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Need For The Application Of Value Analysis And Value Engineering In Cost Reduction
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Value
analysis as an organized study of the function of materials, parts and
components 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 other related process whereas value
engineering represents the application of value analysis at the
preproduction stage. It is purely concerned more of cost-avoidance while
value analysis is concerned more of 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 which can be used by management in
controlling material costs. The fundamental objective of value analysis
activities is the procurement of materials representing the “Best Buyâ€
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 profit, just as a product is purchased to
satisfy a particular purpose. For this reasons, it becomes important to
correct or even avoid those unnecessary cost elements in a production
design. This in essence stimulated the researchers interest most to
carryout this research.
1.2 STATEMENT OF PROBLEM
Nigeria as a
nation is blessed with so many industries whose services the nation
cannot do without. These industries are charged with the
responsibilities of providing goods and services of 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 good procurement procedure. This is essentially as a result of
the fact that purchased materials contribute very tremendously to
companies profit and profitability. Apparently 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 buy wisely and economical profits well and
therefore less vulnerable to economical doom. Succinctly put by O.K.
Oyeoku that “when people put break on improvements in purchasing, they
put 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 cost.
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 aspect of conducting a value analysis programme.
1.3 OBJECTIVE OF THE STUDY
This
study is undertaken in order to explore the academic relationship
between classroom theory and what is practically obtainable in bottling
industry having carefully chosen the project topic.
“The need for
the application of value analysis and value engineering in cost
reduction†(A case study of Nigerian Bottling Company, Owerri).
1. To investigate those factors that are responsible for unnecessary cost of an item in a bottling company.
2.
To identify the gains that can be derived from the implementation of
effective value analysis programme in a bottling industry.
3. To investigate what should be the role of purchasing in value analysis in a bottling company.
4.
To identify those areas in which value analysis is applicable that will
result into cost reduction to the overall goal of the industry.
5.
To cause top-management to realize that value analysis should really be
everybody’s business. In one sense, maximum potential can be realized
from a value analysis programme only if management properly taps these
potential resources.
1.4 SIGNIFICANCE OF THE STUDY
In view of the
huge expenditure on purchase of materials used in industries, it becomes
imperative for the implementation of value analysis techniques to
reduce cost of production in industries. It is the significance of this
study to make a viable and significant rectifications so as to determine
alternative ways of obtaining same quality material or item but at a
reduced cost.
It is also the significant of this study to arcuse
consciousness to the benefits of effective value analysis program in
bottling industries.
This project will also show how purchasing as a member of value analysis team involve in value analysis programme.
This
project is also aimed to review the way cost is being reduced by the
use of value analysis technique in Nigerian Bottling Company, Owerri.
The
study is also undertaken in partial fulfillment of the National Board
for Technical Education and the Federal Polytechnic Nekede, for the
award of HND in Purchasing and Supply. Finally, it will remain as a data
bank for future researchers.
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ABSRACT - [ Total Page(s): 1 ]This project work was chosen in order 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 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 a ... Continue reading---
