Process Value Analysis Will Cut Costs and Boost Satisfaction

When setting up a production line, it’s crucial to understand the purpose of each step. Process value analysis is a great tool for assessing the value of each production process to eliminate unnecessary steps and cut costs. It quickens the turnaround time and increases sales. Learning about this method is the first step to refining your profitable ideas.

Our experts at Business2Community prepared this guide to understand the ins and outs of process value analysis. We have customized a detailed guide and a real-life example so you can achieve your business goals.

What is a Process Value Analysis?

Process value analysis is a tool that businesses use to cut costs and improve production efficiency while keeping a strong focus on delivering customer satisfaction. It divides the production process into separate steps and carefully looks at the purpose of each one to determine its value and benefit to the final customer.

This tool helps your production managers and project designers find the extra steps in production that don’t contribute to the user experience. Removing these steps can save costs and speed up the production time.

In essence, this concept comes down to shortening the turnaround time for customers with the aim to increase satisfaction rates and encourage more sales as well as repeat purchases.

The main goal of this technique is to lower costs by removing unnecessary steps while delivering at least the same customer service quality. It doesn’t necessarily aim to enhance the customer experience directly, rather it’s the eventual outcome of the process.

In this article, we’ll go through the process of conducting this qualitative analytical tool, offer a few real-life examples of its applications, and discuss its limitations so you can fully utilize this project management method with great confidence.

Who Needs to Do a Process Value Analysis?

To build a profitable business model, it is imperative that you to determine procedures that contribute to the primary function and those that contribute to the secondary functions so you can focus resources on high-value-adding tasks.

Wasting money on non-value-adding tasks will not only hinder business production but also drastically lower your customer satisfaction rates. This tool is beneficial for various groups of business people, such as:

• New business owners: When you start a company, value analysis helps you streamline an idea and transform your vision into reality with a optimized production outline.
• Value-engineering experts: For an expert in aligning business goals to consumers’ needs, this tool highlights the important aspects of carrying out a project at minimal cost while allocating resources efficiently.
• Production managers: If you’re a production manager, this technique allows you to create a seamless production flow to minimize costs and deliver a high-quality service.
• Financial analysts: Financial analysts can utilize this method to eliminate unnecessary costs in various production processes and offer potential solutions to clients.
• Departments within a business: Departments like HR, accounting, and marketing can use value analysis to evaluate the efficiency of a process. It helps with internal restructuring and allows higher-quality management.

How to Perform a Process Value Analysis

Performing a process value analysis involves the following 6 steps:

• Step 1: Establish an objective and collect data
• Step 2: Complete a function analysis
• Step 3: Work on improvement ideas
• Step 4: Evaluate your strategies
• Step 5: Develop feasible improvement options
• Step 6: Present your results

Now, let’s take a closer look at each step:

Step 1: Establish an Objective and Collect Data

First, choose an objective for your study. This objective dictates the flow of the analysis and the results. The most common objective is to reduce costs without compromising the quality of services.

Generally, production activities include sourcing raw materials, product assembly, warehouse storage, quality checking, and delivery. If you’re unsure about your production steps, you can gather relevant project documents for information.

Regardless of the purpose of the study, you’ll need an established production flow for analysis. This technique can only examine an existing production line. It can’t generate new ideas for you to complete a production chain if it’s still in the development stage.

Step 2: Complete a Function Analysis

Once you’ve outlined the business process under study, you can separate each step and analyze its purpose towards the primary and secondary functions.

Trace each step back to its function to determine the value chain of the process. This step determines whether a production activity serves a primary function or a secondary function.

Step 3: Work on Improvement Ideas

Now that you’ve identified different functions, you can highlight the extra steps and brainstorm improvement ideas, which could include removing a layer of creative sign-off in an ad agency or rolling two factory workstations into one, for example. This is the stage where you need to determine if a step can be removed or modified. You should prepare several options for your team and other stakeholders to review.

Step 4: Evaluate Your Strategies

Take a closer look at each improvement option to analyze its strengths and weaknesses to inspect its feasibility. Factors like labor costs and production capacity can influence the feasibility of each option. This step is about you honing your improvement ideas so you can be ready to implement them.

Step 5: Develop Feasible Improvement Options

Choose one or more improvement options to implement into your production chain. You should be working with your project team and stakeholders to meticulously plan the updates in the production process to minimize any disruption.

At this stage, your improvement options need to be feasible and address the value-mismatched functions.

Step 6: Present Your Results

Finally, you can present how your improvements will be successful to your investors and decision-makers. After that, it’s time to improve performance and increase sales by executing the chosen plan.

Example of Process Value Analysis

By determining the importance of each step, this analysis enables you to build a deeper understanding of your production processes. To demonstrate the power of this tool in the business world, we have compiled an example of its applications.

Use Process Value Analysis for Cost Reduction

You are the head of the production team at a baby clothing company dealing with rising costs which are reducing profit margins.

First, you establish your objective and collect your data. In this case, your objective is to find ways to reduce production costs while maintaining product quality. Your data collection includes spending time with material suppliers and being present on the factory floor to identify all the steps that go into producing a batch of clothes.

Next, it’s time to complete a function analysis. You evaluate each step in the factory to understand how it contributes to the finished goods. Primary functions would include fabric cutting whilst secondary functions would include daily machine maintenance procedures.

In the third step, you work on improvement ideas in collaboration with your supply chain manager and floor supervisor. You recognize that material can end up stored with the fabric supplier for up to a week and once it arrives at intake, it can be a further three to five days before it moves to production.

With your improvement ideas around storage, you can evaluate your strategies, using tools like SWOT analysis to see if your idea to reduce storage time and move to Just in Time production is suitable.

Now it’s time to understand the changes needed across the business as you develop feasible improvement options. You work with your supplier and your procurement department to find better inventory management tools and find ways to move fabric ordering to an online tool. This should ensure that fabric is ordered only when needed and isn’t waiting in storage as long.

Finally, you need to present your results to the C-suite and demonstrate that your ideas will reduce costs without compromising product quality.

How to Adjust a Process Value Analysis

A process value analysis can be adjusted by changing an element in the production chain. You may want to explore the impacts of new technologies on client satisfaction and their influence on the analysis results. You can easily adjust the results of the analysis by using different methods in the production and observing the changes.

Companies often experiment with alternative ways to reduce costs. When you want to adjust the analysis, you can simply collect relevant project data and investigate how the new method aligns with your goals.

In the fast-paced business world, updating the value analysis regularly is necessary. It helps your firm stay competitive and pushes you to monitor the usefulness of each step.

Limitations of Process Value Analysis

Although process value analysis can refine your production structure and deliver premium services at a lower cost, there are several limitations that you need to be aware of.

An Important Step May be Wrongly Eliminated

A major risk involved in this technique is the deletion of an important step. During the production process, some steps are enforced not to enhance customer satisfaction but to ensure the production is ethically and legally acceptable. If you use this analytical method for cost reduction, you may mistakenly eliminate these steps without realizing the catastrophic consequences.

You need to interpret the results carefully and bring in appropriate stakeholders to avoid this mistake. Even if a step doesn’t enhance the user experience, it can be vital to quality control and legal compliance.

It Doesn’t Calculate How Factors are Correlated

Production processes are not as straightforward as they may seem. A step can influence several others as well as the outcome. This technique doesn’t investigate the dynamics among variables. You can adopt other tools like multivariable analysis to reduce the risk of adjusting a procedure without knowing its impact.

It Doesn’t Offer Actionable Solutions

If you’re looking to modify steps rather than deleting them, this analytical tool fails to offer actionable solutions. You need to work with experts and use qualitative tools like PEST analysis to comprehend the challenges and external influences when formulating strategies.

The Value of Process Value Analysis

In today’s competitive business environment, you need to minimize costs while maintaining customer satisfaction to gain an edge in the game. Process value analysis is an incredibly powerful tool for analyzing the functions in production so you can get rid of the redundant steps.

Incorporating this technique in your business planning allows you to allocate resources efficiently, generate more sales, and redistribute the excess production capacity to more important areas. Whether you’re starting your production chain or revamping your business strategies, this tool will come in handy in your planning process.

However, this analytical tool also comes with its disadvantages. You should be mindful of its limitations and perform further analyses to get the most reliable results.

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