatches. A value mismatch is a high-cost function with low acceptance from the customer’s perspective. Alternatively, a value mismatch can occur when insufficient funds are allocated for something that is important from the customer’s standpoint. Creativity techniques are then used to generate alternative lower-cost ways to satisfy customer requirements. Next, the ideas generated during the creativity session are ranked according to their feasibility, cost, and probability of being accepted by the customer. Ultimately the ideas that represent the best opportunities for value improvement are developed into a written report with recommendations. of the

Value Management Method

The strength of the value method is derived from analyzing and improving the relationship of function costs and worth from the customer’s perspective, cross-disciplinary team problem-solving, identification of value mismatches, application of creativity and consensus building techniques, and a structured approach to optimize overall performance with fewer resources. Businesses can apply the value methodology to combat dwindling profits and price competition. Many of the improvement opportunities identified through value management studies require little or no capital investment. They rely primarily on better planning, organization, teamwork, and the application of new technologies and work strategies. Businesses interested in team-based reengineering methods for improving their competitive position,

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Prepare for Value Analysis


marketability, and value of their products and services are candidates for value management studies.




To get an even deeper understanding of what is involved in a value analysis project, along with step-by-step guidelines and worksheets, take advantage of Rick Sievert’s book, Value Management: How to Do More with Less. This book shares the principles and techniques of value analysis along with the objectives of this activity and management’s responsibilities. Sample charts, diagrams, and worksheets give you the tools and guidelines you need to help identify and resolve value problems in your own organization. Author Richard Sievert, a recognized expert in value engineering and professor in the College of Engineering at Drexel University where he teaches value engineering and prepares students for SAVE International Module 1 basic certification, gives you a blueprint to understand the value in your business so you can: • Concentrate on what’s most important for your business • Cultivate teamwork and creativity • Eliminate waste • Differentiate your company • Gain a competitive edge Get more detail about this title at For more information on this and our other Lean and operational excellence titles, visit

This article was originally published in the March 2013 issue of Printing Industries of America: The Magazine.

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