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Procurement professionals should use ‘value analysis/value engineering’ (VAVE) to shift the emphasis from cost cutting to value generation in their organisations.
Jochen Hauser, procurement engineering manager at electrical firm Eaton, told the ProcureCon Europe conference VAVE analysis could generate new ideas and drive innovation.
“VAVE can be a game changer. It can give you more opportunities beyond pure negotiation,” he said.
Hauser described VAVE as a “systematic, customer-focused approach process” involving “identifying the function of a product from a customer point of view”, analysing the major cost elements and then being creative in looking for new manufacturing methods, materials and sourcing options.
He said VAVE could be carried out “across the whole supply chain” and at any time in a product’s life cycle. “You need to create a culture of change. There needs to be a continuous improvement cycle,” Hauser said.
Les Ball, vice president of supply chain management at Eaton, said: “This can be applied to service industries, indirect products and services. Senior management buy-in is essential. The winners are procurement because it is changing the game from incremental cost-out to efficiency and value generation.”