Cost Value Analysis

February 03, 2011  |   Posted by :  

Cost Value Analysis (CVA) is an effective way to reduce the costs of a business’ own products by evaluating all cost aspects of a product or service to determine if cost-improvement opportunities are available.

In other words:

  • Are individual material / components sourced at the best possible price and have alternatives been considered?
  • Is the design in line with market requirements, or does the product include redundant features, which drive cost?
  • Can standard components be substituted for custom manufactured components?
  • Are there still opportunities for improvement the manufacturing process?
  • Is our sales concept cost effective and are the most cost effective logistics channels being used?

CVA is a continuous improvement activity and applies to both existing and planned products, although in the early development phase both design-to-cost and target costing are possibly more appropriate, whereas for significant post launch changes, a re-design-to-cost process should also be followed.

In the Automobile Industry, some leading companies use CVA very effectively in the area of sourcing. In this case a cost value analysis team operates together with the purchasing organization.
This has considerable benefits in the world of high-tech products, where the “buyers” do not always have the competence to judge the “real cost” of the components or sub-systems, which they are sourcing.

By integrating CVA into the purchasing process, in-house engineers analyse and estimate the real production cost of the component or sub-systems being offered, and provide the buyers with guidance on an acceptable pricing corridor for negotiation.

Cost Value Analysis is an important part of Cost Improvement. To save you the effort and expense of developing your own cost value analysis procedure, for a reasonable fee*, we will provide you with our standard detailed procedure, which can be easily adapted to your organization. Additionally, should you need additional support, we can also provide you with an expert to get your CVA process up-and-running. Just let us know how we can help.

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