Which of the following are typically reasons why an organisation implements value analysis? Select TWO that apply:

Which of the following are typically reasons why an organisation implements value analysis? Select TWO that apply:
A . To determine the value of each component used
B. To decide whether there will be sufficient surplus funds to reinvest in the business
C. To shape and manage supply market
D. To provide an outline business case for the specification
E. To find cost reduction opportunities by optimising the components used

View Answer

Answer: A

Explanation:

Value analysis is a systematic review of the production, purchasing and product design processes to reduce overall product costs.

This can be accomplished through a variety of activities, including the following:

– Designing products to use lower-tolerance parts that are less expensive

– Switching to lower-cost components

– Standardizing parts across product platforms in order to achieve volume discounts

– Altering production processes to minimize the amount of production cycle time, thereby reducing labor costs

– Introducing automation to strip labor costs out of the production process

– Altering product packaging to lower its cost while still protecting the product

The process is not a wholesale attack on costs. Costs are only reduced when the result will not im-pact the perceived level of quality experienced by customers, or the level of customer satisfaction.

Reference: CIPS study guide page 160-163

LO 3, AC 3.4