What is Value Analysis?

Value analysis is a systematic review of the production, purchasing and product design processes to reduce overall product costs. This can be accomplished through a variety of activities, including the following:

Designing products to use lower-tolerance parts that are less expensive
Switching to lower-cost components
Standardizing parts across product platforms in order to achieve volume discounts
Altering production processes to minimize the amount of production cycle time, thereby reducing labor costs
Introducing automation to strip labor costs out of the production process
Altering product packaging to lower its cost while still protecting the product

The process is not a wholesale attack on costs. Costs are only reduced when the result will not impact the perceived level of quality experienced by customers, or the level of customer satisfaction.

Why is Value Analysis Important?

Most businesses should engage in value analysis as an ongoing priority, for several reasons. First, it can incrementally reduce costs throughout the organization, resulting in higher profits and more positive cash flow. Second, if implemented correctly, it can result in more efficient processes, which speeds up transaction cycle times. Finally, value analysis can be used to identify which activities are non-value added, and so can be stripped out of the entity’s processes.