The Psychology of Quality and More

Value Analysis

Quality Tools > Tools of the Trade > 25: Value Analysis

In these days of hyper-competition, customers are an increasingly important rare commodity as players in markets with massive over-supply, such as car manufacturers, fight for each sale. The key word in these battles that is on many people’s lips is ‘value’, and particularly value as defined by the end customer.

Value Analysis might thus be perceived as a new tool, but it is not. It is a well-developed discipline and even has its own specialist associations for industrial value engineers.

How it works

In essence, Value Analysis (and its design partner, Value Engineering) is used to increase the value of products or services to all concerned by considering the function of individual items and the benefit of this function and balancing this against the costs incurred in delivering it. The task then becomes to increase the value or decrease the cost.

Value, Function, Components and Cost

Functions, which can cover either of applied utility or emotional aesthetics, can often be broken down into a hierarchy of sub-functions and sub-components simply by asking ‘How do we do this?’.

Breaking down the value elements

How to do it

1. Identify the item to be analysed and the customers for whom it is produced.

2. List the basic functions (the things for which the customer is paying). Note that there are usually very few basic functions.

3. Identify the secondary functions by asking ‘How is this achieved?’ or ‘What other functions support the basic functions?’.

4. Determine the relative importance of each function, preferably by asking a representative sample of customers (who will always surprise you with what they prefer).

5. Find the components of the item being analysed that are used to provide the identified functions. Again, the question ‘How’ can come in very useful here.

6. Measure the cost of each component as accurately as possible, including all material and production costs.

7. Seek to eliminate or reduce the cost of components that add little value, especially high-cost components.

8. Seek to enhance the value added by components that contribute significantly to functions that are particularly important to customers.

The above analysis can be made more visible and easier to control by the use of appropriate tables and matrices, as illustrated below.

Using a table to analyse value

Next time: How-How

This article first appeared in Quality World, the journal of the Institute for Quality Assurance