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Stores location and layout
For arriving at rightstores location andlocation followingfactors are to bediscussed.
How is the storesorganized? Is the storeorganized as centralizedat one location? Or is itlocated at different
locations closer to thepoints of consumption?This decision is primaryfor location.
Is there a common receiving
station and thendecentralized?
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What product is stored?Nature of the product,
whether inflammable,poisonous, hazardous,physical state.
Store as a suppliershould be close to the
customer, the consumptionpoint.
Minimum movement of Acategory items fromunloading bay up to theuser should be ensured.
Maximum Safety of employeesand also general publicshould be ensured,
especially with respectto hazardous goods.
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For ease in materialhandling, adequate space
for movement should beensured.
As a measure of goodhousekeeping, place foreverything and everything
in its place should beensured.
Optimum utilization ofstorage space must beensured by following govertical principle forspace utilization.
Preservation of contentsstored from weathering
agents.
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Compliance to all rules andregulations must be
ensured.Principle of ergonomicsmust be born in mindwhile planning thelayout.
Provision for adequatelighting should be made.
Adequate fire fightingfacilities must be
provided.
Location of items as mustbe planned as per FSNanalysis.
Provision for futureexpansion must be kept inmind.
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Value Analysis, Value
Engineering
Value Analysis is a processof improving the value ofa product already sold inthe market. And valueengineering is the same
process done at thedesign stage of the
product.
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Value is a the concept inthe minds of customers
that makes them chooseone product incompetition. Every
manufacture likes toimprove the value of his
product so that hiscustomers remain loyal tohim and more customersare attracted.
Mathematically, value is
equal to function/cost.Value of a product can be
improved by any of the
three ways listed below.
Reduce the cost withoutcompromising thefunction.
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Improve the functionwithout increasing the
cost.For a small increase incost make a largeimprovement in function.
Genesis, history of valueanalysis
Value analysis like so manyOperation Researchconcepts came from
military. L D Miles,popularly known as fatherof Value Analysis,developed this concept,for American Navy. After
the war this concept cameto business.
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Selection of products forValue Analysis
Products in the maturitystage in product lifecycle will yield extendedlife if value improvementis made.
To select items for valueanalysis, ABC analysis interms of usage/consumption is done onall the items. Productwith maximum weightage ischosen for Value
Analysis.
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Contribution analysis, interms of contribution
[sales price-variableexpenses] is conductedand product with minimumcontribution is chosenfor Value Analysis.
Why poor value exists?
Why do products becomeunattractive tocustomers? What adds poorvalue to a product?
1. Lack of review ofproduct design
2. Product was designedunder urgency. And
subsequently it is notreviewed.
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3. While launching theproduct factor of safety
was fixed based on thelevel of technicalknowledge available atthat time. Subsequentreview did not take
place.
Lack of awareness aboutalternate materials,cheaper in price butquite adequate in
function, changes intechnology are alsoresponsible for customerseeing value in productsof competitors.
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Reluctance to change withtime. Attitudes, beliefs
and such behavioralproblems add costs toproducts.
Value tests to identify
poor value areas
Some simple tests toidentify poor value areasare as below.
Can the design be changed
to eliminate a part? -Door handle is eliminatedin modern refrigerator.
Can you purchase it at alower cost? Can this
part be outsourced at acheaper cost?
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Does it need all itsfeatures? - Lock as a
feature on refrigeratorwas found to be not needand hence eliminated.
Is there anything betterfor intended use? - Less
expensive, more effectiveand low volume
polyurethane, asinsulator, in arefrigerator replaces
Glass wool.Can a usable part be madeby a lower cost method?Change of process
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Can a standard part beused? Bolts and nuts are
standard parts. It ischeaper to buy themrather than make them.
Is it made on propertooling considering the
quantities involved? Arethe tools chosen takinginto account tool lifeand impact on quality?Ceramic tools in place of
carbide tools.Are there any newly
developed materials thatcan be used? E.g. specialalloys, plastics
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Can two or more parts becombined into one? - ball
pen top, AM/PM mouthwash.
9. Can any specificationsbe changed to effect costreduction? Change in
materials specifications
Value Engineering Process
Seven steps in Job plan due
to Mudge
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General phase: convertresistance to assistance.
This is Human ResourceDevelopment phase whereone has to win over
people. In this phasepotential resistance toanything new must beconverted into interestin something new.
Awareness sessions andtraining programmes lead
by senior management arefeatures of this phase.
Information phase:
Gather authenticinformation about the
product. Technicalspecifications,dimensions, grades.
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Environmental conditions inwhich product should
perform. Whether in outerspace, underwater, insidethe human body, etc.
Engineering drawings.
Production data eg.operations, speed, feed,outputs and stock levels
Cost data eg. material,labour, overhead costs.
Work specifications eg.workplace layout,standard times etc.
Features preferred by
customer. What does thecustomer like most in ourproduct?
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Development and servicerecords
Quantities involved
Scrap generation and rates
Fix costs onspecifications and
requirements
function phase
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Every product has a primaryfunction and secondary
functions. Customer buysthe product mainly forits primary function.Product cost should notdisproportionately leanon secondary functions.If this happens products
become expensive for thepurpose they are bought.
The technique to identify
primary function is todefine the function
product is expected toperform. The definitionof function should always
be in one word like asbelow.
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Productfunction
mirrorreflect light
brakearrest motion
clutchtransfer power
electron tube covershield tube
cigarette lighterprovide ignition
light bulbemit light
screw drivertransfer torque
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coffee cuphold liquid
4. Creation Phase:
creation of ideas on whatelse we can do?tosatisfy basic function.
How value can be added? Howcost can be reduced?Generally brain stormingis done to generateideas.
5. Evaluation phase:
Select most promising ideafrom brain storming forfurther analysis
6. Investigation phase:
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use company or industrialstandards that closest to
the selected idea. Use ofstandards reduces thecost. Consult vendors orspecialists for findingsuitable standards.
7. Recommendation phase:
present facts collected andanalyzed withrecommendations and
motivate action.
Scope for Value Analysis inmaterials management
material substitution
supply size standardizationto reduce scrap
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standardization and varietyreduction
Vendor Development
New tools and technology
Outsourcing
Learning CurveLearning curve is amathematical expressionthat indicates fall inlabour cost for every
doubling of productionoutput.
Learning &skillsimprovement:
As learning takes placeskill improves anddefects reduce raisingthe quality of product.
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Reduction in labour cost isanother manifestation of
improved skill.Learning curve shows scopefor improvement inproductivity.
Expected level of output ata later date can beassessed by usinglearning.
Significance of learning
curve is that humanelement in work is thescope for learning andimprovement.
Concepts and principals of
learning
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Only humans learn. Largerthe human element in work
greater is the scope forlearning.
Learning and familiarity
familiarity results intoinstant learning
Learning and skills Whenthe production quantityis doubled, the labourcost falls by learning%age
Learning and quality - aslearning improves skillsthe defects in workreduce improving the
quality of the out put.
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Learning and cost
learning results in
reduction of costs. Allthe improvements statedabove cause reduction inthe cost
Phases of learning
Phase I familiarity,learning is very fast.Instant benifits
Phase II skills
development, learning isslower. Benefits continueat a slower rate
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Phase III reverselearning, as learning
continues the reductionin man hrs result intoexcess inventory andabuse of the machinecausing breakdown
Managerial utility oflearning curve
1. Cost projection forfuture projects.
When to start workmeasurement in a company?If measurement is made inPhase I of learning curvework standards become
very loose.
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Transfers and promotions. Aperson in phase II of
learning a skill he isready for a for apromotion or transfer foranother area of job.
Material requirement
planning. Materialrequirement for a personin his I phase oflearning is quite large.This drops down with
improvement in skills.If skill improvementfollows learning curve,we can say learning isgood and training is
effective.
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Raising productivity. Allthe features studied
above lead toproductivity improvement.
Price negotiations
- vendors learn at the cost
of customer- with learning his/hercost drops
- prices can be fixed ontime scale based onlearning cure projection
- scientific base forpricing and negotiations
Limitations of learning
curve
Benefits run out withobsoletion of product.
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Only human beings learn.
Attitudes come in the way
of benefits of learning.In the absence of
positive attitude humanbeings refuse to learnand improve themselves.
Inventory constraintslimit the benefit oflearning
As the speed of the
workmans machine becomesincompatible with thespeed of learningemployee, employee slowsdown his work due to
equipment constraints.
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As a result of learningcost per unit goes down
and organization tends tobecome mass productionoriented and vulnerableto the competition.
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