Supplier Value Analysis Program Helps Improve Relationships

By Charles Intrieri

July 27, 2016 at 9:51 AM

Procurement: As part of your strategy to increase supplier involvement and collaboration in product improvement, cost reduction and continuous improvement activities, you should consider a Supplier Value Analysis program. This program is part of a long-term objective to establish and improve business relationships with suppliers built on trust and open sharing of information and ideas.

The purpose of a VA program is to inform suppliers about value analysis, encourage their participation and clearly define the process for submittal and implementation of proposals.

The Supplier Value Analysis program applies to all suppliers of production intended materials, MRO and services.

What is Value Analysis? Value Analysis is the process of looking throughout the supply chain for opportunities to reduce cost, improve quality and eliminate waste in products and various processes.

Participating in VA activities ultimately results in a more competitively priced and/or improved product quality for suppliers and your team. Suppliers may submit an idea that reduces your purchase price cost (PPV: Purchase Price Variance) or improves quality.

Benefits to suppliers. Suppliers that participate in the Supplier Value Analysis program can expect:

  • Preferred supplier status  
  • Involvement in new product design
  • Process improvement
  • Sharing of cost savings (% based on proposal savings)
  • Improved quality

Suppliers showing a willingness and interest in the program through active participation will have increased opportunities for growth with your company.

Types of Value Analysis proposals. Supplier VA proposals can be for component design changes, manufacturing or assembly process changes, and logistics for example. A proposal should not have negative effect on product quality.

Suppliers can submit proposals for components in the design and development phase as well as components already in mass production.

The following are examples of proposals:

  • Change materials or specifications of materials
  • Change dimensions or tolerances
  • Part substitutions to standard or similar parts
  • Reduce unnecessary test requirements
  • New technology to reduce cost for process, improve yields 
  • Logistics improvement resulting in reduced freight costs
  • Packaging improvements
  • Manufacturing or assembly process improvements
  • Improvements that affect part reliability
  • Inventory management

Acceptable proposal examples. How to submit Value Analysis proposals? Suppliers should submit their proposals via e-mail.

A proposal submission should not relate to previous negotiated price reductions. An improvement of some sort must occur to be considered a VA proposal.

Suppliers should use your submission form. 

For each submission, suppliers must determine a calculated cost reduction, quality improvement or waste element, and include completed supporting data and documents to support the improvement and cost reduction as well as sample parts as necessary as well as a preliminary implementation timeline.

Review of proposals. Once procurement receives supplier proposals, a team of individuals from appropriate departments reviews each to determine feasibility. Procurement also conducts a business case analysis to determine the overall impact and worthiness for implementation.

Procurement sends the supplier results of the evaluation.

Supplier expectations. To help ensure a successful proposal and implementation the following are critical expectations: 

  • Supplier top management support and commitment 
  • Designate team members from Engineering, Manufacturing, Procurement, Quality
  • Generate feasible proposals
  • Develop required actions and implementation plans
  • Perform detailed technical and cost analysis
  • Communicate frequently with appropriate staff concerning proposals

Listen to the My Purchasing Center podcast, Value Analysis and Procurement: Stop Thinking about It, Do It. 

Tags: purchasing Supply chain management Procurement Engineering sourcing design value analysis cost VA
Category: Blog Post

Charles Intrieri


Charles (Chuck) Intrieri, Management Consultant at Charles M. Intrieri Consulting, is a highly experienced and credentialed Supply Chain professional and is a recognized thought leader and innovator, primarily in the areas of Supply Chain Optimization, Third Party Logistics (3PL) International Purchasing/Importing, Requests for Quotation (RFQ) generation, Inventory Management and Logistics, Warehousing, strategic sourcing, supplier management, contract negotiations, truckling: TL/LTL/TMS/pooling/consolidation and reviews, and Purchasing operations. He is a motivational team builder with a history of conducting significant organizational transformation and achieving important operational successes at the local, regional and global level.

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