Assessment of the Application of Value Analysis and Value Engineering in Cost Reduction
CHAPTER ONE
OBJECTIVE OF THE STUDYS
This study is undertaken in order to explore the academic relationship between classroom theory and what is practically obtainable in bottling company having chosen the project topic.
As assessment of the application of value analysis and value engineering in cost reduction “(A case study of Nigerian Bottling Company. Owerri),
- To investigate those factors that are responsible for unnecessary cost of an item in an organization.
- To identify the benefits that can be derived from the implementation of effective value analysis programme in an organization.
- To investigate what should be the role of purchasing in value analysis in an organization.
- To identify those areas in which value analysis is applicable; that well result into cost reduction to the overall goal of organization.
- To cause top management to realize that value analysis should really be every body’s business. In one sense, maximum potential can be realized from a values analysis programme only if management properly takes these potential resources.
CHAPTER TWO
LITERATURE REVIEW
Introduction.
This chapter will discuss the literature on the impact of value analysis implementation on cost reduction. The literature review will be conceptualized under the objective of the study and will mainly focus on; the impact of value analysis implementation on cost reduction.
Value analysis.
Value analysis is defined as the elimination of those parts, activities or processes of an existing product or service that do not affect the quality, functioning or operation of a system, but still incur cost. Value engineering is a sub-set of the process and is defined as those processes, activities or features that are put in place so that the costs of product or service are reduced at the design stage (Roy, 2008).
The value of a product or service may be interpreted in different ways by different customers. Its common characteristic is a high level of performance, capability, emotional appeal or style relative to its cost. It can also be expressed as maximizing the function of a product relative to its cost (Crow, 2002).
According to Miles (1961), value analysis is an organized creative approach which has for its purpose the efficient identification of unnecessary cost that neither provides quality, nor use nor life, nor appearance nor customer features, as reported by (Roy, 2008)) .He further noted that one of the causes for poor value in product or services, systems and procedures could be the lack of organized effort in devising such systems.
The purpose of value analysis is to try to reduce costs, and prevent any unnecessary cost, before producing a product or service. Simply put, it tries to eliminate any costs that do not contribute to the value of performance of the product or service. On the other hand Value analysis refers to the same process when it is concerned with cost reduction after the service have been introduced, (Slack & Chambers, 2007).
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN
Introduction.
This chapter describes the research methodology that was employed in the study. It comprised of research design, target population, sample size, sampling techniques, data collection and data analysis.
Research design.
The study used descriptive survey design. Frankel and Wallen (2000) described descriptive survey as that method that involves seeking the opinion of a large group of people through questions about a particular issue. The design was appropriate in establishing the impact of value analysis on cost reduction in Nigerian Bottling Company Owerri. Information was obtained from a sample rather than an entire population. Surveys was concerned with conditions or relationship that exist, opinions that are held, processes that are going on, effects that are evident or trends seen or observed as a result of VA implementation at Nigerian Bottling Company Owerri.
CHAPTER FOUR:
DATA FINDINGS, ANALYSIS AND PRESENTATION
Introduction.
This section presents the findings of the study. It is divided into three parts, namely, an overview of the data collected, data analysis and discussions of the findings.
The main objective of the study was to establish the Impact of Value analysis implementation on cost reduction in Nigerian Bottling Company Owerri. Quantitative data collected from the respondents was analyzed using descriptive tools. The questioners were dropped and picked at a later date to allow the respondents to fill-in the questioners at their own appropriate time. The revelation of the identity of the respondents was optional. Once the respondents answered the questionnaire, data was coded using SPSS then analyzed.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND
RECOMMANDATIONS
Introduction.
This chapter provides the summary of the findings from chapter four, and it also gives the conclusions and recommendations of the study based on the objective of the study. The objectives of this study was to establish the impact of Value analysis implementation on cost reduction in Nigerian Bottling Company Owerri
Summary of the findings.
In this section, summary of the findings have been presented based on the following; respondents profile, Value analysis implementation awareness at Nigerian Bottling Company Owerri and the impact of value analysis on cost reduction based on; Operational processes improvement, cost reduction, result improvement, practical training procedure improvement, speed of cost reduction, procurement process, supplier payment process, management system improvement, administration and registration procedure improvement and finally value and work culture improvement.
Value analysis implementation awareness at KP.
The research sought to establish whether the general staff were aware of the fact that Value analysis was being implemented at Nigerian Bottling Company Owerri. The findings established that those who agree that that VA is being implemented were 80% while those who disagree were 20%. The research intended to establish whether there were teams constituted to oversee value analysis process, according to the findings those who agreed that teams were constituted to oversee the process were 74.3% while those who disagreed were 25.7%. Since value analysis is Value analysis is a management process and is defined as those processes, activities or features that are put in place so that the costs of product or service are reduced (Roy, 2008), the research sought to find out evidence of cost reduction, the findings was, those who agreed that there was evident of cost reduction were 57.1% while those who disagreed were 42.9%. Kolbarcha (2008) indicates that VA helps organizations to gain higher customer satisfaction, product quality, delivery speed and time-to-market speed, the research sought to establish the improvement status of cost reduction from the staff as a result of VA implementation, according to the findings 57.9% agreed that there was improvement, while 42.1% disagreed. This shows that the staffs are aware of the existence of value analysis implementation and that there visible signs of improvement on cost reduction status.
The impact of value analysis implementation on cost reduction in KP.
A according to the findings. The following mean ratings were established for the following variables from the students respondents; 2.88 for Result improvement, Quality of teaching got a rating of 2.94, students welfare was rated at2.69, Registration process was rated at 2.80, conformance to quality standards at 2.84, improved syllabus coverage at 2.90, Delivery of materials at 2.74, practical training procedures at 2.74, skill and competency improvement at 2.83 and finally internal examination result notification time at 2.70. From the students perspective the mean cost reduction improvement index as a result of the implementation of value analysis at KP, was 2.8, missing moderate improvement index by 0.2 improvement index. The verdict of the students is that value analysis implementation has only improved cost reduction a little extent.
The suppliers of Nigerian Bottling Company Owerri rated the improvement index on service variables as stated , the extent to which VA have addressed and improved on the provision of information on tendering is 3.44, tender award procedures is 2.69, payment processing duration is 2.69, response to complaints is 2.88, conformance to quality standards is 3.06, acknowledgement of order delivery was rated at3.20,quality of service rated at 3.31,vendor relationship rated at 3.56 and finally positive value culture and image at 3.13. From the suppliers response the average mean cost reduction improvement index as a result of the implementation of value analysis at KP, is 3.03 moderate improvement. The suppliers think that though value analysis have implemented , the cost reduction status have moderately improved, giving the management to seek areas that still require a lot of effort to reach the desired thresh hold.
According to the staff of Nigerian Bottling Company Owerri, the extent to which VA have addressed and improved on the following variables are enumerated; the staff were asked to rate the extent to which value analysis has improved operational processes; operation is the transformation processes within an organization and involves all those activities that facilitate cost reduction or production process to be accomplished ((Slack & Chambers, 2007), operational process was rated at2.4, organization structure is another that acts as a prime mover to any cost reduction in organization, it involved coordinating the working faculties to work towards a common objective, the staff rated this variable at 2.66, management system improvement involve technology adoption and basically computerizing processes, MS was rated at 3.09, procurement process rate at 3.11, teaching and learning process improvement rated at2.97, fee payment process improvement rated at 2.97, admission and registration process rated at 2.71, Examination administration process rated at 3.11, recruitment and deployment processes rated at3.23, attraction and retention of student rated at 3.03, improvement on efficiency rated at 2.86, result improvement rated at 3.14 and finally cost reduction rated at 2.97. The average mean rating by staff on cost reduction as a result of value analysis is 2.93. According to the rating by staff on the extent to which VA have addressed and improved on cost reduction is to a little extent it has missed medium extent by 0.07 improvement index. This shows that the staff are not yet satisfied with cost reduction status though, they are aware that value analysis has been implemented at Nigerian Bottling Company Owerri.
From the findings, the average improvement index on cost reduction is given by the three categories of respondents, gives a mean of 2.92 which is approximately 3 (Medium extent improvement) against maximum improvement index of 5(Greatest extent improvement). This shows that as a result of value analysis implementation, the cost reduction status have improved but not significantly as may be expected since it is just to a medium extent.
The interview with the Principal revealed that, She is still skeptical about improvement on the overall cost reduction status. She felt it was still too early to assess the impact of VA, because it is when support procedures are being put in place, but her hope is that when all the structures are in place and matured, a great improvement will be realized in terms of reduction in cost and positive cost reduction status, this was echoed by both the registrar and the deputy Principal.
Conclusions.
The main purpose of this study was to establish the impact of Value analysis implementation on cost reduction in Nigerian Bottling Company Owerri. In terms of the stated research objective, the following findings emerged from the study. The staffs of Nigerian Bottling Company Owerri are aware of the existence of value analysis implementation and that VA has improved the general status of cost reduction to a medium extent. From the findings, the average improvement index on cost reduction is given with a mean of 2.95 which is approximately 3 (Medium extent improvement) against maximum improvement index of 5(Greatest extent improvement). This shows that as a result of value analysis implementation, the cost reduction status have improved but not significantly as may be expected.
Recommendations.
The study recommends that good organizational culture, team work and quality standards (QS) adherence need to be emphasized. For VA to effectively be implemented, organizations need to accommodate a balance between functional expertise and process involvement. The Principal needed to actively deal with the issue of VA. Integral part of VA process need to be emphasized among the heads of departments (HODs). The necessary resources and facilities such as human resources finance and information systems need to be positive about the prospects of value analysis and capable of innovative response to the demands that may be required by value analysis process at Nigerian Bottling Company Owerri. The study further recommends that; regular communication must be established between executives and those who are in charge of VA process for effective implementation of the process. Technology to be improved and that roadblock to collaboration between departments need to be addressed. Staff training and competence be encouraged and offered to the staff and finally practical training procedures for the students need to be improved and enhance accordingly. The study recommends that for the success of VA implementation, standard VA implementation schedule or procedures need to be followed to the latter.
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