I wondered how companies are doing cost cutting in their products to achieve a competitive edge over the competitors with absolute no compromising on the quality of the products.
In this regard, present day companies figured out a competitive tool for analysis of the product with at-most detail, this tool is termed as "Value analysis" and "Value engineering".
Generally people tend to call Value analysis as Value engineering and vice verse.
Kenichi Ohmae describes VA and VE in his book "The mind of the strategist" as "analysis of the purchased materials or components from the point of view of price so that the results can be incorporated into planning in such areas as cost reduction and development of new products".
Value analysis/Value engineering :- It is a orderly method to increase the value of the material or component in the system by understanding it's present value and it's associated costs.
In general sense the term value can be determined as the ratio of it's functionality and cost.
VA/VE tend to improve the value by increasing the functionality of the product or decrease the cost associated with it.
Example:
Consider a product X which is charged at Rs 10 and product Y is charged at Rs 10, both are competing in the same market place and both companies are trying to increase their market share, so both companies are allocating huge budgets for marketing people to push the their respective products.
Due to increasing intense competition, the company manufacturing product X wanted to increase their market share and revenue from the product with out any additional budget, so they decide to undertake cost cutting scheme but without affecting the quality of the product.
At this times VA/VE helps to come out of this situation, by analyzing each and every component.
First, collect the competitors product Y and product X, dismantle both the products to the smaller components . Now analyse both the components of products and you can know which component and do cost analysis for the component then you can know which component is costing more and you can try to reduce it with out compromising on the quality of it.
This how the cost cutting measures are taken by major automobiles manufacturing companies in Japan.
In this regard, present day companies figured out a competitive tool for analysis of the product with at-most detail, this tool is termed as "Value analysis" and "Value engineering".
Generally people tend to call Value analysis as Value engineering and vice verse.
Kenichi Ohmae describes VA and VE in his book "The mind of the strategist" as "analysis of the purchased materials or components from the point of view of price so that the results can be incorporated into planning in such areas as cost reduction and development of new products".
Value analysis/Value engineering :- It is a orderly method to increase the value of the material or component in the system by understanding it's present value and it's associated costs.
In general sense the term value can be determined as the ratio of it's functionality and cost.
VA/VE tend to improve the value by increasing the functionality of the product or decrease the cost associated with it.
Example:
Consider a product X which is charged at Rs 10 and product Y is charged at Rs 10, both are competing in the same market place and both companies are trying to increase their market share, so both companies are allocating huge budgets for marketing people to push the their respective products.
Due to increasing intense competition, the company manufacturing product X wanted to increase their market share and revenue from the product with out any additional budget, so they decide to undertake cost cutting scheme but without affecting the quality of the product.
At this times VA/VE helps to come out of this situation, by analyzing each and every component.
First, collect the competitors product Y and product X, dismantle both the products to the smaller components . Now analyse both the components of products and you can know which component and do cost analysis for the component then you can know which component is costing more and you can try to reduce it with out compromising on the quality of it.
This how the cost cutting measures are taken by major automobiles manufacturing companies in Japan.
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