Page 150 - DMGT525_MATERIALS_MANAGEMENT

Unit 10: Value Analysis

Value Analysis is essentially a team effort. What particular items to be taken up for value Notes
analysis, and what action is to be taken is usually decided by a small committee comprising
representatives from the Design, Production, Purchase and Accounts Departments. Any other
departmental representative can be co-opted if and when necessary.
It is the Purchase Manager (or Material Manager) who has to initiate action, convene meetings
at regular intervals, and see that substantial results are obtained. A large share of the initial
phase of the Value Analysis work will be done by the Purchase Manager, or by other departments,
at his instance. It is his responsibility to seek the maximum value when a product requirement
comes upto the point of purchase. It is his duty to challenge wasteful and avoidable costs
inherent in the items he is asked to buy. It is, therefore, inevitable that a large part of whatever
Value Analysis work is done is initiated by the Purchase Manager.

Self Assessment

Fill in the blanks:
13. Value analysis can be applied …………………
14. Items which are imported, or difficult to obtain, and ………………….. items, should receive
high priority.
15. Value analysis is a …………. function.

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Case Study An Evaluation of Value Analysis

he focus of corporate performance had been on reporting higher profits rather than
shareholders wealth maximization. The ability to report such higher profit was a
Treflection of corporate efficiency even to the detriment of other crucial
organizational objectives ranging from customer retention through improved product
quality to employee satisfaction. All these are expected to be achieved within the framework
of the industry regulation. Today, profitability alone had been adjudged as an inadequate
measure of corporate efficiency. This therefore calls for a more pragmatic approach of
producing goods/services at lower costs without a reduction in value (Value analysis).
The efficiency of this approach supersedes the traditional approaches of cost reduction and
cost control in achieving other organizational multifarious objectives.
Recently, the common concern to every participant in a market economy is the magnitude
at which prices of goods multiplied in recent times in Nigeria. This is in addition to the
multiplier effect associated with the process of transacting business in Nigeria; for instance,
as customers complain bitterly of exorbitant prices, likewise sellers and manufacturers
remain worried about low profitability returns in the face of ever increasing competition
in both domestic and international markets that are characterized by differentiated products
while investors remain skeptical about investment returns. As a result, customers shift
from one product to another in search of value that rarely comes despite their readiness to
purchase. All they are confronted with are higher prices, low quality, and at times temporary
scarcity in place of value for money objective they pursue. The management of companies
also seeks for cover everywhere to justify low profitability returns while trying to checkmate
competition and its resultant effect on sales (revenue and profitability reduction) caused
by product proliferation and imitation.
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