I interviewed Vladislav Mandryka who discussed Value Analysis and Value Engineering
Can you first provide a brief background of yourself?
Hi, Dustin. Thank you for the opportunity to provide my latest thoughts about Value Analysis and Value engineering. Well, I am procure-to-pay manager with over ten years’ experience in different multinational corporations who is linking Strategic Business Plan to Supply Chains Strategy. I have a variety of skills in Strategic Model Sourcing, SRM, Cost analysis Management, Supply Performance Evaluation. I have consulting experience and support my personal blog about best practices in procurement.
Can you talk about what value analysis and value engineering mean?
Okay. Well, value analysis and value engineering are quality improvement tools. And as the main aim of reach is to achieve required output for that minimum cost and resources. As the main objective of managing techniques, is to increase profitability. That is the main objectives. The next other objectives, which is improvement qualitative features of the products and services and to increase customer satisfaction respectively.And finally, the next objective is to reduce cost.
Value analysis check the cost components of the product or service and then find the areas where the cost could be reduced or value could be added. It could be a substitution or elimination result in decreased quality. And you could imagine a washing machine, for instance, which consists of 60 different parts. The weight of the washing drum, for instance, could be removed with the help of value analysis and value engineering techniques from 1.3 kilograms to 0.8 kilograms. The control units and the wiring could be modified in light of the best technical design results sacrifices the quality.
As a result, material cost is reduced by twenty mere dollars. This example is described by A.T. Kearney agency in his book, Purchasing Chessboard.
Another example is a revolution of standard international telephone design. The old phone weighed around two kilograms, you could imagine, and consisted of brass ringer, electro-mechanical parts and rotary dial. As an international manufacturer significantly reconsiders this approach, to design a more user-friendly and light version of the telephone.
Of course, he's using value analysis and value engineering techniques. They could design a connecting device to provide a dial tone. As a result, the new telephone was lighter, user friendly, with multiple features.
Can you talk about the structure of value analysis and the value engineering approach?
Well, if your company needs to improve the value and quality of the products, first of all, you should evaluate them. This stage of evaluation includes the next steps. First steps is gathering information. The next one is the section of a feature or function. The third stage is an analysis of the feature or functions. The fourth stage is a design plan. The next stage is defining opportunities. Six stage is a formulation of ideas and the final stage is identifying tools to provide idea and solutions.
Well, that's the describe briefly each of the stages. First stage includes establishing performance metrics, the final customer expectations, gathering important cost data, obtaining detail of manufacturing process, determining quality issues, defining function, and developing function-logic diagram. Finally, it includes allocating costs to function, focusing on improvement areas.
The aim of the second stage is to quantify the total cost. There are four basic costs that the analysis team should target. First of all, it is direct cost. Also, it includes cost of acquisition, cost of operation, and performance cost.
Feature analysis is provided to clearly understand the exact function of a product and services. First, you should evaluate the product. It's described as a number of word pairs, comprising of verb and noun. The analysis centers on the word pairs rather than the product or service itself. The verb is demonstrable as an action. The noun is ideally a parameter or measureable quantities. Therefore, the answer to the question, "What does it do?" becomes a series of two-word sentences.
The analysis is an organized application of the specific tools called a plan. Such plan includes preparation, information analysis, creation, development, presentation, implementation, and finally, follow up.
The value analysis team should estimate preliminary options, develop opportunities statement, measure benefits, estimate the potentials and development and overall assessment and recommendation. This step includes the identification, prioritization, and quantification of specific short-term and long-term improvement opportunities. The formulation of ideas and the solution is done by workshop setting.
During this stage, as ideas and concepts arise, the team leader may request someone in the group to support specific ideas or concepts. Most of all, familiar is a different techniques of formulating ideas. Hopefully you're familiar with a so widely used tool in this way as creative brainstorming.
What is the Value Engineering Role in Cost Reduction?
Of course, value engineering aims in participating in customer requirements, reducing costs, and adding value to the product during the design stage. This is similar to value analysis where a cross-functional team works together to reduce cost and improve the product.
There are many ways when procurement professionals contribute to value engineering. In design and specification, procurement may help R&D team to revise tolerances and parameters. This is accomplished by review and plan with potential suppliers. For instance, machine shops frequently recommend new materials that hold tolerances better than originally specified, resulting in lower fabrication costs.
This way, purchasers can often recommend parts that meet functional requirements at a lower cost. In one instance, a lower cost diode laser recommended by supplier at design meeting replaced a helium-neon laser in the portable sighting device which significantly reduced the cost.
Finally, this brief explanation, which I, hopefully, helped the procurement professional better implement value analysis and value engineering in their practice. Dustin, thank you very much for the opportunity to share my ideas about this concept.
Thanks for sharing today.
About Vladislav Mandryka
Senior Procurement Specialist at Anadolu Efes, MBA