Cerasis friend and experienced engineer and 3PL consultant, Chuck Intrieri, whom you can connect to on LinkedIn, is featured again as a guest blogger. This time he offers a two part series on a value analysis technique you can employ in any industry to gather ideas to better your company, but more specifically in the process of creating new products to manufacture in order to lower costs of goods and increase your bottom line.
It is an orderly and creative method to increase the value of an item. This ” item” can be a product, a system, a process, a procedure, a plan, a machine, equipment, tool , a service or a method of working. Value Analysis, also called Functional Analysis was created by L.D. Miles of General electric Company…
The value of an item is how well the item does its function divided by the cost of the item (In value analysis value is not just another word for cost):
Value of an item = performance of its function / cost
Select the item to be studied and form a cross-functional study group team:
The value analyst should always be aware of functions, not of products, shapes, or processes. The main function is what the item does, is that which somebody wanted to archive by creating the item. Express this function (if possible) with just two words, a verb and a noun.
If the item is composed of various parts, it is useful to ask for the function of each part, and how they contribute to the main function of the item.
Do not be distracted by mere aggregate functions such as the rubber on a pencil’s end or the ice producing part of a refrigerator. These were functions added since it was economical or easy to do so. They have no relationship with the main function.
Find the main function and the secondary functions of an item. Get the cost of realizing each function. The attitude of a value analyst should be critical, aggressive, nonconformist, never satisfied with what she/he receives for the money given. The first action of the group should be to gather all the information about the item. Ask the best specialist of the field, not the person most accessible. Get a detail of costs. Collect drawings, specifications, all the written data on the item. Don’t be satisfied with verbal information.
For a pencil, for instance:
(This example, the pencil, is already a high value item).
Center the attention of the value analysis group on the main function, because, during the analysis, the secondary functions may change. The group may choose different secondary functions to realize the main function.
It is not important that the individual costs assigned are imprecise. Because even an imprecise numerical value is much better than an expression such as “very costly” or “of low cost”. Use Pareto’s 80/20 principle for cost analysis… That means 20% of the items are 80% of the total costs. Focus on these 20% first.
Measure the value of the way each secondary function is realized, is materialized:
Investigate the cost of a function. Put a dollar sign on tolerances and strict specifications. See what’s thought to be necessary and which somebody put in, just to be on the safe side. Remember: All that does not contribute to the main function is waste and should be eliminated.
Creativity (the brainstorming session)
The objective is to find a better way to do the main function. We try to find a different material, or concept, or process, or design idea, that realizes the main function.
People looked for conditions under which the human mind produces really original ideas, a method that helped creativity. These conditions and procedures are stated below and need strict adherence:
This finalizes the brainstorm.
In tomorrow’s post we will go over the rest of the steps of the technique in order to conduct a value analysis and to know how to work towards making products at a lower cost. These include: Evaluation, potential barriers and how to eliminate them, development, recommendations, and then implementation and follow up.
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