Steps in value analysis

Value analysis helps procurement to understand what value is, how it can be improved, and what costs are incurred in delivering this value.

What is value analysis in procurement?

Value analysis (VA) can be defined as “the process of analysing costs to identify cost reduction and cost control opportunities to ensure that a product or service production costs are as efficiently as possible in order to maximize profit.” 

Applying value analysis is used on existing products and services and can identify opportunities to review and enhance specifications in the short and longer term and eliminate unnecessary costs incurred.

How is value analysis used in procurement?

Value analysis helps procurement to understand what value is, how it can be improved, and what costs are incurred in delivering this value.

Value analysis can be used in the following ways:

To determine the value of each component used
To find cost reduction opportunities by optimising the components used

What questions should you ask in the value analysis process?

Crocker suggests eight questions that should be asked within the value analysis process.

Can we use a cheaper process?
Is there a standard part?
Can we simplify it?
Who else buys it for less?
Is there a cheaper supplier?
Is there anything better?
Is there a substitute?
Can cut it out altogether?

Stuart Emmett and Barry Crocker (2008), Excellence in Supplier Management. Liverpool Academic Press.

What are the five steps for carrying out value analysis?

Value analysis can be carried out using a simple five step process and each step has its own procedures to follow.

Gather information: This stage includes information about what should be delivered, information about the product or service being analysed including costs, user requirements or any design or technical constraints.
Carry out functional analysis: This is the core of the value analysis process. Here, the team identifies the key components and determines their function e.g., primary, or secondary. The purpose of functions can be how they are used, but they can also be aesthetic in nature.
Be creative: This stage is to generate ideas across the organisation by looking at things differently and how it can create value for their organisation.
Evaluate: Each option generated in the previous two stages is now evaluated to arrive at the best solution to propose.
Develop: In this final phase the team will explore the options in more detail and rigour, which includes confirmed costs, drawings, and any additional data required to make a final decision.

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