Value Analysis 101

4. STANDARDIZATION: Standardization assumes that one size fits all required functions for all of your customers, which is never the case in the real world. A better strategy is customization, which recognizes that 80% of your customers can accept your standardized products, services, or technologies but that 20% need either a higher or lower specified product, service, or technology. In the end, customization will save you the most money.

5. THINGS CHANGE AND PEOPLE CHANGE: I could bet you that the majority of products, services, and technologies you are buying today were specified by employees who have either retired, transferred to another department, or have left your place of employment. Yet, no one has challenged that the products, services, or technologies specified are conforming to requirements today. For example, we came across a General Requisition Form that was costing our client $180,536 annually. When we performed a value analysis study on this form, we were able to re-engineer the form and correct the huge waste of the form on nursing floors because of faulty printers for a savings of $93,994 annually. That’s what happens when things change and people change, yet no one challenges why these commodities are still being purchased.

One of the secrets to saving money with value analysis is to define the functional requirements or specifications of the products, services, and technologies you are buying. Then, have annual reviews of your top 100 categories of purchase to ensure that they are still conforming to requirements. Chances are, 10% to 15% will not conform to requirements and then can be reconfigured to reduce unnecessary and unneeded costs.