ohapter 12

Effecton Other W o r k
in the Business

A number of very vital interrelationships come into play in the effective

use of value analysis techniques. Some of the most important of these
are the relationship of value analysis to:
Accounting Management
Appearance design Purchasing
Cost reduction Quality control
Engineering Sales
Manufacturing
In the simplest language, the objective of value analysis and value en-
gineering is to develop practical value alternatives to the end that all
decision making will achieve an improved degree of value in the final
product or process.

12-1 Accounting
In the same simple terms-perhaps too simple for the accountant-the
principal objectives of accounting activity are twofold.
 Eflect on Other Work in the Business 225

1. Accumulate suitable after-the-fact figures so that period-end profit

and loss accounting will be proper both for tax purposes and for busi-
ness owners' purposes.
2. Suitably apportion costs and incomes to guide before-the-fact deci-
sion making.
Value analysis bears no relationship to the first objective but a very
significant relationship to the second. More general acceptance of this
fact is needed.
It is only rarely that the situation is assessed as it was by an account-
ing manager who said: "As in engineering, where a product developed
for a particular purpose can be made to accomplish that purpose effi-
ciently and well, so it is in accounting. Systems can be developed to ac-
complish particular purposes. The serious problem, however, is that ac-
counting systems often are used either as they are or in some amended
form for other than the originally intended purposes and then are not as
effective. Give us a clear understanding of an exact purpose, give us time
and resources, and we can develop an efficient system which will accom-
plish that purpose."
As in the physical sciences, where men often endeavor to accomplish
several purposes with the same product and seldom accomplish divergent
ones efficiently, so it often is with accounting systems.
In the past, as an analogy, the horse was employed to pull the plow
and then also to pull the buggy. If he was heavy enough for an efficient
draft job, he was far too slow and inefficient with the buggy. Conversely,
if he was light enough and fast enough to be an efficient buggy horse,
then he was far too weak and inefficient as a draft horse. In four respects
this use scheme bears a striking resemblance in its accomplishment to the
accounting systems commonly in use.
1. A horse suitable for the draft job is used also on the buggy. The
owner rationalizes by saying, and by learning to believe, that "he is also
pretty good on the buggy."
2. A horse suitable for the buggy job is used also in the field. Again,
compromises are accepted, but the owner gets used to the level of per-
formance of the buggy horse in the field. He rationalizes for himself that
"the horse is also a pretty good field horse."
3. A compromise horse is used. Though the horse is not capable of the
heavy loads in the field or of fast work on the buggy, the owner gets
accustomed to its degree of performance in both respects and rational-
izes, "He is a good buggy horse and also a good draft horse."
4. Two different horses are used. The importance of the draft work
and the importance of the buggy work cause the owner to acquire two
distinct types of horses. He now gets efficient draft work and efficient
226 Techniques of Value Analysis and Engineering

buggy work, but he has two horses to own and to feed. From a business-
man's point of view, he must decide whether the increased efficiency
justifies the extra feed.
Although, as the accounting manager stated, accounting systems can
probably be developed to efficiently accomplish almost any purpose,
there is quite naturally and properly a great reluctance on the part of
management to provide more than one basic system. Since tax and earn-
ings accounting are considered absolutely vital, compromises are usually
made and inefficiency is allowed in the second area, which covers useful
and meaningful cost data for making before-the-fact decisions. Usually
modifications, sometimes at great expense, are made in the tax and earn-
ings accounting systems, and the over-all system then is considered
"pretty good" and is used extensively in decision making. In effect, those
interested in costs for decision making usually find that they must use
the ':draft horse" or attempt to work with a modification.
As emphasized in section 8-2, the quality of value alternatives and the
quality of the resultant decision making, which affects the degree of
value in the product, are very deeply affected by the degree of mean-
ingfulness of the costs with respect to the specific purpose of making a
proper selection of the engineering, manufacturing, and other alternatives
to accomplish the functions the customer desires.
Decisions affecting value can be no better than the information which
enters into the comparisons, and this information cannot be better than
the meaningfulness of the cost figures derived from accounting. When a
better degree of value is required, the payoff to the company of mean-
ingful costs created for the purpose of comparing value alternatives will
become very large.
The use of effective value analysis is both troublesome and rewarding
to the accounting activity. It is troublesome because:
Meaningful costs are required. To interpret costs meaningfully, analysts
must inquire into and learn how they are determined.
It may show that much of the detailed work of breaking down costs
by parts and assemblies does not really make a contribution but provides
misleading information instead. If so, accounting must face up to the
shortcomings of traditionally done accounting work and cost compiling.
It may show that many of the costs traditionally used do not precisely
reveal how the business is affected when individual decisions are made
one by one.
It may become necessary for accounting and cost people to learn and
develop some very new practices, procedures, and systems to convert
one system to another.
 Efiect on Other Work in the Business 227

The rewarding aspects are:

Accounting work can now make real additional contributions to
earnings.
Accounting will face real challenges in providing meaningful informa-
tion for the necessary decision making.
Satisfaction will be derived from seeing that the work of accounting is
put to good use and forms the basis of decision making that results in
better decisions and improved earnings.
Two of the important classes of decisions that we are concerned with
here are:
Make-versus-make decisions
Make-versus-buy decisions
At first glance, it may appear to be of vital importance to learn how
the business is really affected only in the case of make versus buy. How-
ever, further thought will show that this is not at all true. The class
of make-versus-make decisions may involve hundreds of different alterna-
tives, some of which will be tabulated here. The cost may very well vary
by a factor of 10 to 1 between different methods for individual items or
individual functional assemblies. The lack of meaningfulness of the costs
can easily lead to support of decisions which cause the product to contain
so much unnecessary cost that orders are lost or perhaps the total busi-
ness is lost.
Some of the kinds of make-versus-make alternatives that may be in-
volved are as follows:
Casting versus stamping
Wire form versus sheet metal
One part versus several parts
One type of machine versus another type of machine
One shift versus another shift
Varying degrees of automation
Totally in-plant versus partly in-plant parts and partly purchased parts
or assembly (the border line or "gray" area between a make-versus-make
and a make-versus-buy decision)
Make as needed versus make periodically and hold in inventory
It is readily seen that although no decisions to make versus buy are
involved in these cases, wide ranges of applicable costs are controlled by
the decisions made on the basis of the costs provided by the accounting
activity for the decision making.
In make-or-buy decisions-or, more correctly stated, in the area of
228 Techniques of Value Analysis and Engineering

determining at which stage in the cycle from the rawest form of raw
material to the finished product is it advantageous for the factory to
bring the material into the plant and perform the necessary operations
on it-it is both exceedingly difficult to develop and exceedingly vital
to have meaningful cost information. I t is a relatively easy matter to
make make-or-buy decisions pertaining to large groups of activities, but
to be realistic in operating a business, even where over-all looks are
taken periodically, important decisions must of necessity be made one
by one. Unless the over-all decision arrived at is one in which decisions
made one by one provide for the right value, the cost information used
is inadequate and unsatisfactory.
While at first glance it would seem simple to determine how the busi-
ness would be affected by making a part, this cannot be done by merely
determining the material used, the labor required, the indirect expenses
in the form of maintenance and liquidation of machines and equipment
employed, and the amount of consumed supplies. Buildings are involved
which might, or might not, exist regardless of the decision on a particular
item. The entire supervisory and management staff of the organization
will probably exist regardless of the decision on the item, and the same
amount of space may be required regardless of the decision; likewise, the
same amount of maintenance may be required. The question of determin-
ing precisely how the business will be affected if a particular decision is
made to buy rather than to make is a most difficult one.
Often, with traditional systems of accounting, it is more straightfor-
ward to determine how the business will be affected by a change from
buy to make if the change is comprehensive enough so that new build-
ings and new machines will be required. In this case, definite costs can
be assigned as an increase to be computed in the decision-making
formula. The sticky problem results when serious consideration is given
to taking the decision in the opposite direction, i.e., from make to buy,
because now many facilities already on hand and already being paid
for in various accounts may not be needed.
A further reason for the need of particularly objective and meaningful
comparative costs in this particular connection is that make-or-buy de-
cisions lie in the emotional area. A strong emotional pull toward decisions
to "do it ourselves" usually exists. Often, this pull is so strong that neither
the accounting specialist nor anyone else is requested to develop really
meaningful alternatives which could lead to decisions contrary to the
do-it-ourselves practice.
Finally, it should also be noted that the techniques of value analysis
apply to any action which costs money. Each activity of the accounting
unit can be analyzed by the use of these techniques to determine pre-
cisely what function is accomplished by each act, by each piece of paper,
 Eflect on Other Work in the Business 229

by each file, by each person each minute of the day. Such evaluation by
accounting people, who have first learned to use the value analysis tech-
niques and then applied them to their accounting practice, has brought
important yields.

12-2 Appearance Design

Those not engaged in value work often believe that decisions prompted
by value analysis techniques will tend to decrease the appearance and
attractiveness of a product. Not precisely understanding the value
analysis techniques or approach, they expect that the procedure is to
eliminate all except the use functions. Nothing could be further from the
truth. Value analysis techniques in the very basic approach recognize two
classes of functions, namely, those functions which cause the product to
work and those functions which cause the product to sell.
The latter class is comprised mainly of features of appearance and con-
venience. More often than not, the application of value analysis tech-
niques results in an improvement in the appearance of the product by
opening up opportunity for effective work in the appearance-design
activity.
One of the phases of the study of a product consists in determining
precisely what, from the viewpoint of appropriate volume of sales at
appropriate prices, constitutes the major areas of opportunity. These
opportunities may fall in one or more of three categories:
Improved performance
Improved appearance and/or features
Lower cost
With the factors of appropriate performance and appropriate cost under
control, attention is then sharply focused in the areas of improved ap-
pearance and features in order to build up the appropriate sales volume.
Value analysis studies have shown that great opportunity exists in
the appearance-design area. Technical people, however, who are expert
in development of performance, often do not realize the magnitude of
the contribution which can be made by those especially skilled and
trained in appearance design. In many cases, they make decisions affect-
ing the appearance as 'best they can." This usually results in added cost
and only a moderate degree of appearance improvement. Because of such
experience, there is a rather widespread belief among technical people
that improved appearance requires increased cost. This is seldom the
case.
Being specifically oriented toward identifying the problem and de-
veloping better solutions to it, the value analysis techniques promote the
230 Techniques of Value Analysis and Engineering

use of specialized skills and knowledge in all fields, including that of

appearance design. With appearance-design aptitude brought to bear on
design problems very much better appearance at substantially lower cost
usually results.
The application of value analysis techniques to a product contributes
materially to the separation of the work functions from the sell functions
and brings appearance design directly into focus to gain from manage-
ment the emphasis and support that it deserves.

12-3 Cost-reduction Activities

Where emphasis is put, accomplishments result. Traditionally, perform-
ance-oriented work is a scheduled, measured, and integrated activity in
the business. Planned resources are spent, and planned results are norm-
ally achieved. The work is taken in stride by the business. Thus, in the
absence of temporary performance problems, suitable performance of the
product is the result of long-term and regular activities.
As for cost, the situation is almost directly the opposite. It is every-
one's job. How a good degree of value is obtained is not too well known,
nor is the degree of value obtained readily measurable. Each person in-
volved does as well as he knows how. The normal measurement of the
suitability of value work is based on an appraisal or a guess of how well
it is done as compared with how competition does it.
Since performance work is basically "right-hand work and value
work is traditionally "left-hand" work, it is normal that costs often be-
come too high. Short-range activities of a fire-fighting nature must then
be established and must be given enough emphasis to prevent results
that are intolerable.
Often, in a particular business, the extent of this problem can be pre-
dicted, so it is planned well in advance to impose, by a number of
expediencies, a certain amount of cost-reduction effort, together with the
resultant measurable reports throughout each regular period of a year.
The work involved competes with the regular work of most technical
men who believe their principal job is one of accomplishing other objec-
tives-usually performance objectives, new-product objectives, or similar
ends. Quite commonly, the manager or boss is more oriented toward, and
more comfortable with, performance work, and so his best supervising
effort goes in the direction of helping and measuring his subordinates on
the performance parts of their jobs. To him, cost-reduction work then be-
comes an added or "thrust-in" burden which he must, to some extent, do
something about.
In these circumstances, a certain amount of pressure may be necessary
to compete with the motivation of a man for the regular phases of his
 Efect on Other Work in the Business 231

job, and he is often told that it is intended that he shall spend part of his
time, perhaps one-half day a week, on the cost-reduction activity. In
order to strengthen the pressure which will cause him to do this, he is
given a budget of savings which he is expected to accomplish in a certain
period.
Cost-reduction work, as a a l e , is after-the-fact work. The tooling has
been provided and the product has been standardized; changes spell
deviation. In many cases, replacement parts must be continuously
stocked, and when changes are made, other items must be added to the
catalogue. Likewise, drawings must be changed. Indeed, these and many
other deterrents to good cost-reduction work often diminish substantially
the valuable results of the activity.
Nonetheless, what is known as cost reduction is a vital activity. As
most businesses are organized, they could not long endure without it. A
first step, when instituting a value analysis program, is to make sure that
those who are working on cost reduction continue to do at least as much
of it as they have been doing. A great deal of effective cost-reduction
activity will be necessary until a planned and integrated activity, pro-
fessional skills, techniques, and knowledge are provided to the business
so that value work can be taken in stride, the same as perforrnance-
oriented work is.
As a business begins to apply value analysis techniques to cost reduc-
tion, two changes will be observed.
The results per man-hour of cost-reduction work will be greatly in-
creased.
More satisfaction will be derived from the work because it will be
seen to be effectively done with the achievement of a larger yield.

Cost Reduction versus Value Analysis

In contrast, value analysis is a long-range planned activity. It has set
objectives, and it operates to always keep the costs right.
Similarly, just as long-range integrated performance work uses good
tools, long-range integrated value work uses good tools to accomplish the
set objectives.
Suitable value work is done in the product-conception stage, in the
engineering-design stage, in the manufacturing-engineering stage, in the
purchasing stage, and in the production stage.
By doing this work on a planned basis as the product "grows" and
is developed, it becomes practicable to take many actions not possible
in after-the-fact cost-reduction work, which is not a part of the normal
pattern and which is hampered by problems of existing tooling, stand-
ardization, servicing, replacement, etc.
 232 Techniques o f Value Analysis and Engineering

The reader must not, however, overlook the fact that the value analysis
techniques are often also used on products in the after-the-fact stage,
especially when the particular industry has progressed to the point where
substantial redesign is imminent or when a competitive degree of value
work has not been done during the earlier product stages.

Case Study
INCREASED DOLLAR YIELD PER MAN-HOUR
FOR COST-REDUCTION WORK

When fabricated, 2% cents worth of steel in this back plate, Figure 121,
became 10% cents of cost. The part was in a high-volume appliance.
With a quantity of 1 million, each penny becomes $10,000. Therefore,
each penny of unnecessary cost is important. The function of the back
plate was evaluated at considerably less than 10% cents.
Cost analysis and value analysis study showed that far too much of this
cost was for the operations of suitably smoothing and deburring the top
edge of the plate. Investigation was made of alternative materials,
products, and processes which would accomplish the needed functions. It
was found that adding 1/2 cent per pound to the cost of the steel, which
ensured providing it with a mill edge, completely eliminated the burring
and smoothing expense. The result was an identical part from a use and
appearance viewpoint-probably a somewhat neater part-with cost re-
duced from lw cents to 4% cents. This study was motivated by the cost-
reduction coordinator and netted him a $60,000 credit to his budget.

12-4 Engineering
The enormity of the engineering activity in most organizations is largely
underestimated. Greatly oversimplified, it may be said that the engineer-
ing function has two responsibilities.
Design and development of new products
Constant reduction in cost of existing products
A somewhat closer view will show the complexity of the responsibility
normally carried by engineering. While in years past its job was deemed
satisfactorily done if the product performed its functions reliably, in more

ROUNDED EDGE

T-
2"

ROUNDED
OPTIONAL
~9
Fig. 12-1 Back plate.
 Efiect on Other Work in the Business 233

recent times a great many complicating requirements have been included

in the engineer's responsibility. Some of these-aside from determining a
way to accomplish a function and providing a design which will do it-
are:
Design to size
Design to weight
Design to special conditions of vibration, temperature, corrosive en-
vironments, etc.
Design to appearance
Design to cost
Design to new manufacturing processes
Design to time schedules
Design to utilize new materials
A realistic appraisal shows that the engineer must keep in mind so
many factors that he usually has to be satisfied with compromises in some
areas of his responsibility. Quite naturally, the areas in which he can
prove his attainments readily by tests are the ones that get his best at-
tention. In other areas, such as that of value, where definite measure-
ments are largely nonexistent, he must often, under the pressure of time
schedules and other commitments, consider that he has "done well
enough" and jell up his designs.
I t is in the areas affecting cost that value analysis has an intimate rela-
tionship to engineering and can contribute greatly to the value content of
technical work. The relationship of value analysis to engineering may
well be compared to the relationship of, say, metallurgy or heat transfer
to engineering. In these two fields, information vital to engineering de-
cision making is recognized to exist, and the engineer is accustomed to
drawing on these techniques, and the knowledge therein, before he
makes his decisions. As the metallurgists act to assist the engineer in
identifying appropriate metals for use in accomplishing a specified func-
tion, so the value analyst acts to provide the engineer with information
which will allow him to identify unnecessary costs.
The engineer must draw his conclusions and make his decisions based
on the best facts he can lay his hands on. The value analyst must be pre-
pared to provide more facts about value alternatives for the engineer to
use at the point and time of engineering decisions.
I t may help the reader to review here some of the types of situations
that every experienced engineer has faced and that have often been the
cause of unnecessary costs in designs. Frequently, costs are lacking. In
theory, the engineer might be said to have cost figures to use in choosing
his alternatives. In actual practice, however, very many vital decisions
must be made with exceedingly poor cost estimates, if indeed cost esti-
234 Techniques of Value Analysis and Engineering

mates are at all available. It is not unusual to find an engineering

manager saying, "I had no reasonable idea of what the costs would be
until after the first production run." A part of the kit of tools of the value
analyst will serve to provide useful and meaningful costs at the time of
decision.
Commonly, in any particular plant, there is considerable pressure and
habit directed at designing for the machines already owned. The engineer
knows that the machines will make suitable parts, and especially if he is
short of time, he might be open to criticism if he produced a design that
could not be made on the local equipment. In consequence he takes the
normal way out and designs for the available equipment. One of the
functions of the value analyst is to search out the very best process for a
functional part or assembly, regardless of what the process may be or
where the equipment may be located, and to determine what the cost of
the found alternative will be. Again, the engineer is provided with sound
value information at the time of his decision making.
Some applicable methods of manufacture are unknown to the par-
ticular manufacturing and engineering people in any one location at some
time or another. It is again the task of the value analyst to reach out and
cause the corresponding value alternatives to be developed and brought
into focus for the engineer's decision.
Certain materials are thought to be unsuitable. Every person tends to
draw upon his experience and his knowledge, thinking that it is appli-
cable when it is not. As a result, excellent value alternatives are not con-
sidered. The search techniques in the value analysis kit of tools, combined
with the special knowledge of value analysis, must be applied to develop
objective information for the engineer to use in his decisions. The same
is true when certain methods and processes are thought to be unsuitable.
Objective information will show that they are suitable and represent good
alternatives. Every human being accumulates a certain number of mis-
conceptions as he proceeds in his business career. The use of the value
analysis techniques illuminates whole families of misconceptions with fact
and brings out into the open good value alternatives which otherwise
would be rejected without even being considered.
Wide ranges of functional products can be furnished by specialty sup-
pliers to be used, either as they are or with some modification, to accom-
plish the needed function. Once again, the search techniques and the
special knowledge of value analysis bring much more of this sort of in-
formation into clear view for the engineer's consideration in his decision
making.
The field of new materials is expanding so rapidly that it provides a
wide area of opportunity for the value analyst to search out and identify
new applicable materials for the engineer's functions and then to bring
them to his attention with complete, appropriate costs.
 Effecton Other Work in the Business 235

One of today's normal methods of securing business in many industries

consists in providing an engineering service. The engineers of suppliers
are anxious to become acquainted with needed functions and to endeavor
to adapt their products, materials, or processes to them. Value analysis
includes action to search out such supplier engineering competence, to
clearly convey to capable representatives the functional problems in
question, and to bring back their solutions for the responsible engineer's
decision.
Engineers working on a design often realize that more time and
resources would provide better value in their solutions, but at the same
time, they may be hard pressed by a management to end their work and
make the product as it stands. Utilization of the special knowledge and
techniques of value analysis helps to bring useful alternatives into view
within time periods allowable. Any individual can use only those ideas
which he is able to think of at the specific time. The value analyst, by
application of his techniques, can often assist the engineer in thinking up
more applicable value ideas.
Experience indicates that it is not an unusual thing for engineers to
find themselves bogged down in clerical work. Taking a leaf out of value
analysis teachings and proceeding to analyze the function of such clerical
activity have, on numerous occasions, helped the engineer to rid him-
self of much clerical effort and have thus enabled him to proceed with
his creative work faster.
One extensive area in which value analysis can be of great importance
to the engineer may be well identified as the "warm-blood" area. After
a person has been confronted with a situation, studied it, collected in-
formation on it, thought it through, and reached a decision, this decision
becomes his "warm blood." Psychological studies show that it is very
difficult for him to start again with the same problem and not be pulled
into the same preformed channels of thinking. Value analysis can assist
him greatly in such situations by bringing up new objective alternatives
for his consideration and decision making.
It is well to recognize again that the engineer has one of the most
difficult of all jobs to perform. He must first search for and develop his
own evidence. He must then be the judge and make his decision on his
own evidence. Experience shows that when more and better evidence
is developed through value analysis, decision making by engineers results
in very much improved value.

Case Study
CAN WE SCRAP THE SCRAP?

In order to secure advantageous operating characteristics, it was necessary

to provide a silicon-steel transformer core of a specific configuration with
236 Techniques o f Value Analysis and Engineering

relation to the coils which went on it. As the steel laminations were stamped
to make this core, 42 per cent of the steel became scrap while the remain-
ing 58 per cent was used in the product. It appeared that, without
sacrificing efficiency or operating characteristics, this was the way to do it.
A value consultant brought into contact with the job went to the silicon-
steel specialist and also to the transformer specialist in a large research
organization and confronted them with the problem. It just didn't seem
right to him to live with the enormous amount of unworking cost involved
in throwing away 42 per cent of the silicon steel. The silicon-steel specialist
brought forth a change which resulted in reducing the scrap from 42 per
cent to 25 per cent by working out a new stamping pattern. Two months
later, after careful study and test, changes were put into effect which
eliminated 5 cents apiece of the cost on 3 million transformers per year, a
difference of $150,000.
Then two interesting things occurred. The engineers were startled and
intrigued that this could be done, and both the transformer-circuit
specialist and the silicon-steel specialist became intrigued by the problem.
In about a year, another suggested improvement was made and tested.
This involved changes both in the silicon-steel core and in the coils. Im-
proved performance was found to be provided without adding to the coil
cost, and the silicon-steel loss was reduced to 5 per cent.
I n conclusion, the relationship of value analysis to engineering is one
of generating greatly expanded information for the use of engineers and
of identifying value alternatives for the engineer's inclusion in his deci-
sion making. I t is little wonder that the first vice-president of engineering
of a well-known company to examine the operation of these techniques
stated, "Value analysis is the best method yet found to help engineers
remove unnecessary costs from their products."

12-5 Manufacturing
Basically, the job of manufacturing is to use machines, processes, and
people to change the form of material to conform to the designs of
engineers.
The basic function of value analysis is to identify each element of
function provided by each element of cost. Accordingly, the consultation
provided by the value analyst to manufacturing will start always with a
clear identification of the contribution to function furnished by each
activity in manufacturing which adds cost. Creative study of the incre-
ments of function and of the increment of cost brings expanded informa-
tion into the decision-making area and makes practicable a still further
elimination of unnecessary cost.
For example, more information is provided by observations of rather
difficult or time-consuming operations throughout manufacturing.
 Effecton Other Work in the Business 237

What contribution is made by the hardened steel?

What contribution is made by having holes slightly different instead
of the same size?
What contribution is made b y heat-treatment between operations?
What contribution is made by a tapered instead of a straight screw?
What contribution is made b y a n operation that is causing quality
difficulties?
T h e functions and contributions required of t h e process and t h e re-
lated difficulties having been brought into view, the search techniques
of value analysis, together with the special knowledge, elicit alternatives
for t h e responsible manufacturing man to use in his decision making
and in his discussions with the engineers.
Studies of manufacturing work often show that unprofitable items are
being produced. T h e reason for this lies in the nonexistence of clearly
crystallized and developed alternatives. When information of that char-
acter is developed, unprofitable work may be removed from the factory.

Case Study
DID THE VENDOR CONTRIBUTE?

No operation should be performed by manufacturing people unless it con-

tributes to the enterprise; in fact, if many are performed which do not con-
tribute, the vitality of the business is sapped. This case reports one study
to determine the realities of manufacturing contribution.
In one phase of value work on an assembly of a few hundred parts,
quotations were obtained from appropriate vendors on machine parts
which were actually being made in the plant. The quotations showed that,
on a considerable number of the specialized parts, vendors' prices were
lower than the comparable in-plant manufacturing cost, which consisted of
labor, material, and overhead.
In this particular plant, it was the custom for the manager of manufac-
turing engineering to make make-or-buy decisions. He was considerably
challenged by these lower competitive costs and arranged for a study of
his own manufacturing operations on the items in question. In all but one
of a dozen cases, he was able to lower his costs comparably, and hence he
allowed only the one part to be placed with a supplier. This was protested
by the purchasing people who had been instrumental in helping select the
vendors who provided the lower quotations. As a result, the case was re-
solved in the higher manager's office. There, after the facts were de-
veloped, the question was asked: What is the right action for us to take in
cases of this type? It was quickly decided and accepted that the right
action was, whenever suppliers had made contributions, to compensate
them in some suitable form.
The manufacturing engineer, however, felt that the suppliers had not
238 Techniques of Value Analysis and Engineering

contributed. "They didn't show us how to speed up our machines, how to

use different types of cutting tools, how to plan some of the parts more
effectively. All of this we did ourselves."
The manager's response was, "Whenever anyone comes here and takes
any action that causes us to eliminate substantial amounts of unnecessary
costs from our products, he has made a contribution regardless of all other
circumstances." Again he raised a question: What is the appropriate action
to take in this case?
After discussing the issues involved, he instructed that at least one-third
of the jobs on which suppliers had developed effective bids and made con-
structive quotations should be awarded to them regardless of other factors
and that they should continue to enjoy the business for approximately a
year, even though the factory now had improved its own processing to
meet the lower costs.
Good value work will help rid manufacturing areas of "busy work"
which does not contribute, so that their efforts may be used on operations
which make important contributions to the business.
Often manufacturing work proceeds along rather habitual lines in-
volving the particular products being made on orders placed with the
factory for quantities according to specific schedules. More complete
information on expected quantity requirements, inventory-carrying costs,
types of tooling for the resultant volume, and applicable specialized
vendor knowledge often allows the manufacturing decision makers to
eliminate important amounts of unnecessary cost.
Whenever a change is to be made, there is much work to be done in
connection with obtaining the new and complete information, analyzing
and evaluating it, and persuading those involved that the path to better
value lies in a different direction. In all these activities, the value analysis
tools and special knowledge are very helpful to manufacturing.
Misunderstanding is often eliminated by the application of value
analysis tools. Too often costly specifications are continued, and in effect,
needless and costly operations are performed which do not, if the whole
story were known, add in the slightest to value. In one instance a stamped
steel bracket was carefully "sized" in an expensive operation so that it
would fit perfectly into a mating part. Study to ascertain precisely the
value that came from the mating operation showed that a lead mallet was
always used at assembly and so, of course, the sizing operation made no
contribution whatsoever to value.
The process of associating precisely the contribution to function of each
addition to cost identifies the area in which the relationship of value
analysis to manufacturing allows manufacturing men to make different
decisions that help solve their problems, speed production along, prevent
quality problems, and lower costs.
 Efect on Other Work in the Business 239

12-6 Management
Basically, t h e objectives of management with relation to t h e business are
to provide the proper organization, including facilities, and to make the
proper decisions to operate on a profitable basis. If not profitable, all the
tragedies of bankruptcy will soon occur.
The method is to use the resources of capital, men, materials, equip-
ment, and time to make and sell products ( o r services) as skillfully as
competitors do. Competition is the measure. T h e need is for answers
as good as, or a little better than, competition, i n order for the business
to endure.

Case Study
THE CONTACTS THAT WERE LOST

Large benefits to management result from the new information which they
can now have as a result of knowing the value of the various functions in
the products they manufacture. Often normally undiscovered opportunities
to increase these values will result.
In the design of new products or in major redesigns, accumulated ex-
perience is studied, new information believed to be applicable is searched,
and models are prepared for test. In the case of electrical equipment, cer-
tain types are also sent to the Underwriters' Laboratories for its inspection
and test. The value audit of a product which had been in production two
years indicated that it contained considerable "waste," that is, cost which
made no contribution to life, safety factor, or use of the product. The
contacts used cost $26,000 per year more than seemed appropriate, and
an investigation was made. It was found that during the design work
reasonable and appropriate contacts had been developed by test, and they
had been selected. However, it was also found that, during the assembly
process for preparation of samples to be sent to the Underwriters', some-
thing had gone wrong and the supply of the appropriate contacts had
been exhausted. In order to avoid delay at the time, the engineer had
furnished another, more expensive contact to the assemblers. This had
solved the assembly problems and the samples had been made and sent to
Underwriters' Laboratories where they had received approval. Two years
later, with this information in hand, the appropriate contacts were sub-
mitted to the Underwriters', and of course, approval came forth with the
result that the unnecessary, noncontributing cost was eliminated. Searches
often disclose the unexpected.
The work of a business is twofold: to provide something which the
public wants and to provide it for low-enough cost. The business will
succeed or fail according to the effectiveness with which management
makes decisions in these two areas.
The relationship of value analysis to management, of course, falls in
240 Techniques of Value Analysis and Engineering

the second category. In the past, there have been severe organizational
shortcomings. High among them is the fact that most important respon-
sibilities can be effectively delegated and the degree of their accomplish-
ment measured so as to be known. For example, the president or general
manager delegates :
To his engineering head responsibility for performance and design
quality
To his manufacturing head responsibility for production quality and
shipments to a predetermined schedule
To his industrial designers, or the engineering head, responsibility for
competitive appearance and features
To the manager of inventory control responsibility for keeping inven-
tory within certain established ranges
To each of these men, that which is delegated is the prime job. Success
or failure depends upon accomplishment in the assigned area.
When it comes to value, this is everyone's business. Each party is told
to coordinate and cooperate with the others to secure good value. Attain-
ment of good value is a "second j o b with unclear delegation and indefi-
nite evaluation.
Experienced managers have often said that one of their major prob-
lems is that they have had little choice, no matter how much they were
in need of lower costs, but to have the same people reexamine their work
of the past. The result has been that a very negative, unrewarding, and
inefficient job has been done.
With the advent of value analysis techniques, this vital problem of
management is being corrected. The manager may now arrange for a
suitable number of competent men to learn how to handle value. He may
delegate directly to them responsibility for achieving certain value ob-
jectives. This becomes their job and they succeed or fail according to
their performance on this one objective. Accordingly, the magnitude of
results is of a different order.
The best managers agree that where management places emphasis,
there they secure results. This they are enabled to do with the help of
the value analysis suggestion sheet written in managers' language. The
reader will recall that the suggestion sheet is a clear-cut presentation of
unveiled solutions uncluttered by supporting data which are needed only
by the engineer or other on-the-job decision maker. With the value in-
formation oriented to specifics, the manager may now apply effective
emphasis to achieve the degree of value results which he feels the
business needs.
Another important way in which the use of value analysis techniques
can greatly assist the manager is in identifying, and helping to com-
 Eflect on Other Work in the Business 241

pensate for, the costly disadvantages of honest errors. In any field of

activity, responsible people accumulate honest wrong impressions and,
accordingly, make entire patterns of decisions incurring more costs than
necessary. Experience has shown that the costs in such instances can
often be from two to five times as high as is necessary to reliably accom-
plish the desired functions.
In this respect, any manager can do much good by having his sub-
ordinates know he understands that a portion of their decisions will be
in error and that they will not be criticized for what is a normal occur-
rence. He must also recognize that the same is true for a percentage of
his own decisions, and since these may vitally affect the earnings position
of his company, he would do well to use value analysis techniques to
illuminate wrong beliefs with objective value data, so that decisions in
the future may be more in harmony with best alternatives.
An important phase of the relationship of value analysis to manage-
ment can be emphasized by the question: What is a most important
responsibility of management to value analysis? In Chapter 11, the im-
portance of the decision-making environment, which is largely under the
control of the manager, was discussed. As a prime requisite, a manager,
to enchance his earnings results, must provide an environment in which
men can make decisions to obtain better value without the risk of
personal loss. Full recognition and proper implementation of this situa-
tion by the manager can more than double the rate at which good value
alternatives that deviate from past practice are put into use to retain
product reliability and quality and to provide increased earnings.

12.7 Purchasing
A significant part of the responsibility of the value analyst, after the
functions required have been determined, is to locate in the vendor
market the particular product, process, or know-how which will bring
the best answer at the lowest price. Therefore, close and extensive rela-
tionships must exist between purchasing and value analysis.
Fortunately for both operations, effective value analysis greatly im-
proves the grade and degree of purchasing work, and efficient execution
of certain purchasing activities greatly improves the degree and amount
of value analysis accomplishment.

Case Study
IT'S PATENTED

A large quantity of special metal dials were being purchased. They cost
90 cents each, which seemed high, but purchasing had been able to get no
other bids.
242 Techniques o f Value Analysis and Engineering

A value consultant studied the functions. They were found to be very

simple, certainly not worth 90 cents. Discussions were arranged with the
supplier, whose attention was called to the large increase in the quantities
purchased and to the simple function of the dial, as well as to the fact
that cost analysis showed it was not worth 90 cents.
When the chips were down during the negotiation, he acknowledged
these statements but said, "The dial is patented." It was such a simple
product, however, that the patentability of it seemed very much in ques-
tion. The patent attorney was consulted, and when he got in touch with
the patent people of the supplier company, he received information on
what was patented. It proved to be only an extremely minor detail which
was relatively unimportant in the use to which the dial was being put. The
result was that the supplier proposed a price of 40 cents instead of 90
cents. He stated that, although a quotation of 30 cents might be expected,
he felt that his pioneering work in the field of dials had been important
and that even though the precise item he had patented was of little value,
it seemed reasonable to him to receive a 10-cent payment for it. This was
a well-founded contention.
The matter was concluded by deciding to continue buying the dials
from him, but for 40 cents rather than 90 cents. This resulted in saving a
large amount of the cost of the military product involved. Investigation of
questionable patent situations, as well as of any other situation which
might add cost, is a part of value analysis.
To those using the value analysis techniques, purchasing can supply
valuable information about specialty-vendor knowledge and precise data
regarding individual companies' personnel, products, or processes. The
following value analysis techniques can be most efficiently used only
with continuous purchasing support.
Use industry specialists to extend specialized knowledge.
Utilize vendor's available functional products.
Utilize and pay for vendor's skill and knowledge.
Utilize specialty processes.
Utilize applicable standards.
Purchasing men, situated as they are at the point of transfer of the
company's money for materials, products, and services, often have reason
to suspect that good value is not being obtained on particular items. In
such circumstances, their invitations to value consultants to study the
items, combined with their suggestions as to where to turn and how to
obtain efficient work, almost always prove highly profitable.
The inducement to such action by purchasing men lies in the added
job satisfaction-over and above the day's pay-derived from feeling that
extra contributions are being made to improve company earnings. Basi-
cally, purchasing personnel are dedicated to getting their money's worth.
 Efect on Other Work in the Business 243

In the atmosphere of competition, however, they must also be constantly

aware of the fact that their expenditures have a bearing on the profit
picture. They can ill affordto let this point be overshadowed in the execu-
tion of the diverse, and often laborious, aspects of their responsibilities,
such as ensuring that needed materials and supplies of satisfactory quality
are obtained on time and that emergencies of supply, of transportation,
etc., are resolved promptly.
The work of obtaining full value for expenditures, which is in keeping
with the attainment of higher earnings, can be inestimably enhanced by
the effective use of value analysis techniques by competent persons
trained and skilled in applying them. As functions are studied and fur-
ther clarified, value alternatives come to light. Discussions with technical
people crystallize the alternatives that are practical, usable, and accept-
able from the technical viewpoint. This allows purchasing people to buy
a material or a product which may be entirely different from that origi-
nally intended but which is obtainable at very much lower cost and still
is functionally useful. The result is satisfaction in a job well done.
It should be observed at this point that full recognition of certain
basic premises is necessary for the effective interplay of the relationships
in question. These premises are:
1. The value analyst will not do the buyer's job. Unless the value
analyst has a complete prior understanding with the buyer, the interest
that he takes in vendors and his communications with them will be
questioned. As the buyer sees it, this is his corner of the ball diamond,
and now the value analyst is on it. Quite naturally he wonders: "What is
he doing in there? What is the effect going to be on my job? How will
the efficiency and effectiveness of my work be affected? In the past I
have enjoyed contacts even with the technical people of the vendors and
have progressively learned from them. Will the value analyst's work now
reverse this trend and steadily weaken me in the area?"
These and allied questions will interfere with the buyer's performance,
and it is imperative for him to know that the value analyst will not do
his job and also just what the value analyst will do. With a precise
understanding of the relationship of value analysis to his job, the buyer
will recognize that it will extend his range, increase his competence,
promote his growth, and enhance his contributions to the company's
earnings. The value analyst will not be making decisions which were
formerly the buyer's, but he will be providing more information for the
buyer to work on so that he can make more rewarding decisions.
2. The buyer must be kept advised. If the buyer, as well as the com-
pany, is to benefit from the value analyst's activities, the buyer must be
protected from any embarrassment that could result. Therefore, he must
244 Techniques of Value Analysis and Engineering

be a party to whatever work is being done in his area. This does not
mean that he personally needs to expend time sitting in on all discussions.
I t does mean, however, that the value analyst will let him know what is
going on and will give him the opportunity to take part, to the extent
he wishes, in discussions leading to later purchases. It is very common
for technical people to work with competent vendors on projects involv-
ing considerable complication and to arrive thoughtlessly at the answers
to the various problems so that the purchasing decision is in reality being
made step by step by others than the buyers. This is contrary to the
philosophy of good management under which a specific person is assigned
responsibility for each major activity, such as engineering, manufacturing,
sales, purchasing.
Thus management expects the purchasing manager and his organiza-
tion to be responsible for properly purchasing any particular product.
When, during the cooperative development of a purchasing decision, the
purchasing people are not properly advised of the steps along the way,
but are told only of the final answer, they become, in effect, rubber-stamp
manipulators who blindly place orders and abdicate their responsibility
to make sure that their purchases represent value. If they refuse to follow
the decision and open the project to bidders who have not had time
either to learn all of the intricacies of the job or to make substantial
financial and technical contributions to its development, their action may
result in injury to the competent vendor who originally worked with the
technical people as well as harm to their company. The product thus
selected will probably not be up to standards when it arrives from the
new vendor; and the result will be additional injury to the purchasing
department, which becomes subject to criticism by management, and, in
the final analysis, to the customer, who may not receive on time the
product he had a right to expect.
A few simple ground rules and a reasonable amount of mutual under-
standing provide for a very rewarding cooperation between purchasing
people and value consultants. For anyone who expects to be using value
analysis techniques, it will be profitable to examine some of the pur-
chasing practices which would be affected, adversely or favorably, by
his work. The following extracts are offered from a set of guides which
have stood the test of usage.

These statements and purchasing practices are guides to be used with

intelligence and with consideration of the other fellow and his job.
 Eflect on Other Work in the Business 245

1. Sources of Supply
The purchasing department will select sources of supply. They will
endeavor to do so in the best interests of the company and with a view
to creating and maintaining good vendor relationships. If vendors are
asked to bid, they must know that the source has not already been
decided.
Strong and enduring relationships with tested suppliers are to be
maintained. To do this, frankness and fair dealing, with maintenance of
quality, delivery, and fair price, will have a great weight. It is the in-
tention of the company to conduct purchasing so that suppliers will
value business sufficiently to make every effort to meet legitimate
competition.
a. Buyers will buy from sources with good reputation and sufficient
financial standing to meet the job requirements.
b. The best bid on the combined bases of price, quality, and service
will be accepted.
2. Commitments
a. The purchasing department conducts and concludes all negotiations
affecting purchaser, selection of vendor, prices, terms, delivery, ad-
justments, etc.
b. Commitments and orders, to be valid, are to be stated by a letter, a
purchase order, or a contract which sets forth appropriate details and
which is signed by the purchasing agent or by a person duly au-
thorized to sign in his stead.
c. Negotiations leading up to, or apt to conclude in, contract arrange-
ments should not be undertaken without the knowledge and author-
ization of the interested buyer in the purchasing department.
d. No one who is not a member of the purchasing department should
commit himself to any vendor on preference for any product or
source of supply for any product or give any information regarding
competitive performance, final approval, or price.
3. Vendor Relations
The purchasing department, realizing that good vendor relations is a
company asset, must be alert to promote a program of equity and
friendship with sources of supply.
a. Salesmen will be received in the purchasing department and in other
departments after arrangements have been made by the purchasing
department.
b. In addition, the purchasing department will arrange interviews be-
tween vendor representatives and company production, engineering,
research, and maintenance personnel when it appears to be to the
advantage of the company or when the buyer is in doubt as to the
merits of the proposal or when such an interview has been requested
by an appropriate employee of another department.
C. All suppliers' representatives are to have a complete hearing for their
sales arguments the first time they call. Subsequent policy will de-
246 Techniques of Value Analysis and Engineering

pend on the particular circumstances. Courtesy and prompt reception

of salesmen are part of the code; if the interview is to be denied,
there should be a prompt acknowledgment of the call, together with
a reason for not granting the interview. A buyer, or any other com-
pany person, is not required to put his time absolutely and indis-
criminately at the disposal of any and all comers, however frequent
at whatever time, or on what mission they may be calling. Some
matters are not appropriate to the department's needs or are not
timely at the moment the salesman elects to press them, The buyer
must necessarily be the judge, but he is not relieved of his obligation
of courtesv.
d. The purchasing department will handle all correspondence with sup-
pliers except when technical details make it desirable to secure
technical or other assistance.
e. Requests for prices, trial lots, etc., should.be made by the purchasing
department.
f . When a free sample is accepted for test, an obligation is assumed by
the company to make a fair trial and to inform the vendor of the
outcome of the test. However, as a preferred practice, the company
may buy sample lots, thus incurring no obligation but establishing
the interest of the company in completing the trial and making a
fair evaluation.
g. In fairness to all concerned, prices and other specific information re-
ceived from vendors are considered confidential. The auotations of
one supplier may not be divulged to another, and such information
should not be circulated indiscriminately within the company.
h. Buyers should be reasonable in requesting supplier's technicians to
call, unless volume of business justifies such expense. Information can
ordinarily be obtained by letter, telephone, or telegraph.
I

4. Interdepartment Relations
The success of the purchasing department depends on the kind of
job it does in procuring materials, equipment, facilities, ideas, and sup-
plies. The most effective functioning of the purchasing department is
possible only when other departments perform well their functions of
engineering, planning, receiving, testing, and storing. Therefore, in-
telligent, constant, and harmonious contact between purchasing and
other departments relative to their needs and the procurement of their
needs is a "must."
a. The purchasing department has the duty and authority to ask recon-
sideration of specifications or quantity of material if, in the opinion of
a buyer, it appears that the interests of the company may be better
served. However, the final determination of quality and quantity are
the prerogative of the engineering and requisitioning departments.
(1) Purchasing specifications, while written by engineering, should
be checked by the purchasing department before being issued
to be sure material is obtainable and practical.
 Effect on Other Work in the Business 247

( 2 ) It is desirable that the drawings for new-purchase parts be sub-

mitted to purchasing, as much in advance of the required date
as possible, to allow purchasing to develop the best possible
source of supply.
b. Buyers must be alert to pass on to potentially interested individuals
information derived from salesmen's interviews and direct mail or
other advertisements and deemed useful. In a similar manner, mem-
bers of other departments are expected to reciprocate by drawing
items deemed to be of value to the attention of the purchasing de-
partment. If the purchasing department does not have a record of,
or experience with, the items, suitable inquiry will be made by its
personnel.

12-8 Quality Control

While value analysis is not as directly related to quality control as it is to
purchasing or engineering, one specific relationship exists with extensive
opportunity for mutually beneficial activity. Before dealing with it, it will
be well to identify two important areas of possible misconception about
the relationship of value analysis to quality control.
These two misconceptions, which are entirely too general, are:
1. "The function of value analysis is to identify and cause to be re-
moved all costs which provide extra safety, extra quality, and extra life
beyond the minimum needs. It is the aim of value analysis to remove all
of the quality which can be eliminated without having the product fall
apart in its customary use."
This statement is totally false in every degree of its implication. The
use of the value analysis techniques identifies unnecessary cost, i.e., cost
which does not add to safety, to performance, to life, or to the appear-
ance desired by the customer and which, in fact, adds nothing whatso-
ever to the product under any condition.
2. "Lower cost means lower quality." This common belief, which is
often inherited from early childhood and which normally persists to con-
trol vital decisions, is also entirely false. Cost and quality have no direct
relationship. Indeed, it frequently occurs that the highest cost gives the
lowest quality. The reader will add greatly to his value competence if, at
this point, he frees himself of any remaining tie to his childhood experi-
ence of buying small oranges for 25 cents a dozen and larger ones for
50 cents a dozen.
The reason for the existence of any product is that it accomplishes a
certain function or a certain group of functions. Good quality comes with
the selection of good answers to the question of how to use materials,
processes, parts, and human efforts to accomplish these functions. Poor
248 Techniques o f Value Analysis and Engineering

quality results from having poor answers to t h e question. It is as simple

as that. Cost is not part of quality determination.
Now, t o introduce cost in its proper perspective:
Good-quality products result whenever t h e answers chosen are good
answers whether they b e high-cost answers or low-cost answers.
Poor-quality products result whenever the answers selected are un-
reliable answers, whether they b e high in cost or low in cost.

Case Study
LOWER COSTS MAY MEAN DOING IT THE
RIGHT WAY

Precision gear sleeves, about 2 inches in diameter and 5 inches long, were
used on a precision product with expanding volume. They were manu-
factured in the plant at a cost of $15.75 each. Extensive inspection was
required, as this was both a high-temperature and a high-speed gear on
which even minute imperfections had to be eliminated.
As the volume increased faster than the production facilities for manu-
facture, it became necessary to locate another source. Considerable pur-
chasing effort produced a source which made suitable gears. However, the
cost was $17 each.
During this search for suppliers, a specialist who had achieved con-
siderable success in some of the branches of the gear field had also been
located, and he had quoted a price of $6. But the consequences of the
failure of the job were great, and thus a feeling prevailed that, "He is so
new in the business that he doesn't know what he is up against, and to do
business with him will bring trouble."
Nevertheless, after the $17 supplier was located, discussions proceeded
in an orderly fashion with the one who had quoted $6. A tool maker and
an inspector from the factory visited this vendor and brought back word
that his facilities, processes, and equipment were excellent. The buyer then
revisited the supplier and went through each detail of the drawings and
specifications, encircling in red the tolerances, requirements, and specifica-
tions which it was feared the vendor might have overlooked. The vendor
advised that, in each case, he had noted the requirements and had ex-
pected to make the sleeves according to the specifications. He did, how-
ever, sense that concern was caused by the lowness of his quotation, and
so he increased his price to $6.75 to provide a contingent amount for any
possible unforeseen factor for which he had not planned.
A production order was then placed with him subject to the strict
limitation of individual-lot release. Thereafter, when the first ten were re-
leased and arrived at the plant, they were found to be the smoothest and
best gears of this type which had ever been seen. Still, a normal cautious-
ness and concern existed. The inspector said, "I doubt that these were
built on the production facilities the vendor expects to use. Every one is
perfect. They seem to have been built on gauge machines instead."
 Efect on Other Work in the Business 249

After being assured that the ten gears were built on the equipment
which was put in place for the production order, a release of one hundred
was issued. These hundred were also of the same hitherto unexperienced
high quality. This was followed by a release of a thousand, also of the
same high grade.
Two interesting results followed. First, the inspection department, after
days of making inspections and never finding any flaws, began to feel that
inspection was superfluous, and a simple checking routine was established
which eliminated 95 per cent of the inspection of the gears from this sup-
plier. Second, inspection personnel started putting strong pressure on the
procurement department and on the factory to discontinue buying from
the $17 supplier and also to discontinue in-plant manufacture of the item
so that the extensive inspection required on gears received from these two
sources could be permanently and totally discontinued.
The outcome was that the $17 supplier was clropped. But, in order to
have a second source of supply for the vital part should a serious problem
of any nature end production temporarily in the plant of the $6.75 sup-
plier, 25 per cent in-plant production was continued.
Scores of cases of this type prove to the experienced that good
quality is the result of "doing it the right way." So is good value.
As stated repeatedly in the foregoing discussions, the operation of value
analysis is to identify the functions clearly and then to search out and
develop, by using value analysis techniques and special knowledge, good
answers for the lowest cost. No quality reduction is involved. However,
if quality problems are present at the start of the value study, quality
improvement will result.
With the factual situation in clear focus, it will b e recognized that
value analysis and quality control have joint opportunities. Value analysis
techniques can have an important impact on the solving of quality prob-
lems, and in turn, the quality control activity is an important means of
identifying the areas in which contributions can be made by the use of
value techniques. Whenever quality problems exist, it means that the
functions involved are not being secured in a suitable manner. This pro-
vides a clear start for the effective application of value analysis.

12-9 Marketing
I t will be found that beneficial relationships exist between value analysis
and sales work. Products in general may be divided into three classes:

Existing products
New products
Products adapted to customers' special requirements
250 Techniques of Value Analysis and Engineering

With regard to existing products, the sales department must provide

to customers the performance features and attractiveness they want at
competitive prices. Often, costs in comparison to competition are too
high, and the sales department is unable to sell until lower costs are
established. Lowering of costs by the required amount is invited and
supported by the use of value analysis techniques in important areas of
the product.
In the development of new products, it is incumbent upon the sales
department to determine what functions, or what combinations of func-
tions, the customer desires and, further, to determine at about what
market price these functions can be sold. It is at once apparent that the
sales department is here dealing in functions and costs, which are the
stock in trade of value analysis. The opportunity exists for value con-
sultants to apply the special techniques and the special knowledge toward
the development of value alternatives which will provide a sound basis
for investment, planning, advertising, staffing, etc., to provide the new
products.
In connection with customers' special requirements, the value analysis
techniques are tools for studying with them precisely what their needs
are. With a clear understanding of the function, or functions, a customer
needs, sales people are enabled, by providing the precise new functional
components required, to effectively adapt their products to accomplish
most economically the full need of the customer.
Viewing the relationship from the opposite end, it will be seen that
sales provides to value consultants important areas of opportunity. With
regard to established products, they know precisely where to work to
meet the company's emergencies. In connection with new products, they
know the considerations which should receive top priority in the new
product line and can make contributions that will have long-standing
high value. As for special products, they have the extra opportunity of
using their techniques to help secure specific additional orders.

SUMMARY
Properly organized, instructed, and integrated value analysis people do
not make the work of anyone more confused or difficult. Instead, they
increase the effectiveness of the work of most of the other administrative
or professional groups.
In the area of accounting, value analysis encourages the use of mean-
ingful costs. Meaningful costs bear the same relationship to good decisions
among "cost" alternatives that meaningful tests do among "performance"
alternatives. A value analysis organization helps accounting people con-
 Efect on Other Work in the Business 251

tribute to better decisions by encouraging use of costs that are meaning-

ful for the purpose of comparisons.
Appearance design people are assisted by the separation of the aes-
thetic from the use function, the separation of the costs that go into
aesthetic functions, and the emphasis value analysis places upon provid-
ing an opportunity for them to use their special abilities and skills on
the product.
Every technique of value analysis is so constituted that when utilized
by cost-reduction people, a far greater yield per man-hour results. Cost
reduction is a part-time activity of everyone. It is essential to normal
operation. Value analysis is a full-time activity of a few with special
training, techniques, and skills. Both have the objective of minimizing
unnecessary costs.
Engineering people are assisted at every turn by the operation of the
value analysis system. Essential information is gathered for them. Func-
tions that they must provide are made clearer. Costs that they need are
developed for their decision making.
Manufacturing people find that the functions provided by the opera-
tions they must perform are often evaluated, and less troublesome or less
costly means for achieving the required purpose are brought into view.
They find that alternative means for accomplishing functions help them
to remove unsatisfactory operations from the factory. Value analysis
search techniques often uncover materials or processes that they can
examine and include.
Furthermore, value analysis brings a good answer to a vital dilemma
of management people. Nearly all essential work, excepting that of secur-
ing good costs, can be assigned to a competent group: performance of
the product to engineering, quantities of production to manufacturing,
volume of sales to marketing. The results are measured-they are suitable
or they are not-and proper corrective measures can be taken. However,
the vital factor of proper costs, in a competitive business, is a matter of
conversation and harangue. It is "everybody's" job and hence it is no-
body's job. It is not assigned, and performance is not measured as are
other vital factors. Properly staffed and assigned, value analysis people
will accept the assignment of assuring proper costs. They have the tools
to accomplish it, and it can be measured by the competitive cost results.
The possible contribution of purchasing people to earnings is increased
because every value analysis operation assists them to more nearly buy
"function." The search system finds suppliers of specialty components,
materials, skills, and information, which purchasing people can thereafter
use to bring greater value into their company.
Those responsible for the control of quality are assisted by the prob-
252 Techniques of Value Analysis and Engineering

lem-solving system of value analysis, which finds better answers to engi-

neering, manufacturing, and purchasing problems. Good quality is the
result of "doing it the right way," which results from the use of the
value analysis system.
The vital sales responsibility to know "for sure" what functions the
customer wants and is willing to pay for is emphasized as the very start
of high-grade value work. Help is provided when needed. Sales people
are provided with clear statements of the functions the engineering and
manufacturing departments are striving to provide and with the "value"
(lowest known cost) of producing each of the functions. They are sup-
plied with alternatives that provide various benefits for their discussions
with customers and for their evaluations.