What is value analysis?

the systematic and critical assessment by an organization of every feature of a product to ensure that its cost is no greater than is necessary to carry out its functions.

Lawrence Miles conceived of Value Analysis (VA) in the 1945 based on the application of function analysis to the component parts of a product. Component cost reduction was an effective and popular way to improve “value” when direct labor and material cost determined the success of a product. The value analysis technique supported cost reduction activities by relating the cost of components to their function contributions.

Value analysis defines a “basic function” as anything that makes the product work or sell. A function that is defined as “basic” cannot change. Secondary functions, also called “supporting functions”, described the manner in which the basic function(s) were implemented. Secondary functions could be modified or eliminated to reduce product cost.

As VA progressed to larger and more complex products and systems, emphasis shifted to “upstream” product development activities where VA can be more effectively applied to a product before it reaches the production phase. However, as products have become more complex and sophisticated, the technique needed to be adapted to the “systems” approach that is involved in many products today. As a result, value analysis evolved into the “Function Analysis System Technique” (FAST) which is discussed later.

 

Value Analysis: -

 

It means to identify expenses which can be dispensed with, either by using cheaper materials or through a new product that uses fewer components in the design. A passive outlet which led to blame the decline in the value-added quality and workmanship. For example, cars are now made of lightweight steel as well as the window frames have become far less frills than it was in the past.

value analysis is theprocessof analyzing the sequence of business functions in which customer usefulness is added to products or services.

 

Manufacturing: Systematic analysis that identifies and selects the best value alternatives for designs, materials, processes, and systems. It proceeds by repeatedly asking "can the cost of this item or step be reduced or eliminated, without diminishing the effectiveness, required quality, or customer satisfaction?" Also called value engineering, its objectives are (1) to distinguish between the incurred costs (actual use of resources) and the costs inherent (locked in) in a particular design (and which determine the incurring costs), and (2) to minimize the locked-in costs. Purchasing: Examination of each procurement item to ascertain its total cost of acquisition, maintenance, and usage over its useful life and, wherever feasible, to replace it with a more cost effective substitute.

The importance of financial analysis: -

Financial analysis has to be attached by evaluating the following matters: -

• the institution's financial structure (the institution's assets and sources of money that got them.

• an operating its (the stages of the product or service and sell it and collect it.

• directions taken by the institution over which Addhsnoat.

• Flexibility by the Foundation enjoys to deal with unforeseen events such as (deviation in sales and deviation in cash flow)