Supply Chain Management

The Need for the Application of Value Analysis and Value Engineering in Cost Reduction

The Need for the Application of Value Analysis and Value Engineering in Cost Reduction


This project work was chosen to determine the need for the application of value analysis and value Engineering in cost reduction. It will x-ray the gains, benefits, and contributions of value analysis and value Engineering in the Bottling industries with special reference to Nigerian Bottling Company Owerri.

The topic in question will reveal the methods by which value analysis and value engineering techniques can be applied as well as the contribution of other functional departments in the application of value analysis and value engineering.

It will also identify the factors that are responsible for the unnecessary cost of products and the reasons why the value analysis program fail sometimes.




Value analysis is an organized study of the function of materials, parts, and components that involves the critical examination of goods or products, which is aimed at improving its efficiency in use by changes in design, production technique, packaging and another related process whereas value engineering represents the application of value analysis at the preproduction stage. It is purely concerned more with cost-avoidance while value analysis is concerned more with cost-correction.

Value analysis is an organized procedure for the efficient identification of unnecessary cost by analysis of the function i.e. (the property of the product which makes it work or sell). The essence of value analysis, therefore, is first to identify the function of the product and then to examine alternative ways in which this function can be achieved, choosing that which involves the least cost. Value analysis is probably the greatest cost-saving technique used in industries today. It represents a powerful set of tools that can be used by management in controlling material costs. The fundamental objective of value analysis activities is the procurement of materials representing the “Best Buy” in terms of function to be performed.

The general idea behind this is the issue of quality and cost. The main objective of every organization is to make a profit, just as a product is purchased to satisfy a particular purpose. For these reasons, it becomes important to correct or even avoid those unnecessary cost elements in a production design. This in essence stimulated the researcher’s interest most in carryout this research.


Nigeria as a nation is blessed with so many industries whose services the nation cannot do without. These industries are charged with the responsibility of providing goods and services of the high-quality standard at a reduced and affordable price for the citizens. Materials in this respect become so vital that no results could be achieved without a good procurement procedure. This is essential as a result of the fact that purchased materials contribute very tremendously to companies’ profit and profitability. This stems very sufficiently as a result of lack of recognition being accorded purchasing function by most of these companies.

It is a material fact that a company that buys wisely and economically profits well and therefore is less vulnerable to economical doom. Succinctly put by O.K. Oyeoku that “when people put a break on improvements in purchasing, they put a limit to profitability.

The researcher associates part of the problems with:

1. The organization does not have enough time to examine critically all the possible alternative materials and processes.

2. The organization’s inability to apply a formalized approach to the identification and elimination of unnecessary costs.

3. The materials procured by the organization are very expensive.

4. The purchasing function is not accorded its due recognition.

5. The organization does not have the skills to consider the technical and commercial aspects of conducting a value analysis program.

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