Definition of terms used in Operations Management
Operation it is defined in terms of the mission it serves for the organisation, technology it employs and the human and managerial processes it involves. Operations in an organisation can be categorised into Manufacturing Operations and Service Operations.
Manufacturing operation is a conversion process that includes manufacturing yields a tangible output: a product,
Service operation is, a conversion process that includes service yields an intangible output: a deed, a performance, an effort
Operating system is a configuration of resources combined for the provision of goods or services
Operations management is the process which combines and transforms various resources used in the production/operation subsystem of the organization into value added products/services in a controlled manner as per the policies of the organization.
The definition of the operations management contains following keywords: Resources, Systems, Transformation and Value addition activities.
Resources are the human, material and capital inputs to the production process. Human resources are the key assets of an organisation.
Systems are the arrangement of components designed to achieve objectives according to the plan. The business systems are subsystem of large social systems. In turn, it contains subsystem such as personnel, engineering, finance and operations, which will function for the good of the organisation
Transformation and Value Adding Activities
The objective of combining resources under controlled conditions is to transform them into goods and services having a higher value than the original inputs. The transformation process applied will be in the form of technology to the inputs
Objectives and Characteristics of Operations Management
The operations function can be connected to other functional operations within organization such as marketing, finance, human resource and etc. so it can be described that all functional areas undertake operations activities because they all produce the services and goods.
Objectives of operations management
- Producing the right kind of goods and services that satisfy customers‘needs
- (effectiveness objective).
- Maximizing output of goods and services with minimum resource inputs (efficiency
- Ensuring that goods and services produced conform to pre-set quality specifications
- (quality objective).
- Minimizing throughput-time- the time that elapses in the conversion process- by reducing
- delays, waiting time and idle time (lead time objective).
- Maximizing utilization of manpower, machines, etc. (Capacity utilization objective).
- Minimizing cost of producing goods or rendering a service (Cost objective).
ELEMENTS OF OPERATIONS MANAGEMENT
- Product selection and design: The right kind of products and good designs of the products are crucial for the success of an organizing. Products/services, therefore, must be chosen after detailed evaluation of the product/services alternatives in conformity with the organization‘s objectives. Techniques like value engineering may be employed in creating alternate designs, which are free from unnecessary features and meet the intended functions at the lowest cost
- Process selection and planning: Process selection decisions include decisions concerning choice of technology, equipment, machines, material handling systems, mechanization and automation. Process planning involves detailing of processes if resource conversion required and their sequence.
- Facilities (Plant) location: Plant location decisions are strategic decisions and once plant is set up at a location, it is comparatively immobile and can be shifted later only at a considerable cost and interruption of production. Although problem of location choice does not fall within preview the production function and it occurs infrequently, yet it is of crucial importance because of its major effect on the performance of every department including production. Therefore, it is important to choose the right location, which will minimize total ―delivered customer‖ cost (Production and distribution cost).
- Facilities (Plant) layout and materials handling: Plant layout is concerned with relative location of one department (Work center) with another in order to facilitate material flow and processing of a product in the most efficient manner through the shortest possible time. A good layout reduces material handling cost, eliminates delays and congestion, improves co-ordination, provide good housekeeping etc. while a poor layout results in congestion, waste, frustration, inefficiency and loss of profit.
- Capacity Planning: Capacity planning concerns determination and acquisition of productive resource to ensure that their availability matches the demand. Capacity decisions have a direct influence on performance of production system in respect of both
resource productivity and customer service (i.e. delivery performance). Excess capacity results in low resource productivity while inadequate capacity leads to poor customer service. Capacity planning decisions can be short-term decisions. Long-term capacity
planning decisions concern expansion/contraction of major facilities required in the conversion process, economics of multiple shift operation, development of vendors for major components etc. Short-term capacity planning decisions concern issues like overtime
working, sub-contracting, shift adjustments etc. Break-even analysis is a valuable tool for capacity planning.
- Production Planning and Control (PPC): Production planning is the system for specifying the production procedure to obtain the desired output in a given time at optimum cost in conformance with specified standard of quality, and control is essential to ensure that manufacturing takes place in the manner stated in the plan.
- Inventory control: Inventory control deals with determination of optimal inventory levels of raw materials, components, parts, tools; finished goods, spares and supplies to ensure their availability with minimum capital lock up. Material requirement planning (MRP) and Just in time (JIT) are the latest techniques that can help the firm to reduce inventory.
- Quality assurance and control: Quality is an important aspect of production system and it must ensure that services and products produced by the company conform to the declared quality standards at the minimum cost. A total quality assurance system includes such aspects as setting standards of quality, inspection of purchased and sub-contracted parts, control of quality during manufacture and inspection of finished product including performance testing etc.
- Work-study and job design: Work-study, also called time and motion study, is concerned with improvement of productivity in the existing jobs and the maximization of productivity in the design of new jobs. Two principal component of work-study are: Method study and Work measurement.
- Maintenance and replacement: Maintenance and replacement involve selection of optimal maintenance (preventive and/or breakdown) policy to ensure higher equipment availability at minimum maintenance and repair cost. Preventive maintenance, which includes preventive inspection, planned lubrication, periodic cleaning and upkeep, planned replacement of parts, condition monitoring of the equipment and machines, etc. is most appropriate for critical machines.
- Cost reduction and cost control: Effective production management must ensure minimum cost of production and in this context cost reduction and cost control acquires significant importance. There are large numbers of tools and techniques available that can help to make a heavy dent on the production cost.
RESPONSIBILITIES OF OPERATIONS MANAGER
- Policy Formulation
Formulating policy is one of the core duties of an operations manager. Companies must operate and function on a daily basis within a prescribed set of guidelines. These guidelines are generally established by operations managers. These can include how different departments within the company or organization communicate and cooperate with one another. Policies can also include disciplinary actions taken when employees break company rules.
The planning of various company operations and activities is another major concern of the operations manager. Operations managers tend to determine which products are bought and sold, what prices they are bought or sold for and to whom they will be marketed. The operations manager also helps plan and coordinate activities between various departments such as determining what types of sales promotions the company will engage in.
- Controlling Resources
Controlling major company resources is yet a third major function of an operations manager. Operations managers oversee the implementation of payroll policies and procedures, how much employees are paid, how funds are allocated for benefits packages and how other funds are spent to keep the company operating smoothly on a day-to-day basis. Operations managers regularly review financial statements to ensure that the company is operating as efficiently and as profitably as possible.
A final core responsibility of an operations manager is communicating with other management professionals within the organization to keep the company running smoothly, and communicating with other companies and organizations with which the company does business.
Operations managers are responsible for putting together reports and financial statements that are essential for other top executives within the company or organization.
- Planning and controlling change.
- Managing quality assurance programmes.
- Researching new technologies and alternative methods of efficiency.
- Setting and reviewing budgets and managing cost.
TRANSFORMATION PROCESS IN OPERATIONS MANAGEMENT
- The transformation model
The three components of operations: inputs, transformation processes and outputs. Operations management involves the systematic direction and control of the processes that transform resources (inputs) into finished goods or services for customers or clients (outputs). This basic transformation model applies equally in manufacturing and service organizations and in both the private and not-for-profit sectors.
Some inputs are used up in the process of creating goods or services; others play a part in the creation process but are not used up. To distinguish between these, input resources are usually classified as:
- Transformed resources – those that are transformed in some way by the operation to
- produce the goods or services that are its outputs
- Transforming resources – those that are used to perform the transformation process.
- Inputs include different types of both transformed and transforming resources.
Three types of resource that may be transformed in operations are:
- Materials – the physical inputs to the process
- Information that is being processed or used in the process
- Customers – the people who are transformed in some way.
Many transformation processes produce both goods and services.
- Transformation processes
A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients.
Transformation processes include:
- changes in the physical characteristics of materials or customers
- changes in the location of materials, information or customers
- changes in the ownership of materials or information
- storage or accommodation of materials, information or customers
- changes in the purpose or form of information
- changes in the physiological or psychological state of customers
Feedback information is used to control the operations system, by adjusting the inputs and transformation processes that are used to achieve desired outputs
Feedback is essential for operations managers. It can come from both internal and external sources. Internal sources include testing, evaluation and continuously improving goods and services; external sources include those who supply products or services to end-customers as well as feedback from customers themselves.
Product versus Service operations
- Product operations
Manufacturing operations convert inputs like materials, labour and capital into some tangible outputs. Manufacturing processes are the primary processes and can be grouped under three basic categories, namely, forming, machining and assembly.
The objectives of each process are to change the shape or physical characteristics of the raw
- Forming processes: Include casting, forging, stamping, embossing, spinning etc. These processes change the shape of the work piece without necessarily removing or adding material.
- Machining processes: Involve basically metal removal, by turning, drilling, milling, grinding, shaping, boring etc., it also includes chipless machining processes such as electro discharge machining (EDM), electrochemical machining (EeM), chemical milling, laser drilling etc. P
iii. Assembly processes: Involve the joining of component or piece parts to produce a single component that has a specific function. Some of the common assembly processes are welding, brazing, soldering, riveting
Non-manufacturing or service operations also transform a set of inputs into a set of outputs but the outputs are not tangible
Differences between product and service operations
- Productivity can be more easily measured in manufacturing operations than in service operations because manufacturing operations produce tangible products whereas outputs of service operations are generally intangible.
- Quality standards are more difficult to establish and product quality is more difficult to evaluate in service operations. They are relatively simple and easy in manufacturing operations.
- Customers have more contact with persons who provide services than with those who perform manufacturing operations.
- In continuous production of standard products, manufacturing operations can accumulate or decrease inventory of finished product, whereas non-manufacturing operations cannot produce outputs that can be stored.
- The proportion of expenses required for material handling is more in manufacturing operations than for non-manufacturing operations.
- Investments in assets such as facilities, equipment and inventory are higher in manufacturing organizations than in service organizations.
- Manufacturing operations depend more heavily on maintenance and repair work than non-manufacturing operations.
ROLE OF MATERIALS MANAGEMENT IN OPERATIONS MANAGEMENT
|The scope of materials management includes decision on purchasing raw materials, management and control of work in progress items, stores and warehouse management, and the shipping and distribution of finished products.
The materials flow is divided into three different overlapping functions
– production control, inventory control and the materials handling function.
The objective of the production control function is to regulate the flow of materials throughout the manufacturing cycle. The departments that are part of the production control function are the purchasing, receiving, raw materials inventory and production departments. The inventory control function covers raw materials inventory, the production department and the finished goods department.
The materials management function handles the physical movement of materials into, through and out of the firm.
The departments that are involved in material handling functions are the purchasing, receiving, raw material inventory, production, finished goods inventory, shipping, distribution and warehouse departments.
Storage of materials is an important aspect of materials management. All types of materials such as raw materials, work-in-progress, finished goods, spare parts and other consumable goods are stored such that they are easily available whenever and wherever required. Usage of technology has improved the efficiency of the material handling.
The technologies that are commonly used in materials handling are robots, automated guided vehicles, and automated storage and retrieval systems. Techniques used in the management and control of material in an organization include the Kanban system, the ABC classification system and JIT purchasing.
Through proper management and control of materials, an organization can achieve significant cost saving, reduction in lead time, improvement in production efficiency and reduction in wastage.
PRODUCT DESIGN AND DEVELOPMENT.
PRODUCT AND SERVICE DESIGN
Principles of product and service design
A good product design must ensure the following:
- Function or performance: The function or performance is what the customer expects the product to do to solve his/her problem or offer certain benefits leading to satisfaction. For example , a customer for a motor bike expects the bike to start with a few kicks on the kick peddle and also expects some other functional aspects such as pick- up, maximum speed, engine power and fuel consumption etc.
- Appearance or aesthetics: This includes the style, colour, look, feel, etc. which appeals to the human sense and adds value to the product.
- Reliability: This refers to the length of time a product can be used before it fails. In other words, reliability is the probability that a product will function for a specific time period without failure.
- Maintainability: Refers to the restoration of a product once it has failed. High degree of maintainability is desired so that the product can be restored (repaired) to be used within a short time after it breaks down. This is also known as serviceability.
- Availability: This refers to the continuity of service to the customer. A product is available for use when it is in an operational state. Availability is a combination of reliability and maintainability. High reliability and maintainability ensures high availability.
- Producibility: This refers to the ease of manufacture with minimum cost (economic production). This is ensured in product design by proper specification of tolerances, use of materials that can be easily processed and also use of economical processes and equipment to produce the product quickly and at a cheaper cost.
- Simplification: This refers to the elimination of the complex features so that the intended function is performed with reduced costs, higher quality or more customer satisfaction. A simplified design has fewer parts which can be manufactured and assembled with less time and cost.
- Standardisation: Refers to the design activity that reduces variety among a group of products or parts. For example, group technology items have standardised design which calls for similar manufacturing process steps to be followed. Standard designs lead to variety reduction. and results in economies of scale due to high volume of production of standard products.
However, standardised designs may lead to reduced choices for customers.
- Specification: A specification is a detailed description of a material, part or product, including physical measures such as dimensions, volume, weight, surface finish etc. These specifications indicate tolerances on physical measures which provide production department with precise information about the characteristics of products to be produced and the processes and production equipment to be used to achieve the specified tolerances (acceptable variations) .
Interchangeability of parts in products produced in large volumes (mass production and flow-line production) is provided by appropriate specification of tolerances to facilitate the desired fit between parts which are assembled together.
- Safety: The product must be safe to the user and should not cause any accident while using or should not cause any health hazard to the user. Safety in storage, handling and usage must be ensured by the designer and a proper package has to be provided to avoid damage during transportation and storage of the product. For example, a pharmaceutical product while used by the patient, should not cause some other side effect threatening the user.
Source of new product and service design
- Customer requirements: The designers must find out the customers to ensure that the products suit the convenience products must be designed to be used in all kinds of conditions exact requirements of the of customers for use.
- The Convenience of the operator or user: The industrial products such as machines and tools should be so designed that they are convenient and comfortable to operate or use.
Trade-off between function and form: The design should combine both performance and aesthetics or appearance with a proper balance between the two.
- Types of materials used: Discovery of new and better materials can improve the product design. Designers keep in touch with the latest developments taking place in the field of materials and components and make use of improved materials and components in their product designs.
- Work methods and equipment: Designers must keep abreast of improvements in work methods, processes and equipment and design the products to make use of the latest technology and manufacturing processes to achieve reduction in costs.
- Cost/Price ratio: In a competitive market, there is lot of pressure on designers to design products which are cost effective because cost and quality are inbuilt in the design. With a constraint on the upper limit on cost of producing products, the designer must ensure cost effective designs.
- Product quality: The product quality partly depends on quality of design and partly on quality of conformance. The quality policy of the firm provides the necessary guidelines for the designers regarding the extent to which quality should be built in the design stage itself by deciding the appropriate design specifications and tolerances.
- Process capability: The product design should take into consideration the quality of conformance, i.e., the degree to which quality of design is achieved in manufacturing. This depends on the process capability of the machines and equipment. However, the designer should have the knowledge of the capability of the manufacturing facilities and specify tolerances which can be achieved by the available machines and equipment.
- Effect on existing products: New product designs while replacing existing product designs, must take into consideration the use of standard parts and components, existing manufacturing and distribution strategies and blending of new manufacturing technology with the existing one so that the costs of implementing the changes are kept to the minimum.
- Packaging: Packaging is an essential part of a product and packaging design and product design go hand in hand with equal importance. Packaging design must take into account the objectives of packaging such as protection and promotion of the product. Attractive packaging enhances the sales appeal of products in case of consumer products (nondurable).
THE PRODUCT AND SERVICE DESIGN PROCESS
Stages of Product or Service Design
There are five stages of product or service design. The designers should pass through those sequences of stages to get a final design of a product or service. But in practice, designers may sometime recycle or backtrack through the stages.
First comes the concept generation stage, which is the main root of the whole process. It is the development stage of the concept which is later screened to try to ensure whether it is feasible, acceptable and its vulnerability. Then concept is turned to preliminary design and goes through evaluation and improvement to see if the concept can be served better cheaply and easily. Then the concept is subject to prototyping and final design.
- Concept Generation:
Generally, in some organisation concept is generated form the research and development (R&D) department. As its name states, research develop new knowledge and idea to grasp any opportunity or to solve any problem. And development is the attempt to try to utilize and
operationalise the idea that come from research. Ideas for new product or service concept can come from customers, competitors and staffs as well. Regular customer who gives feedback and complains gives us an idea about how to improve the product and service. Staff who meet the customers day to day knows what their customers want which may be helpful to generate new idea.
- Concept Screening:
The main purpose of this stage is to take the flow of concepts and evaluate them because no every concept generated will necessarily be capable of further development into product and services. Best design is chosen among the several designs by evaluation of their value. From large number of design concepts only one design is selected form the evaluation screens. We have to think in terms of the following design criteria:
- Feasibility: the ability of an operation to produce a process, product or service.
- Acceptability: the attractiveness to the operation of a process, product or service.
- Vulnerability: the risk taken by the operation in adopting a process, product or service.
iii. Preliminary Design:
This is a stage after generating an acceptable, feasible and viable product or service concept, where first attempt of specifying the component products and services in the package and defining the process to create the package is done.
Specify the components of the package
Exactly what will go into the product or service will be defined in this stage. The order in which the component parts of the package have to be put together should be known earlier. Information of the constituent component parts of the product should be collected and the bill of materials
(BOM), which is the quantities of each component part required to make the package should also prepared. For example, rifle shooting in adventure holiday, activities can be broken down into level one shooting practice and level two target shooting. Also the components for the rifle shooting (like a .22 air rifle, some shot, a back board, a target holder and card targets) are defined and bill of materials includes the quantity of those components.
- Reducing design complexity
When an organisation produces variety of goods and services with several ranges on those goods and services as a whole, it becomes complex and may increase costs. Designers as well as the producers want simplicity in their product and services. Designers adopt several approaches to reduce complexity in the design of the product and service. The three common approaches for the complexity reduction are:
- Standardisation: This is all about variety reduction of the product or services. For example, garment manufactures produce cloths in only a limited numbers of sizes.
- Commonality: This helps simplifying design complexity by using common elements within a product or service.
- Modularisation: Designing standardised ‘sub-components’ of a product or service whichmcan be assembled in different ways is the main principle of modular design. For example,ma package holiday industry can assemble holidays to meet a specific customer
- Define the process to create the package
The bill of materials and the product or service structure specify what has to be put together and this stage is to specify how the process will put together the various components to create the final product or service. We show the flow of materials or people through the operation and identify the different activities that take place during the process. Simple flow charts, routing sheets and process flow charts help us examine the process before any product or service design is finalised.
- Design evaluation and improvement:
In this stage preliminary design can be improved before the product or service is tested in the market. In other words, it involves re-examining the design to see if it can be done in a better way, more cheaply or more easily. Typical techniques that can be used in this stage to evaluate and improve the preliminary design are:
- Quality function deployment (ensures that the eventual design of a product or service actually meets the needs of its customers)
- Value engineering (try reducing costs, and prevent any unnecessary costs, before producing the product or service)
- Taguchi methods (tests the robustness of a design i.e. it assumes that the product and service should still perform in extreme conditions.)
vii. Prototyping and final design:
This stage involves providing the final details which allow the product and service to be produced. It is risky to go to full production of the product or service before testing it out. So it is appropriate to turn the improved design into a prototype so that it can be tested. Many retailing organisations pilot new products or services in a small number of stores in order to test customers’ reaction to them. A fully developed design for the package of products and services are then finalised and delivered them to customers.
REASONS FOR DESIGNING A PRODUCT/ DESIGN FOR PRODUCT AND SERVICE WITH RESPECT TO LOGISTICS AND QUALITY OF SUPPLY
- Designing for the customer: Designing for aesthetics and for the user is generally termed industrial design which is probably the most neglected area by manufacturers. In many products we use, parts are inaccessible, operation is too complicated or there is no logic to setting and controlling the function of the product. Sometimes worst conditions exist, metal edges are sharp and consumers cut their hands trying to reach for adjustment or repairs. Many products have too many features-far more than necessary and for instance many electronic products have too many features which the customers cannot fully make use ‘of (operate). One approach to getting the price of the customer into the design specification of a product is quality function deployment (QFD). This approach uses interfunctional teams from marketing, design engineering and manufacturing to incorporate the features sought by the customers in the product at the stage of product design. The customer’s requirements (with its importance weightage) and the technical characteristics of the product are related to each other in a matrix called house of quality. The customers are asked to compare the company’s products to the competitor’s products. The technical characteristics are then evaluated to support or refute the customer perception of the product. This data is then used to evaluate the strengths and weaknesses of the product in terms of technical characteristics.
- Designing for Manufacture and Assembly (DFMA): Design for Manufacturing (DFM) and Design for Assembly (DFA) are related concepts in manufacturing. The term design for manufacturing is used to indicate the designing of products that are compatible with an organisation’s capability. Design for assembly focuses on reducing the number of parts in a product or on assembly methods and sequence that will be employed. Designing for manufacture includes the following guidelines:
- Designing for minimum number of parts.
- Developing modular design.
- Designing for minimum part variations (i.e., communization or using standardised parts)and Designing parts for ease of fabrication.
- Designing for ease of production (or for producability or manufacturability):
Manufacturability or producibility is a key concern for manufacturing products. Ease of fabrication and/or assembly is important for cost, productivity and quality. Designing products for ease of production is a key way for manufacturers to be competitive in the world
Three concepts which are closely associated to designing for ease of production are:
A specification is a detailed description of a material, part or product, including physical measures such as dimensions, volume, weight etc. These physical measure are given tolerances (acceptable variations). Tolerances are stated minimum and maximum for each
dimension of a product. Tight tolerances facilitate interchangeability of parts and allows ease of assembly and effective functioning of the finished products.
Standardisation refers to design activity that reduces variety among a group of products or parts. This will result in higher volume for each product or part model which can lead to lower production costs, higher product quality and lower inventory and higher ease of automation.
Simplification of product design is the elimination of complex features so that the intended function is performed with reduced costs, higher quality and better customer satisfaction. Simplified design provides products to customers which can be easily installed, maintained and used by them. Also production costs can be reduced through easier assembly, less expensive substitute materials and less waste or scrap during production.
- Designing for quality: Building product quality into the product design is the first step inmproducing products of superior quality.
This is known as “quality of design” which is followed by “quality of conformance.” Quality of design refers to the quality specifications
incorporated in the design. It consists of quality characteristics such as appearance, life, safety, maintenance and other features of the product. Quality of conformance is the degree to which the product actually conforms to the design specification
Designing for robustness (or robust design): Customers expect products to perform satisfactorily when used in all kinds of field conditions. A robust design is one that will perform as intended even if undesirable conditions occur either in production or in the field.
- Designing for Ergonomics: Poorly designed products may cause work-related accidents resulting in injuries to users. Hence, comfort, safety and ease of use for the users are becoming more important quality dimensions that have to be considered in product design.
- Designing for environmental protection: This includes designing products which are environmental friendly (e.g., Euro II automobile) known as green designs.
- Designing for recycling: This approach to product design focuses on designing products somthat raw materials such as plastics can be retrieved once the product has finished its useful life and scrapped.
- Designing for mass customisation: It is a strategy of designing standardised products but incorporating some degree of customisation in the final product. Delayed differentiation and modular designs are two tactics used to make mass customisation possible. Delayed differentiation is the process of producing but not quite completing, a product, postponing completion until customer preferences or specifications are known.
PRODUCT AND SERVICE ANALYSIS
- Value engineering
Value Engineering (VE) is concerned with new products. It is applied during product development. The focus is on reducing costs, improving function or both, by way of teamwork-based product evaluation and analysis. This takes place before any capital is invested in tooling, plant or equipment.
- Value analysis
Value Analysis (VA) is concerned with existing products. It involves a current product being analysed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These include costs, function, alternative components and design aspects such as ease of manufacture and assembly.
A significant part of VA is a technique called Functional Analysis, where the product is broken down and reviewed as a number of assemblies. Here, the function is identified and defined for each product assembly. Costs are also assigned to each one. This is assisted by designing and viewing products as assemblies (or modules). As with VE, VA is a group activity that involves brainstorming improvements and alternatives to improve the value of the product, particular to the customer.
Reasons for Value Analysing Existing Products.
VA reduces costs (in all areas such as materials, parts and production), as well as improving product function. Therefore, the value of the product is increased to the customer.
- Reducing the cost of products increases revenue and profit per product. Therefore, giving your company the option of reducing price to sell more or investing in R&D.
- VA enables improvements to be made to the product in a variety of areas, such as design and engineering, material selection, testing, manufacturing, assembly, shipping, installation, use by the customer, service, maintenance and recycling.
- For many manufacturing businesses their product range has evolved over time, as a collection of solutions to meet new customer needs, rather than being the result of strategic planning. Often products have been developed under tight time constraints and as a result, a wide variety of parts and materials have been sourced and used. This leaves lots of scope for component rationalisation across the range. In-turn this opens the door to cost reduction negotiations based on ordering greater quantities and economies of scale. A value analysis exercise can deliver this.
- A VA project enables your business to take commercial advantage of the constantly falling price of some technologies, as well as source alternative components and materials.
- The above factors all increase perceived value of the product by all those who interact with it, throughout its product life (including of course, the customer).
- The prestige value of the product increases, therefore making ownership more desirable, which should help product sales (and indeed the process of marketing and selling it).
- A customer who perceives the value of the product as being more prestigious is more willing to pay a premium for it or choose it over rival products if it is priced the same.
- An all-round better quality product is easier and less costly to produce, assemble, ship, install, use, service and recycle. The result is to reduce all associated costs throughout the product lifecycle (importantly, including ownership costs for the customer).
- VA, in conjunction with other world class manufacturing techniques, can help realise substantial company-wide improvements, thereby delivering significant competitive advantage.