What is Value Analysis? Definition and How it works

In this article, we have given a detailed explanation about value analysis, how it differs from value engineering, the steps involved in implementing it, and the best examples.

What is Value Analysis?

Value analysis is defined as the set of techniques used to increase the value of a product by using value engineering methodologies. It is a method that aims to improve the overall function of a product without compromising quality and performance.

At the core of value analysis is the goal of cost reduction by means of eliminating avoidable, wasteful processes. The cost reduction is not achieved at the expense of reduced performance, but instead by making the processes leaner which in fact improves the value and performance of the product.

The project at hand can be a service or a product. Value analysis very rigorously undertakes the task of extensive research, identification of friction points, to then devise an innovative strategy to reduce cost and improve the value of the product.

Value Engineering VS Value Analysis

The terms value engineering and value analysis are very closely related, which can be slightly confusing. So it’s important you understand the difference between these two terms.

Firstly, let’s understand what value engineering means. Value engineering is a methodology used during the development process of a new product. Teams use value engineering to analyze the product and find ways to improve its function and reduce costs. However, the process is only conducted for new, in-development stage products, for which no early investments are made yet.

value analysis

Value analysis, on the other hand, is the process conducted for existing products with the goal of improvement at the forefront. It is a step-by-step process that evaluates all possible segments of a product to make them leaner. Another aspect of value analysis is function analysis, where the product is broken down into individual components which are all analyzed separately.

How does value analysis work?

Now that we have briefly defined what value analysis means, you are probably wondering how a company defines value or function. So before we dive into the steps and phases of value analysis, let’s first define a few important terms.

  1. Value - Lean defines value as anything a customer is willing to pay for. Value can also be considered as the ratio of derived customer satisfaction over the incurred cost.
  2. Need - Any function, feature, or product that is desired by the customer.
  3. Function - The utility of a product or element that contributes to meeting customer needs.

The process of value analysis is carried out in several different stages according to the Value Methodology standard. The stages are as follows:

  1. Gaining Information about the Project
  2. Function Analysis
  3. Devising Innovative Ideas
  4. Further Evaluation
  5. Development
  6. Presenting the Alternatives

1. Gaining Information about the Project

Any analysis always begins with the data collection phase. Here, teams work on understanding all the information about the project structure, its components, design, and the overall project scope. With this basic information outlined, teams then move on to analyzing the cost, revenue, risks and both monetary and non-monetary issues.

The goal of this stage is to familiarize yourself with all the information pertaining to the project, along with the problem areas, which will then allow teams to analyze these aspects. This phase will include site visits (if needed) and meetings with project teams. Teams need to also familiarize themselves with all the project-related documents like the project plan, process flow, drawings, and specifications, along with any performance or quality control related reports.

All the information obtained during this stage will form the base for the stages to come.

2. Function Analysis

As mentioned earlier, function analysis is the main step in the value analysis process. Function analysis can be simply defined as the process of identifying the individual functions of a product and analyzing them.

These functions can be of two forms:

  1. Primary functions - these are the most basic functions of the product that directly contribute to satisfying the customer’s needs.
  2. Secondary functions - these are functions that support the primary functions and serve the overall product without being one of the core functions.

During the function analysis process, teams first need to identify these processes and segregate them into primary and secondary functions. You are most likely to find many secondary functions that are not directly visible to the user but are nevertheless essential.

Once the functions are identified, teams perform a detailed analysis to understand the value of each function. Teams typically lookout for any value-mismatch functions. Such functions might result in some obstruction in the regular functioning of the product. Identifying these friction points will then allow teams to devise innovative solutions to solve for them.

3. Devising Innovative Ideas

This phase essentially deals with the generation of new, innovative, and creative ideas. After a thorough brainstorming session, teams develop alternative ways that are cost-effective to perform the primary and secondary functions of the product.

Here, each function is first accessed individually to then list all the alternative ways that function can be performed. Here all the functions are treated equally and the focus is on finding alternatives.

4. Further Evaluation

In this phase, the team evaluates all the ideas brainstormed in the earlier stage. As it’s practically impossible to implement all the improvement initiatives, each idea is given a priority in this phase.

Based on the priority, the ideas are further discussed to identify the risk involved, potential incurred cost, implementation strategy, and the overall effect on the performance. This will then allow the teams to decide if the improvement is worth implementing.

5. Development Phase

This is the penultimate phase of value analysis. Once the teams define a cohesive revamp model that addresses all the problem areas and provides accessible solutions, they move to the development phase.

In this phase, the value engineering team develops the changes to pass them on to the project team. The changes must be clearly documented so the project team can follow them easily. The benefits of these changes, the forecasted cost reduction, all should be mentioned in the documentation.

6. Presenting the Alternatives

value analysis

Finally, the outcomes of the value analysis are presented to the various stakeholders. The presenter will explain all the facets of the changes to the stakeholders, so they themselves can understand what the new ways will look like. The reports presented can include risk analysis reports, present worth analysis, advantages, and disadvantages, among other facets.

Since stakeholders are the ones who bear the burden of risk and reap the benefits, the value analysis report is presented to them.


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