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Product by Value Analysis Method to Realize Cost Reduction in Manufacturing: The Execution Process

In the first post about how to product by value analysis, we gave you the initial steps of a value analysis method or technique which will allow you and your manufacturing facility to conduct a brainstorm first by understanding the goals and gathering information. Ultimately, once you then execute past the information and gathering steps, you will output information which will allow you to realize cost reductions on current products, and learn how to work towards developing new products which help grow revenue and reach new customers and keep current customers.

We conclude our value analysis method today, from guest blogger and 3PL consultant, , by talking about the execution process of the value analysis method.

Evaluation

The evaluation should be done after an interval, at best about two days after the brainstorm, to allow the group to gain perspective.

Now the group analyzes each idea. They group similar ideas. When evaluating, do not think why the idea would not work, why it is not possible. Develop each idea, making it more practical, making it function better. Estimate a very approximate cost for each idea and investigate carefully ideas with an apparently low cost. When an idea is canceled, that should be based on facts, not opinions.

Identify barriers and eliminate them tactfully.

Barriers are excuses or preconceived ideas that cannot be substantiated with numbers, facts, detailed and precise information or experimental evidence. Barriers can be honest beliefs. Normally there is gold behind a barrier.

Now select the two to four ideas having the lowest cost.

  • Obtain information for analyzing and developing an idea. Do not work in isolation. Once the group has advanced as far as it can on its own, make contact with specialists. This may be necessary in the selection and also during the development of ideas. The value analyst is a coordinator of specialists, of groups of experts in other companies (Pay them for their contribution in some manner).
  • Obtain information from the best source, not the nearest or most accessible one. Do not take into account an answer by a person or specialist that lies outside his field of expertise. The use of specialists is a powerful way of tearing down barriers. Avoid generalizations. Do not accept second hand information. Ask for copies of documents.

Development of the two to four ideas selected

Make a real effort to develop the ideas of lowest cost that do the main function. Make tests, prototypes, get quotes of cost. Estimate costs of short term alternatives, of long term alternatives and of any new ideas produced during the evaluation.

At the end of this process, the idea of least cost should have been identified. Ask yourself: "Would I spend my own money on this solution?" If not, modify it.

Recommendation

If you work in an organization or enterprise, be sure that the person really interested in applying the solution gets to see it. Present the final solution in writing, on a single sheet of paper, to the person that should implement it. Give a copy to his boss. This sheet should state the savings, costs and a detailed plan for implementing the idea. It should have all the information needed so that a person that does not know this subject can understand it and do it. The value analysis group should not itself implement the idea, if this is outside its normal area of work.

Implementation and Follow Up

  • Value analysis is not a method of controlling the work of others or of investigating errors.
  • Normally the amount of work to implement an idea is greater than the amount of work needed to produce the idea. Therefore it is a good procedure to let the people that implement the idea get most of the praise and merit. That produces excellent relations.
  • Obtain that the group that implements the idea informs of the savings produced and, if possible, benefits from these savings. If needed, help them to establish the way the implementation will be checked and the savings calculated.

It is good to have a recorder on the cross-functional team to write the minutes. A Captain is appointed to lead the discussion. Assignments are given to all members with due dates for replies. Always solicit Suppliers. They are the specialists in their field. Get your suppliers involved. Consider using a Supplier Day Conference for an item or commodity to gather ideas and collaborate with your suppliers.

Cost Reduction is assured using this value analysis approach. How do you conduct a value analysis? Let us know in the comments below!

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Chuck Intrieri

3PL Consultant at
Mr. Chuck Intrieri is a highly experienced and credentialed Supply Chain Management professional and is a recognized thought leader and innovator, primarily in the areas of Supply Chain Optimization, LEAN initiatives, Operations, Manufacturing, Third Party Logistics (3PL) International Purchasing/Importing, Inventory Management and Logistics, Strategic Sourcing, and Procurement Operations.
Chuck Intrieri

Chuck Intrieri

Chuck Intrieri

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