1. What is Value Analysis?

Ans: Value Engineering (VE) or Value Analysis (VA) is an important and powerful approach for
improvement in the performance of the products, systems or procedures and reduction in costs
without jeopardising their function. The terms VE and VA are used almost interchangeably. Other
terms used to convey the same concepts are Value Assurance and Value Management (VM).

2. State the types of values.

Ans: The term value can be divided into following types: a) Use Value: The properties and qualities
which accomplish a useful purpose or service. b) Esteem Value: The properties, features or
attractiveness which cause us to want or own it. c) Cost Value: The sum of labour, material and
various other costs required to produce it. d) Exchange Value: The properties or qualities which
enable us to exchange it for something else we want.

3. Value Engineering had its origin at the General Electric Company (GEC)

4. What is Function Cost Matrix?

Ans: A tool for identifying poor value areas by showing percentage importance of a function in a
product and percentage cost spent in accomplishing that function.

5. What is value index?

Ans: Ratio of relative importance of a function to its relative cost.

6. What is Paired-Comparison in value engineering?

Ans: A technique of determining relative importance of functions in Value Engineering by comparing

two functions at a time.

7. Define Esteem Value.

Ans: The properties, features or attractiveness which create a desire to possess the article is called
esteem value.

8. Write a short note on value methodology and value study? 5 (M)

Ans: A value methodology focuses on improving value by identifying alternate ways to reliably
accomplish a function that meets the performance expectations of the customer. Function Analysis
is the foundation of a value methodology Function describe the work being performed within the
scope of the project under study. Function described using two word, active verb/measurable noun
pairings; for example one function of a hammer is to apply force.

A Value Study is the formal application of a value methodology to a project in order to

improve its value. This application is also referred to as value engineering, value analysis, value
planning, or value management. The subject of a Value Study whether it is a product, process,
procedure, design, or service will be referred to as the “project.

9. State the phase of value analysis?

1. Phase of Origination:
In the first phase, a value analysis study team is
constituted. The project is selected and clearly defined.
The team examines in detail the product and its
components to understand thoroughly their nature.

2. Phase of Information:
After familiarisation, a functional analysis is carried out to
determine the functions and uses of the product and its
components. The cost and importance of each function are
identified. A value index is calculated on the basis of cost
benefit ratio for each function. A list is being prepared in
which the items of functions are arranged in decreasing
order of value.

3. Phase of Innovation:
This is the creative phase concerned with the generation
of new alternatives to replace or removing the existing
ones.

4. Phase of Evaluation:
Each and every alternative is analysed and the most
promising alternatives are selected. These alternatives are
further examined for economic and technical feasibility.

The alternatives finally selected must be capable of

performances the desired functions satisfactorily. These
must meet the standards of accuracy, reliability, safety,
maintenance and repairs, environmental effects and so on.

5. Phase of Choice:
In this phase, report is prepared. This report contains a
summary of the study, conclusions and specific proposals.
The decision makers choose the alternative. The programs
and action places are then developed to implement the
chosen alternative.

6. Phase of Implementation:
The chosen alternative is put to the actual use with the
help of the programs and action plans so developed in
advance.

7. Phase of Review:
The progress of analysis changes in continuously
monitored and followed up in order to provide assistance,
to clarify any misconceptions and to ensure that the
desired results are achieved.

Merits of Value Analysis:

1. Improvement in Product Design:

It leads to improvements in the product design so that
more useful products are given shape. Now in case of ball
points, we do not have clogging, there is easy and even
flow of ink and rubber pad is surrounding that reduces
figures fatigue.

2. High Quality is maintained:

High quality implies higher value. Thus, dry cells were
leaking; now they are leak proof; they are pen size with
same power. Latest is that they are rechargeable.

3. Elimination of Wastage:
Value analysis improves the overall efficiency by
eliminating the wastages of various types. It was a
problem to correct the mistakes. It was done by pasting a
paper. Now, pens are there and liquid paper is developed
which dries fast and can write back.

4. Savings in Costs:
The main aim of value analysis is to cut the unwanted
costs by retaining all the features of performance or even
bettering the performance. Good deal of research and
development has taken place. Now milk, oils, purees pulp
can be packed in tetra packing presuming the qualities
and the tetra pack is degradable unlike plastic packs.

5. Generation of New Ideas and Products:

In case of took brushes, those in 1930’s were flat and
hard, over 60 to 70 years brushes have come making
brushing teeth easy, cosy and dosy as it glides and
massages gums.

6. Encourages Team-Spirit and Morale:

Value analysis is a tool which is not handled by one, but
groups or teams and an organisation itself is a team of
personnel having specification. A product is the product of
all team efforts. Therefore, it fosters team spirit and
manures employee morale as they are pulling together for
greater success.

7. Neglected Areas are brought under Focus:

The organisational areas which need attention and
improvement are brought under the spot-light and even
the weakest gets a chance of getting stronger and more
useful finally join’s the main strain.

8. Qualification of Intangibles:
The whole process of value analysis is an exercise of
converting the intangibles to tangible for decision making
purpose. It is really difficult to make decisions on the
issues where the things are (variables) not quantifiable.

However, value analysis does it. The decision makers are

provided with qualified data and on the basis of decisions
are made. Such decisions are bound to be sound.

9. Wide Spectrum of Application:

The principles and techniques of value analysis can be
applied to all areas-man be purchasing, hardware,
products, systems, procedures and so on.

10. Building and Improving Company Image:

The company’s status or image or personality is built up or
improved to a great extent. Improvement in quality and
reduction in cost means competitive product and good
name in product market; it is a good pay master as sales
and profits higher and labour market it enjoys reputation;
it capital market, nobody hesitates to invest as it is a
quality company.

Limitations:
Like any other cost reduction technique, value analysis
has its own limitations. The most common limitations are
that the man made excuses are the blocks in implementing
these plans of value analysis.
The most common excuses given are:
(a) Lack of motivation

(b) Resistive to change

(c) Inertia

(d) Lack of knowledge and patience

(e) Attitude of ‘It will not work in India

(f) We are very small or very big

(g) This has been tried earlier and failed

(h) The change is too big

(i) ‘Let competitors try before we try’

(j) Difficulty of teams meeting or team meeting for getting

consensus.

Cost Control – Definitions

Cost control is defined as “the guidance and regulation, by
executive action, of the cost of operating an undertaking.”
It is exercised through numerous techniques such as
standard costing, budgetary control etc. It is to improve
performance or efficiency to achieve the target.

5 Elements Involved in Cost Control System

Efficient organisation and operation of cost control
system involves the following elements:
1. Setting up the targets.

2. Measurement of the actuals.

3. Comparison of actuals with the targets to ascertain
variances.

4. Analysis of variances (between the targets and the

actuals) to their causes.

5. Taking such corrective actions as are necessary to

eliminate the variations.

Write a short note on cost reduction

Cost Reduction:
1. Objectives – Cost Reduction is directed to explore the
possibilities of improving the targets or standards
themselves. It challenges all standards and makes
continuous efforts to better them.

2. Approach – Cost reduction is a continuous process and

recognizes no condition as permanent. It involves a
continuous process of analysis and tries to find out new
means to achieve reduction in costs.

3. Nature – Cost reduction is corrective function. It

operates even when effective cost control system exists. It
presupposes that there is always a room for reduction in
the achieved costs.

4. Emphasis – In case of cost reduction, the emphasis is on

the present and the future. The emphasis is not o what
have been the cost but what could be the possible
improved in the costs. Thus, there is no end to cost
reduction.

5. Assumptions – Cost reduction assumes the existence of

concealed potential savings in the standards or norms
which are therefore subject to constant challenge or
improvement.

Some of the other differences between cost control

and cost reduction are –
1. Cost control seeks adherence to standards. Cost
reduction is a challenge to standards. It assumes that
there are chances of improvements in predetermined
standards.

2. Cost control is the achievement of predetermined costs.

Cost reduction is the achievement of real and permanent
reduction in cost.

3. Cost control is concerned with predetermined costs,

comparing it with actual costs, analysing the variances
and taking corrective action. Cost reduction is concerned
with improvement in performance.

4. Cost control is a preventive function. It aims to prevent

the costs from exceeding the predetermined costs. Cost
reduction is a corrective function. It challenges the
predetermine costs and seeks to improve the performance
by reducing cost.

5. Cost control is achieved once the costs do not exceed

the standards. Cost reduction is a never ending process.

6. Standard costing and Budgetary control are the

important tools of cost control. Value Analysis, work study,
operations research, simplification and standardisation are
the important tools of cost reduction.