I cannot tell you how many times I have seen value analysis defined as cost over quality equals value. That cannot be further from the truth and is just simply taking the two words “value” and “analysis” and trying to define an outcome. The reality is that cost nor quality matters in the value analysis equation. Those may be part of your goals to save money and improve quality, but they are not the meaning or the end game with a VA study. Value analysis has always been clearly defined and process driven with the key principles that will allow you to clearly meet your goals exactly.
What is More Important Than Cost and Quality?
Value analysis is the study of function and the search for lower cost alternatives to meet customers’ exact requirements reliably. Simple, right? If a product, service, or technology does not meet your customers’ requirements, then cost nor quality nor shiny features matter. If your goal is to keep costs to a minimum, you need to first source products that meet your customers’ requirements exactly which includes meeting all their functions and being reliable. Cost and quality will then fall into place. If you undershoot the function, then your customers may need to use two or three of your products when they should only need one which will cost you more even though you may have a cheaper price.
Price Thinking Should Not Equate to VA Outcomes
Every product, service, or technology that we use has a price and end costs of use and/or ownership to the organization, but it is how we choose these products that is the key to value analysis success. Price should not be a factor in your VA sourcing until you first determine the exact functional requirements that your customers require. We don’t ask the customer about quality as that is a bit subjective as one surgeon’s quality may not be the same as another’s. Primary functions and secondary functions are the name of the game. Find these out first. Then, you have your specifications for sourcing the products, services, and technologies in your contract portfolios.
Either Start with the Incumbent Product or Start with a Blank Piece of Paper on New Product Requests
The gift that is given the majority of the time in the value analysis world is the gift of the incumbent products that our customers are already using and we can analyze using the functional approach to ascertain exact specifications. If you are working on reducing costs and think you have a feature-rich, more costly product that you want to find a lower cost alternative for, then the functional approach will help you get there. If you have a totally new product request and the functional requirements are new and there is no incumbent involved, then you get to perform a true VA functional review and start with a blank piece of paper to find your functional requirements.
Value Analysis is Really Simple
Did we just simplify your approach to value analysis? I certainly hope so as it is a very straightforward process using the functional approach, but you can easily get sidetracked in many ways by sales, marketing, third-party evidence, customers’ opinions, etc. The anchor you should always be tethered to is the functional approach as every product, service, and technology has a primary function and secondary functions that can be identified. Knowing your customers’ exact functional requirements will give you the power to source, reduce costs, improve quality, better outcomes, and gain higher levels of reliability. It just makes sense!
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