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