Project Materials

ASSESSMENT OF THE APPLICATION OF VALUE ANALYSIS AND VALUE ENGINEERING IN COST REDUCTION

ABSTRACT

This project was chosen to provide an assessment for the use of value analysis and value engineering in cost reduction. It will examine the advantages, benefits, and contributions of value analysis and value engineering in an organisation, with a focus on Nigerian Bottling Company Owerri. The issue at hand will expose the methodologies for applying value analysis and value engineering techniques, as well as the role of various functional departments in their implementation. It will also discover the variables that contribute to needless product costs, as well as the reasons why value analysis programs occasionally fail.

Chapter one

Introduction

1.1 Background of the Study

Value analysis is an organised study of the function of materials, parts, and components that involves the critical examination of goods or products with the goal of improving their efficiency in use through changes in design, manufacturing techniques, packaging, and other related processes, whereas value engineering is the application of value analysis at the pre-production stage.

It focusses on cost avoidance, which means that anything that adds to the cost is removed on the manufacturing floor before the materials are turned into final product, whereas value analysis is more concerned with cost rectification.

Value analysis is an organised technique for efficiently identifying excessive costs through function analysis. The essence of value analysis is to first determine the product’s function and then explore potential approaches to achieve this function while minimising costs. Value analysis is undoubtedly one of the most cost-effective methodologies utilised in industry today.

It represents a powerful set of instruments that management can utilise to control expenditures. The primary goal of value analysis activities is to purchase materials that are the “best buy” in terms of function to be performed.

The main premise underlying this is the issue of quality against money. The primary goal of any organisation is to create a profit. Just as a thing is purchased to serve a specific purpose.

For these reasons, it is critical to rectify or even eliminate unneeded cost factors in a production design. This was the primary motivator for the researcher to conduct this study.

1.2 Statement of the Problem

Nigeria as a country is endowed with numerous industries whose services the nation cannot do without. These industries are responsible for offering high-quality goods and services at a low cost to citizens.

Materials in this regard are so important that no result could be accomplished without proper procurement methods. This is primarily because acquired resources significantly increase a company’s earnings and profitability.

This appears to be due in large part to most of these companies’ acknowledgement of the purchasing function. It is a proven truth that a company that buys intelligently and economically earns well and is thus less subject to economic downturn.

The researcher is affiliated with the following.

1. The organisation does not have enough time to thoroughly investigate all potential alternative materials and procedures.

2. The organization’s inability to implement a formalised strategy to identifying and eliminating wasteful costs.

3. The materials purchased by the organisation are quite expensive, adding value to the cost.

4. The purchasing function is not given adequate recognition when doing its function in an organisation.

5. The organisation lacks the expertise to examine the technical and commercial aspects of running a value analysis exercise.

1.3 PURPOSE OF THE STUDY

This study is being conducted to investigate the academic relationship between classroom theory and what is realistically available in a bottling firm after selecting the project topic.

As an assessment of the application of value analysis and value engineering in cost reduction “(A case study of Nigerian Bottling Company, Owerir). ,

1. To analyse the variables that contribute to the unnecessary expense of an item in an organisation.

2. Determine the benefits that can be achieved from implementing an effective value analysis programme in an organisation.

3. To study what function purchasing should play in value analysis inside an organisation.

4. Identify those areas where value analysis is applicable, which may result in cost savings for the organization’s overall purpose.

5. To make upper management realise that value analysis should be everyone’s responsibility. In one sense, the full potential of a values analysis program can only be realised if management correctly utilises these potential resources.

1.4 Significance of the Study

Given the enormous expenditure on the procurement of materials used in industries, it is critical to use value analysis methodologies to lower production costs. The purpose of this study is to identify alternate methods of obtaining the same quality materials or commodities at a lower cost.

• It is also significant that this study raises awareness about the benefits of a successful value analysis program in organisations.

• The project will also demonstrate how purchasing, as a member of the value analysis team, participates in the value analysis programme.

• This research will also look at how value analysis approaches are used in organisations to cut costs.

• The study is also being conducted in partial fulfilment of the National Board for Technical Education and the Federal Polytechnic Nekede’s requirements for the award of an HND in purchasing and supply.

• Finally, it will serve as a database for future researchers.

1.5 RESEARCH QUESTIONS.

To meet the study’s aims, the following research questions are necessary, notable among which are:

1. Is value analysis a viable tool for cost reduction?

2. Does value analysis result in significant cost reductions in products and services across industries?

3. Does purchasing play an important role in the value analysis programme?

4. Do people involved in product design have adequate time to properly evaluate alternative materials and processes?

5. How have firms profited from the use of a value analysis programme?

1.6 Hypothesis.

Based on the research issues raised above, the following hypotheses are proposed to be evaluated.

1. Ho: Why is value analysis ineffective as a cost-cutting strategy?

H1: Value analysis is a useful tool for cost reduction programs.

2. H0: Not every company requires the use of value analysis.

H1: Every business requires the application of value. analysis

3. H0: There is no need to use value analysis to reduce costs in bottling companies.

H1: Bottling businesses should use value analysis to reduce costs.

4. H0: The use of value analysis has not benefitted firms.

H1: Firms have not benefited significantly from the implementation of a value analysis programme.

5. H0: Purchasing does not have a dual role in value analysis.

H1: Purchasing is an important part of value analysis.

1.7 SCOPE OF THE STUDY

This study is supposed to cover notable bottling industries, but as a student, faced with so many work in school, which includes lectures, studying for final exams, and writing of this project at the same time, and due to time constraints, this research work will be focussing on the very department in ” Nigerian Bottling Company.

Owerri “that will make an impact on the subject matter, and these departments are as follows: Purchasing production. Quality assurance, accounting, design, and engineering departments.

1.8 Limitations of the Study

The researcher has several challenges, including time constraints, financial constraints, insufficient literature, and low response rates.

(a) Time: One of the limiting factors that influenced this project work was the time available to complete it, which does not allow or enable the researcher to conduct a thorough investigation and obtain the necessary data.

(a) Finance: In a project of this magnitude, there are going to be some roadblocks and obstacles that impede progress.
As we all know, money is difficult to come by, thus the researcher must limit herself to available financial means and fundamentally alter the project.

C. INSUFFICIENT LITERATURE MATERIALS: The researcher’s capacity to carry out this project successfully and efficiently is hampered by the lack of available literature material.

D. POOR RESPONSE: People’s responses during the interview were quite poor, and when some questions were asked, their responses may be that they were incapable to speak on such matters, or they would say that it is confidential. As a result, information was not disseminated easily.

There was also the risk of running up and down to gather the essential data for the project, which could not be obtained all at once.

Also, the conditions under which we are studying are really terrible, and the researcher was required to attend her lectures, complete her assignments, and carry out this project work.

This had no effect on the project’s design; instead, some of the data and facts contained within are correct to the best of my knowledge.

1.9 Operational Definition of Terms

FUNCTIONAL VALUE: Functional value is basically what allows an object or product to perform its declared function. It is also known as used value.

AESTHETIC worth: This is just the measure of the worth of beauty associated to a thing that makes it more desirable.

ANALYSIS: This is a thorough examination of anything in order to gain a better understanding of it or its components.

PURCHASING: As used above, it is an important aspect of material management, primarily for obtaining the correct quality material from the right source, at the right time, and in the right quantity.

ALTERNATIVE: This is something you can choose or have from two or more options to attain the same goal.

EXCHANGE VALUE: This is the cash value of something in its current form. It is the amount a buyer offers for an item.

VALUE ANALYSIS: This is the systematic analysis of a product or material with the goal of lowering its cost by redesigning or deleting design aspects that increase cost but offer little value.

VALUE ENGINEERING: This is the use of value analysis methodologies during the pre-production phase.

RE- DESIGN: This is the process of redesigning a product or material in a different way. It is a change to a product’s design that removes specific functionality.

COST: The monetary cost of acquiring, producing, or sustaining anything.

PRODUCTION: This is the process of creating or manufacturing things and services into final products with exchangeable value.

VALUE: value is just the desirability of an item.

ORGANISATION: This is a structured gathering of people who come together to pursue a specific aim.

QUALITY: The set of qualities and characteristics of a product or service that meet a certain demand.

PROCURE: The term simply means to obtain or acquire.

SPECIFICATION: This is the description of any object, materials, or procedure in sufficient detail to allow its fabrication and subsequent identical reproduction.

ELIMINATE simply means to remove or take out.

RAW MATERIALS: These are the materials on which the manufacturing process is carried out. It refers to the materials used in the further creation of goods and services.

Profit is the excess of revenue over quality and expenses in a company enterprise.

DEPARTMENT: This is a specialised section of a larger organisation, such as a business.

TECHNIQUE: This refers to a practical method or conduct used to do a specific talent.

INDUSTRY: This is merely a branch of commercial enterprise dealing with the production of a specific product.

A component is a constituent part or facet of a more complicated system.

RELIABLE simply implies trustworthy and dependable.

FEATURE: This refers to a prominent or distinctive feature.