Operational Value Analysis Focuses on Cost Takeouts for Your Business and Key Clients

BY TOM WEBER

With each new year comes the trepidation of what may be ahead for many of us as our businesses revert to what they were before the COVID-19 pandemic (possibly). Two things are certain: Nothing will remain the same, and if we apply the correct resources toward our clients, better days will be ahead. This is the foundation for my following suggestion: to capitalize on the available human capital we have on hand who may, for the first time in a few years, have some time to focus on cost takeouts for your businesses and key clients.

The use of this approach is certainly not new, but it does require willing participants, some scheduled time, discipline, and the right mix of team members to ensure success for both parties. It is important to note that cost takeouts manifest themselves in unique ways, and possibly, cost-sharing may ultimately need to be established.

The following is an operational value analysis template that I was trained in from my days with Tenneco Packaging in the 1990s. I am happy to share it, and if any further explanation is necessary, please reach out to me.

Note: A suggested question to ask after you possibly identify your top five clients to discuss this approach with depending on your internal and external available resources is, How do we get started, and when?

Let’s make it another great year together.

Tom Weber is president of WeberSource LLC and is AICC’s folding carton and rigid box technical advisor. Contact Tom directly at asktom@AICCbox.org

Example Operational Value Analysis (OVA)

Jointly Developed OVA Team for Major Cost Takeouts

Objective:

$300,000 cost takeout initiative—targeting a minimum of $15,000/quarter and/or $60,000/year.

Term:

Supply agreement for three years in place, effective Jan. 1, 2023, through Jan. 1, 2026.

Team Dynamic:

Two to three rotational team members from each company meeting on predetermined quarterly dates and times, publishing meeting minutes to senior leadership, and developing specifi c action plans to implement with costouts associated. Meetings are intended to be rotational in nature between customer and supplier facilities. No single facility contributes alone.

Initial Suggested Team Leaders:

• Supplier OVA team: rotational with plant, sales, engineering, and maintenance leadership.

• Customer OVA team: TBD.

• Possibly request key outside suppliers to participate.

Documented Savings: Agreed upon in writing by all team members/leaders with details, responsibilities, and materials/process steps needed to implement. (Objectives should be low to no capital required.)

Ova Key Discussion Points

Defi nitions:

• OVA is an orderly and creative method to increase the cost-effectiveness of a manufacturing operation.

• An operation that performs better than another provides more value to the company.

• The lowest-cost item that performs equally well as another has more value to the company.

How It Is Accomplished:

• Component cost takeouts.

• Reduction of redundant processes.

• Reduction of secondary processes.

• Facilitation of flexibility in thinking and exploring multiple concepts.

• Focusing on essential functions to meet end-use product requirements.

• Identification of “low-hanging fruit” to drive a change culture.

• Utilization of a capital “lite” mentality.

Why Us:

• Proper assessment of the customer’s needs.

• Appropriate acknowledgment of customer priorities.

• Obtaining and utilizing 100% of customer feedback.

• Focusing on material usage, reduced waste, and significant operating costs.

• Reduced shipping, handling, and distribution costs.

• Increased customer satisfaction.

• Increased employee morale from being part of the solution.