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.