OPERATIONS MANAGEMENT

Value Analysis

1. Cost reduction technique.

2. Organised creative approach.
3. Main focuses.
4. Birth – Second World War.
5. Recent years -
• Value Engineering.
• Molecular Engineering.
• Vertical Thinking.
 What is Value

The minimum money which has to be expended in

purchasing or manufacturing a product to create the
appropriate use of esteem factors.
 Division Of Value

1. Use of functional Value.

2. Esteem Value.
3. Cost Value.
4. Exchange Value.
 Advantages of Value Analysis
 It leads to improvements in product design so that, most appropriate
products are produced .
 High quality (value) is maintained.
 All-round efficiency is achieved by eliminating waste of various types.
 Cost savings provide a measure for judging managerial effectiveness.
 New ideas are generated and incorporated.
 Teams spirit and morale are improved.
 Areas requiring attention and improvement are pin pointed.
 Procedure of Value Analysis
 There is no standard approach or procedure
 Ascertaining the needs and wants of customers.
 Specifying the function of products and components.
 Determining the appropriate cost of desired
performance.
 Identifying better alternatives in terms of works
procedures.
Implementation of Value Analysis

Identifying the function:-

Primary.
Secondary.
 Evaluation of the function by comparison :-
 Basic question
 “does the function accomplish reliability at the best cost “
 Develop Alternatives.
Value Analysis Steps
1. Gather Information.
2. Measure Performance.
3. Analyse Functions.
4. Generate Ideas.
5. Evaluate and Rank Ideas.
6. Develop and Expand Ideas.
7. Present Ideas.
 Value Engineering
 Value engineering is a total of management which
approaches the question of saving cost from the
point of view of ‘value’.
 Requires co-operation of all functional departments.
 In large organisations, there are value engineering
teams having full time jobs.
 Value Engineering
Value and cost

Value = Function
Cost
 Value: What the product is worth to the customer.

 Function: Properties and qualities of product.

 Cost: Money value of materials used, Labour & indirect

costs.
 Value Engineering
Suggestion schemes
 Suggestion scheme facilitates the work of value
engineering team.
 The scheme helps in the changes of value
engineering and makes it implementation easier.
 Value Engineering
Requirement of a product
 Use.
 Esteem.

It is essential to be considered how much to be

added in order to sell the part.
The reasonable price of a product can be obtained
by comparing with a comparative product.
 Value Engineering Approach
No standard approach – discuss with team members.
Subject Basic question Analysis Answer

Function What functions 1) Is there any possibility of elimination?

are performed? 2) What alternative methods are available?

Material What is the 1) Can alternative material be used?

material 2) Can the specification be amended?
specification?
What quantity of 1) Is the size or weight of material excessive?
material should be 2) Can the quality be reduced?
used? 3) Will a cheaper material serve the same
purpose?
4) Is the cutting done economically without
waste?
Value Engineering Approach
Subject Basic question Analysis Answer

Labour Which are the direct 1) Are all the operations necessary?
labour costs? 2) Will alternative operations be cheaper?
3) Can certain assembly operations be modified?

Process Are the best 1) Are all the operations necessary?

Processes being 2) Will alternative operations be cheaper?
used? 3) Can certain assembly operations be modified?

Standardization Are the materials or 1) Can the materials be standardized?

components 2) Can a number of product use standard (common)
standard? parts?
3) Can methods be standardized?
Waste Control
 Reasons for wastages in industry
 Obsolescence
 Surplus
 Scrap
 Role of Management in waste control
 Proper inventory control
 Materials management
 Effective Co-ordination among departments
Input-Output Analysis
 Systematic study of production structure.
 Predict total production of each year.
 Production structure of all the industries are to be
grouped together.
 Output material of 1 sector becomes input raw-
materials for the other.
Original Information Innovation Evaluation Choice Implementation Review
Phase Phase Phase Phase Phase Phase Phase
 1. Product Design and Development

1. Factors considered in product design :-

 Customer’s requirement.

 Operator’s Convenience.

 Types of materials.

 Work methods and equipment.

1. Product Design and Development
2. Design.
3. Planning.
4. Specialized function.
5. Visible in long run.
2. Application of Value Engineering
 Overall quality and performance.
 Work together to reduce cost.
 Latest developments.
 Service function.
 Desired objective.
3. Simplification of Product
1. Elimination of undesirable features.
2. The main purpose is to improve quality and to
reduce unit costs.
 Reduce cost and prices.
 Reduction of undesirable materials.

3. Benefits.