How can value analysis achieve cost reduction?

The objective of value chain is to serve as means of increasing the customer satisfaction and managing costs effectively. Coordination of the individual parts of the value chain activities creates conditions to improve customer satisfaction in terms of cost efficiency, quality and delivery. A firm which performs value chain activities more efficiently and at a lower cost than its competitors will be able to gain competitive advantage.

Value analysis can do cost reduction in the following manner:

• By identifying and removing unnecessary components in a product which had utility earlier.
• By introducing component substitution at a lesser cost without affecting the quality of the product.
• By simplifying the product design.
• By introducing alternative methods with less cost but improved efficiency.
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