Value Analysis: The Daily Definition
What is value analysis?
Value analysis is the process of evaluating a product or service’s features. Features are evaluated for their functionality, general appeal to the customer, overall cost, and other pertinent factors. If value is found to be lacking, the item or service is typically reevaluated and then either improved or discontinued.
Let’s say you conduct some value analysis on the shoelaces that your distribution company sells to customers. You find that their price point is ideal for you and that you profit from them, but also that these shoelaces receive terrible customer reviews. They are fragile and break before customers expect them to.
While it might be tempting to keep selling these laces due to their low cost to you, consider the damage they cause your company’s reputation. You need your customers to be satisfied with the quality of the goods you sell to them. In today’s hyper-connected day and age, dissatisfied customers can easily find another shoelace supplier — pay attention when the data reveals problems with your inventory.
Our two cents:
While value analysis important, it’s only one piece of the inventory management puzzle. There’s a lot that goes into proper inventory management methods, but it all boils down to visibility. Knowing not only the value of your inventory, but also how and when it’s making you money gives you an edge on the competition.
It’s easy for businesses to mistake merely tracking inventory for managing it. There are key differences between the two, though, that can have big consequences for you and your business. Get familiar with your current method, then take some time to evaluate whether or not you need to make any changes. This will take some elbow grease, but it’s worth it. Don’t let the wrong inventory strategy stand in the way of your potential!