The Procurement Glossary » Value Analysis
Value Analysis
Sourcing & RFx
Definition
A systematic review of a product or service to improve its value — cutting cost without losing function, or adding function without adding cost.
Explanation
Value analysis (or value engineering) challenges specifications: does the item need that grade, finish or feature? By focusing on the function required rather than the current design, buyers and engineers often remove cost the specification quietly baked in.
Example
Value analysis shows the packaging spec calls for a thickness no customer needs; dropping a grade saves 8% with no complaints.
Related terms
- Should-Cost Analysis — A bottom-up estimate of what a product or service ought to cost, built from its materials, labour, overhead and reasonable margin.
- Specification — A precise description of what is required — the features, quality, quantity, standards and performance a supplier must meet.
- Total Cost of Ownership (TCO) — The full lifetime cost of a purchase — not just the price, but delivery, installation, operation, maintenance, downtime and disposal.
- Demand Management — Influencing what and how much the business buys — challenging need, standardising specs and curbing over-consumption — to reduce spend at the source.
Frequently Asked Questions
What is Value Analysis?
A systematic review of a product or service to improve its value — cutting cost without losing function, or adding function without adding cost. Value analysis (or value engineering) challenges specifications: does the item need that grade, finish or feature? By focusing on the function required rather than the current design, buyers and engineers often remove cost the specification quietly baked in.
Can you give an example of Value Analysis?
Value analysis shows the packaging spec calls for a thickness no customer needs; dropping a grade saves 8% with no complaints.
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