VALUE ANALYSIS SAVES COMPANY $7.5 MILLION
A CHANGE IN STRATEGY NETS BIG SAVINGS
*Case studies have been anonymized for client confidentiality
Always on the watch for new ideas that could improve profits, the president of a $600 million manufacturing company in Kansas City, decided to try a new cost and value improvement technique called Value Analysis (or Value Engineering).
After reading about one large company’s great results using these services, the owner decided he wanted the manufacturing consultants to start his program. This company’s initial plan was to have a large number of people trained in the basics of the Value Methodology, and then send them back to their jobs, and wait for results.
Their hope was that enough savings would be generated during the training period to at least cover the cost of their consultant fees. The consultants on the project, however, suggested another route that would give them larger more immediate cost savings, and leave a trained person behind to carry the program forward.
The new process would be an aggressive, goal-oriented approach to profit improvement. It was a simple procedure; the company would set the dollar amount of savings they need for corporate profitability, and identify possible future in-house MVA specialists; The manufacturing consultants, in turn, would conduct enough workshops to reach the dollar goal, and begin to train the candidates.
A corporate goal of $8MM, approximately $500,000 per division, was chosen as the cost reduction goal, and four potential candidates were selected from those chosen for the trial project.
Fifteen months, 18 products, 1 process, and 3 procedures later, $7.5MM in net savings had been identified, and a new Corporate Manager of Value Analysis was established.
During a fifth-quarter review of the Value Analysis program, the new Corporate Value Manager stated that $1.4MM in savings had already cash flowed, and the remaining amount was on schedule.
In addition to the dollar savings obtained, the company has also established better working relationships within the divisions, resolved all critical customer identified faults and complaints, (on all 18 products) and the company now has a knowledgeable Value Analyst located in each division.
By switching strategies from a “wait and see” mode to a “goal oriented positive approach”, the company was able to pull their results from sometime in the future into today’s profits.
Using Value Analysis, guided by an experienced business strategy consultant, a company can reduce overhead, and improve a product in the process.
The typical guidelines for Value Analysis are as follows:
Adjust the company’s priorities to allow adequate time and resources for a proper Value study
Establish a team based on the “right people”, not on whoever is available. Train these people to continue the work on an ongoing basis
Establish a specific, measurable, numerical goal that your team can work towards
Get your customer to provide valid feedback and be involved in the changes
Fix all serious faults identified by your customers and your team members
OTHER PRODUCT IMPROVEMENT PROJECTS: