Value Analysis

31/07/2020 1 By indiafreenotes

Value Analysis (VA) is concerned with existing products. It involves a current product being analysed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These include costs, function, alternative components, and design aspects such as ease of manufacture and assembly.

A significant part of VA is a technique called Functional Analysis, where the product is broken down and reviewed as several assemblies. Here, the function is identified and defined for each product assembly. Costs are also assigned to each one. This is assisted by designing and viewing products as assemblies (or modules). As with VE, VA is a group activity that involves brainstorming improvements and alternatives to improve the value of the product, particular to the customer.

It is a rational and structured process consisting of:

(a) Functional analysis to define the reason for the existence of a product or its components,

(b) Creatively analysis for generating new and better alternatives and

(c) Measurement for evaluating the value of present and future concepts.

The phrase value analysis can be defined as a technique which examines the facts of a function and cost of a product in order to determine whether the cost can be reduced or altogether eliminated, while retaining all the features of performance and quality of a product or both.

Therefore, logically, VA is an organised approach of exposing and eliminating unnecessary costs. The method has logical foundation in its fundamental approach to cost reduction and profit improvement and in this objective approach, the VA techniques must analyse the functional cost of an item and recommend a change.

Put alternatively, VA is a team approach to think functionally about a component as to “what it does” rather than “what it is”. This approach is the real test of understanding problems under study.

Phases of Value Analysis:

As an exercise, the phases of value analysis are:

  1. Phase of Origination:

In the first phase, a value analysis study team is constituted. The project is selected and clearly defined. The team examines in detail the product and its components to understand thoroughly their nature.

  1. Phase of Information:

After familiarisation, a functional analysis is carried out to determine the functions and uses of the product and its components. The cost and importance of each function are identified. A value index is calculated on the basis of cost benefit ratio for each function. A list is being prepared in which the items of functions are arranged in decreasing order of value.

  1. Phase of Innovation:

This is the creative phase concerned with the generation of new alternatives to replace or removing the existing ones.

  1. Phase of Evaluation:

Each and every alternative is analysed and the most promising alternatives are selected. These alternatives are further examined for economic and technical feasibility.

The alternatives finally selected must be capable of performances the desired functions satisfactorily. These must meet the standards of accuracy, reliability, safety, maintenance and repairs, environmental effects and so on.

  1. Phase of Choice:

In this phase, report is prepared. This report contains a summary of the study, conclusions and specific proposals. The decision makers choose the alternative. The programs and action places are then developed to implement the chosen alternative.

  1. Phase of Implementation:

The chosen alternative is put to the actual use with the help of the programs and action plans so developed in advance.

  1. Phase of Review:

The progress of analysis changes in continuously monitored and followed up in order to provide assistance, to clarify any misconceptions and to ensure that the desired results are achieved.

Merits of Value Analysis:

Value analysis is really a very valuable technique of cost reduction and quality improvement. The specific merits of its are:

  1. Improvement in Product Design:

It leads to improvements in the product design so that more useful products are given shape. Now in case of ball points, we do not have clogging, there is easy and even flow of ink and rubber pad is surrounding that reduces figures fatigue.

  1. High Quality is maintained:

High quality implies higher value. Thus, dry cells were leaking; now they are leak proof; they are pen size with same power. Latest is that they are rechargeable.

  1. Elimination of Wastage:

Value analysis improves the overall efficiency by eliminating the wastages of various types. It was a problem to correct the mistakes. It was done by pasting a paper. Now, pens are there and liquid paper is developed which dries fast and can write back.

  1. Savings in Costs:

The main aim of value analysis is to cut the unwanted costs by retaining all the features of performance or even bettering the performance. Good deal of research and development has taken place. Now milk, oils, purees pulp can be packed in tetra packing presuming the qualities and the tetra pack is degradable unlike plastic packs.

  1. Generation of New Ideas and Products:

In case of took brushes, those in 1930’s were flat and hard, over 60 to 70 years brushes have come making brushing teeth easy, cosy and dosy as it glides and massages gums.

  1. Encourages Team-Spirit and Morale:

Value analysis is a tool which is not handled by one, but groups or teams and an organisation itself is a team of personnel having specification. A product is the product of all team efforts. Therefore, it fosters team spirit and manures employee morale as they are pulling together for greater success.

  1. Neglected Areas are brought under Focus:

The organisational areas which need attention and improvement are brought under the spot-light and even the weakest gets a chance of getting stronger and more useful finally join’s the main strain.

  1. Qualification of Intangibles:

The whole process of value analysis is an exercise of converting the intangibles to tangible for decision making purpose. It is really difficult to make decisions on the issues where the things are (variables) not quantifiable.

However, value analysis does it. The decision makers are provided with qualified data and on the basis of decisions are made. Such decisions are bound to be sound.

  1. Wide Spectrum of Application:

The principles and techniques of value analysis can be applied to all areas-man be purchasing, hardware, products, systems, procedures and so on.

  1. Building and Improving Company Image:

The company’s status or image or personality is built up or improved to a great extent. Improvement in quality and reduction in cost means competitive product and good name in product market; it is a good pay master as sales and profits higher and labour market it enjoys reputation; it capital market, nobody hesitates to invest as it is a quality company.


Like any other cost reduction technique, value analysis has its own limitations. The most common limitations are that the man-made excuses are the blocks in implementing these plans of value analysis.

The most common excuses given are:

(a) Lack of motivation

(b) Resistive to change

(c) Inertia

(d) Lack of knowledge and patience

(e) Attitude of ‘It will not work in India

(f) We are very small or very big

(g) This has been tried earlier and failed

(h) The change is too big

(i) ‘Let competitors try before we try’

(j) Difficulty of teams meeting or team meeting for getting consensus.

These limitations are man-made and can be over-come one the company divides to implement. However, they should be educated of the plus and minus points and the main beneficiaries are those that are to be told and they are to be taken into confidence.