Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Value Management in Nigerian Manufacturing Companies:
Challenges and Prospects
Ezezue B.O
Value Management/Analysis is very crucial in Nigeria manufacturing companies. The study
investigated the prospect as well as the challenges posed by VM in Nigerian manufacturing
companies. In spite of the fact that value management is an important concept for improvement of
quality, productivity and customer satisfaction, many managers are unaware of these. It is against this
background that this study is embarked upon to determine the extent to which inadequate orientation
and focus on VM principle impeded the success of VM in Nigerian manufacturing companies; to
ascertain the extent to which value management eliminate waste or unnecessary costs in Nigerian
Manufacturing Companies, to compare managers trained in VM with managers untrained in VM. In
the conduct of this study the survey design was used. Questionnaires and Oral interview were the
tools used for the purpose of data collection. The population of the study included the top, middle and
lower management staff of the twenty (20) manufacturing companies selected out of five (5) states in
South-Eastern Nigeria. The total number of management staff of those selected manufacturing
companies was six thousand (6000). The Sample size of the study was 375 which was determined
using Taro Yamene Formular. The findings of the study revealed that inadequate orientation and
focus in VM principles impeded the success of VM in Nigerian Manufacturing Companies: The study
also discovered that with proper orientation, focus and training on the concept of VM, management
could perform better and productivity will be high. The study also found out that trained managers are
better than untrained managers. Conclusively, the study noted that VM is “a race without a finish”,
hence the survival of any manufacturing organisation depends on “high value”.
1. Introduction
Value Management began at General Electric Company USA during World War II. As a
result of war, there were shortages in skilled labour, raw materials and component parts.
Lawrence D miles, Jerry Leftow and Henry Erlicher at GE were mandated to look for
acceptable substitutes, without sacrificing quality, utility, performance and so on. Through a
team approach, they achieved these objectives. They also noticed that theses substitutes
often reduced costs, improved the product quality or both; what started out as an accident of
necessity was turned into systematic process. They called their technique “Value
Management, “Value Analysis, or Value Methodology”.
Value Management (VM) is a technique designed to reduce material cost by a scientific
approach and analysis. It also tries to conserve the scare material resources, foreign
exchange reserves and promote the indigenous development of substitute materials. VM
should not be seen as a mere cost reduction technique. It is more comprehensive and
improves the value without sacrificing quality, reliability, maintainability, availability,
aesthetics. etc (Miles 2006).
______________________________________________________________________
Dr. (Mrs) Ezezue B.O, Faculty of Management Sciences, Department Of Business Management, Ebonyi State
University, Abakaliki, Nigeria. Email: Ezezuebernadine@Yahoo.Com
1
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Corne (2001) observes that Value Management is a powerful management tool for use in an overall
strategies management framework including the development of all total assert management strategies.
In general terms, it may be described as a structured, analytical process for developing innovative,
holistic solutions to complex problems. It involves representatives of key stakeholders in a facilitated
workshop. It is a team based creative approach to problem solving that sets values management apart
from other management tools. The process seeks improved value for money outcomes that maximize
the standards of quality or performance within the resource limits available (Corne, 2001).
Collier (1989) opines that value management is the role model for the new way of doing business.
Managers were required to practise value in their daily activities and to provide leadership through
value among their peers and subordinates. In the same vein, Zemke (1992) observes that
organisations that invest in value management efforts experience outstanding returns and
improvements in performance. Various studies show that quality-focused organisations achieve better
employee participation and relations, improved product and service quality, higher productivity,
greater customer satisfaction, increased share, and improved profitability. Companies/Manufacturers
should note that it is important to focus on value; David (2006) confirms this as he states that it is
vital to focus quality improvement efforts on both design and conformance. This is because many
companies simply confine their quality efforts to one dimension; for example, they might focus on
defect elimination, but fail to design products that customers really want, or they design great
products that are plagued with deflect and service errors. Value is simply the foundation for achieving
competitive advantage.
Furthermore, value-based approach indicates a clear dependency between the process and products. It
sees that we need to develop and optimize process activities so that processes produce the products
needed. It sees that we must analyze products in order to reveal problems in processes and develop
processes from the product point of view as well.
This is vitally important, especially for companies that respect customers opinion and aim at
optimizing costs in their process, because the customers are the ones paying for the products and
product-related services, hence, the happier the customer, the more he sees worth in buying the
products from companies. It is also clear that when we know process and product cost, worth and
2
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
value, our ability to estimate, budget and take care of future risks will improve significantly (Morgan,
2003). In retrospect, Value Management/Analysis by its very nature is an intensive, interdisciplinary
problem-solving activities that focus on improving the nature of the functions that are required to
accomplish the goals or objectives of any product, process, service or organization. It is the
systematic application of recognized techniques that identify functions of the product or service,
establish the worth of those functions; and provide only the necessary functions to meet the required
performance at the lowest overall cost, eliminate, or minimize wasted material, time, and product
cost, all these geared towards improving value to the customer (James etal, 1996).
2. LITERATURE REVIEW
The study reviewed works of different authors whose works have direct bearing on the subject matter.
2.1 ORIGIN OF VALUE MANAGEMENT
VM emerged in the United States during the 1940s, at a time when challenging decision had to be
made regarding the alternative design in choices needed to overcome a general shortage of resources.
General Electric’s Vice President of purchase, Henry Erlicher, observed that design changes and
material substitutions often resulted in a better product at a lowest cost. He was interested in
discovering why this expected result had occurred and this set in motion the actions that would
eventually yield VM (2). Erlicher requested that Lawrence D. Miles, manager of purchasing, develop
effective ways to improve value. This program, termed Value Analysis (VA), was established in
December 1947; Miles realized that the functions performed by a product held the key to improved
value. In addition, he recognized that the VM was unique – not part of the conventional process
routine. However, sustaining the methodology required a champion and converts. Miles obviously
filled the role of the champion. General Electric embarked on an extensive training program in
October 1952 in response to the early success it had with the VA Program (3). VM has, on occasion,
been inappropriately viewed as cost cutting. This likely stemmed from poor or misguided efforts to
lower product or project cost without truly understanding how it should perform. However, it is clear
that from the start, VM targeted improvement. At the first VM training session in October, 1952, E.E
Parker established the ground rules in his opening presentation, indicating that “our creed is the same
performance for lower cost”. Although the value and design team ultimately have the same objective,
the most cost effective and appropriate product or project, the approaches taken are different.
3
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
However, even at this early state Miles cautioned that “there is no competition between us (value and
design teams), let’s never let that thought prevent our cooperation” (Parker, 1997).
2.2
THE BENEFIT OF VM
The most visible benefits arising out of the application of VM include:
1.
Provide an unbiased, outside opinion and senior expertise as inputs to the design process, thereby,
increasing the resources available to develop the project.
2.
Document that all reasonable measures have been taken to minimize project cost and maximize the
return on investment for delivery.
3.
Identify design criteria that are poor value, thereby allowing the project decision makers and
stakeholders to re-evaluate project criteria (Douglas, 2000).
4.
Generally it also enhances and promotes the team spirit.
5.
It identifies constraints, issues and problems which might not otherwise be obvious or have been
considered.
6.
It improves understanding and ownership of outcomes.
7.
Elimination of unnecessary functions and features and incorrect assumptions regarding other
requirements.
2.3 CONCEPT OF VALUE
The concept of value relies on the relationship between the satisfaction of many differing needs and
the resources used in doing so. The fewer the resources used or the greater the satisfaction of needs,
the greater the value, stakeholders, internal and external customers may all hold differing views of
what represents value. The aim of value management is to reconcile these differences and enable a
company to achieve the greatest progress towards its stated goals with the use of minimum resources
(David etal, 2004). It is important to realize that value may be improved by increasing the satisfaction
need even if the resources used in doing so increase, provided that the satisfaction of need increases
more than the increase in use of resources.
2.4 SIX SIGMA AND LEAN PRODUCTION
Lean production refers to approach initially developed by Toyota Motor Corporation that focus on the
elimination of waste in all forms, including defects requiring rework, unnecessary processing steps,
unnecessary movement of materials or people, waiting time, excess inventory, and over production. A
4
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
simple way of defining it is getting more done with less. It involves identifying and eliminating nonvalue added activities throughout the entire value chain to achieve faster customer response, reduced
inventories, higher quality, and better human resources (Evans and Lindsay, 2005). Six sigma is a set
of practice to systematically improve processes by eliminating defects. It was heavily inspired by six
preceding decades of quality improvement methodologies. Lean thinking focused on process
improvement, but more holistically than six sigma, and requires a whole system view including a
focus on people. There are similarities but also important differences between the two approaches
(Morgan, 2003).
2.5 WHAT VALUE MANAGEMENT IS NOT
Greenfield (2004) confirms that value management is not what good planners and designers do as a
matter of routine, its not part of the typical design development process. A VM analysis is more
rigorous than the typical project review. Each VM effort brings together an impartial team of
professionals with common purpose, improving the project design. The format and structure of the
value management methodology serves to aid both the owner and designer with achieving their
objectives. Similarly, a VM analysis is not traditional cost reduction approach. In a VM analysis, cost
reduction is achieved by making a design more efficient without reducing essential performance,
reliability or maintainability. Conversely, traditional cost reduction efforts will concentrate on
material substitutions, and reducing or eliminating specific elements. This approach frequently results
in reduced quality, or diminished performance.
2.6 CURRENT AND FUTURE CHALLENGES
The real challenges today is to ensure that managers do not lose sight of the basic principles on which
value management and performance excellence are based. As former Xerox President, David Kearns
observed, value is “a race without a finish”. The Global market place and domestic and international
competition have made companies around the world realize that their survival depends on high
value”. Evans and Lindsay (2005) opines that many countries, such as Korea and India, are mounting
national efforts to increase value awareness, including conferences, seminar radio shows, school easy
contexts and pamphlets distributions. Spain and Brazil are encouraging the publication of quality
books in their native languages to make them more accessible (these books have been translated into
Spanish and Chinese). These trends will only increase the level of training and education for
managers and frontline employees alike as well as the development of technical staff. Thus, a key
5
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
challenge is to allocate the necessary resources to maintain a focus on quality, particularly in times of
economic downturns as we have globally today.
2.7 PROSPECTS
As business and industry began to focus on value, the government recognized how critical quality is
to the nations economic health. Value practice expanded into the service sector and into such nonprofit organisation as schools and hospitals. In Nigeria today, quality awards are established by the
Government, some states have developed award programs for recognizing quality achievements in
business, education, technology etc.
In Nigeria today, tremendous improvement have been recorded in textile industries with regards to
quality. Years back, Nigerian textile were regarded as inferior materials, “Akpuruka”, Igbo-made,
Nigerian-made, “Igbanjo” and so on, but today, the story is different. Nigerian textile materials are
preferred to their foreign counter-part, especially “Nigerian Abada” and their prices too are cheaper
and the quality has greatly improved and its duration is higher than London and USA prints.
3. METHODOLOGY
To obtain the necessary data, the researcher used personal interview and questionnaire. A total
number of three hundred and seventy five (375) copies of the questionnaire were distributed and three
hundred and fifty (350) were returned, representing an encouraging rate of eight-five percent. The
hypotheses of the study were tested with Z, Chi-square, X2/t-test, and Analysis variance (ANOVA).
3.1 SAMPLE SIZE DISTRIBUTION
A sample of 375 representing 75.1 of the entire population of the management staff in the (20) twenty
manufacturing companies were chosen for the study. The sample size was statistically determined
and calculated using “Taro Yamene” formula. The formula is given as:
n = N
1+N (e)2
Where: n = the sample size
N = population size
E = margin of error (assumed 5%)
1 = unity (a constant)
6
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
TABLE 1: QUESTIONNAIRES DISTRIBUTION
S/N
STATE
NO OF ORAS
NO OF QUESTONNAIRE
PERCENTAGE
1
Anambra
6
112
30%
2
Abia
5
94
25%
3
Enugu
4
75
20%
4
Imo
3
56
15%
5
Ebonyi
2
38
10%
TOTAL
20
375
100%
ACKNOWLEDGEMENT
The researcher is most thankful to Prof. Ewurum U.J.F, a professor in the Business Management
Department, University of Nigeria Nsukka (Enugu Campus) for his superior guidance, corrections,
objective criticism and advice.
4. FINDINGS/DECISION
It was found that most of the respondents either agreed or strongly agreed that value management had
an effect on organisational productivity, growth and sustainability in Nigerian Manufacturing
Companies. The study also revealed that inadequate orientation and focus on value management
principle impeded the success of VM in Nigerian Manufacturing Companies.
This finding is true of most of the companies studied, in fact, its one of the major challenges.
It was also discovered that value management enhanced product quality and customer satisfaction in
Nigerian Manufacturing Companies. Most of the managers in the companies visited believed that
value management helped to eliminate waste and unnecessary cost in Nigerian Manufacturing
Companies. Most of the respondents strongly agreed that managers trained in value management are
better than untrained managers in VM. Above all, the study discovered a high rate of ignorance on the
concept and technique of VM. In some companies visited, managers are yet to learn about, the concept
of VM. The findings further revealed that team work and team spirit account for good success in value
management concept and practice; hence, managers were advised to create a conducive environment
for team work to thrive and for value management to survive. Furthermore, the study discovered that
7
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
participatory management is better than traditional management where subordinates are asked to leave
their brain, at the door of the companies. Hence, in participatory management which is modern
management system, employees are allowed to make decision and take the full consequences of their
decision; the employee are given the chance of being part and parcel of the companies too. All these
practices account for the success of VM in the countries and companies where they being practiced.
Finally, the study discovered that VM is not something that should be left to chance; hence, adequate
training and orientation on VM principle, technique and concept should be given to managers and
subordinates if really VM practice should be a success in Nigeria Manufacturing Companies.
5. CONCLUSION
Conclusively and realistically, value management as a concept is the foundation for achieving
competitive advantage. Companies that invest in value management efforts experience outstanding
return and improvements in performance. Various research studies show that quality focused
companies achieve better employee participation and relations, improved product and service quality,
higher productivity, greater customer satisfaction, increased market share, and improve profitability.
As former Xerox President David Kearns observed, value is “a race without a finish”. The Global
market place and domestic and international competition have made companies around the world
realize that their survival depends on high value”.
Value management is a worthwhile exercise if properly facilitated. It is bound to become more popular
in future. Those who conduct cost cutting exercise under the guise of VM may cause developers to
distrust VM. This will be a great pity, however, by using value chain Analysis and following it and
implementing it thoroughly, you can achieve excellence in the things that really matter to your
customers. Value management processes and techniques are recognized worldwide as a highly
profitable means to achieve increased profits, customer satisfaction, and improved quality. Businesses
and government agencies using the process save costs, increase profitability every year. These results
were often achieved while increasing product quality, usefulness, customer satisfaction and other
increases in essential product component requirement fulfillment.
8
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
REFERENCES
Akerlof G.A, Yallen J.L 1997, Rational Models of Irrational Behaviour. 77 pp 137-142.
Ani S. and Suresh .N. 2009, Operations Management, New Delhi, New Age
Berger, J.O (1997) Statistical Decision Theory and Bayesian Analysis (2nd Ed) New York,
Springer Verlag.
Brain R.N and William C.M 1998, Value Management in Construction, London British Research
Establishment. Co. Ltd.
Bryant J. 1993, Supporting Management Teams or Insight 6.3.19-27.
Checkland P. 2001, Systems Thinking, Systems Practice, New Jersey, Wiley-Chichester.
Collier D.A. 1989, The Customer Service and Quality Challenge, “The Service Industries Journal Vol.
7, No. 1 January.
Corne P.D.L 2001, Value Management: An Optimum Solution, International Conference on Spatial
Information for Sustainable Development, Nairobi Kenya 2-5 October.
Daft R.C. 2003, Management, Texas, R.R Donnelly and Sons.
David .R and Dixon P.E. 2004, Extreme Lean: How to Keep Jobs in America, Society of
manufacturing Engineers. New Jersey, WESTEC
Douglas .G. 2000, “Kaiser Takes Cyber Cure”, Business week, February.
Drucker P.F. 2002, Delivering Value to Customers. Quality Progress 35, No.5.
Evans J.R. and Lindsay W.M. 2005, The Management and Control of Quality, Singapore, Seng Lee
Press.
Greenfield .H. 2004, Integrating VE in project Planning. “4th Annual SAVE Conference, Montreal,
QC, Canada, July 12-15 7pp. http://www.valueeng.org/pdfdocs/monographs/vmstd.pdf.
Ikeagwu E.K 1998, Groundwork of Research methods and procedures, Enugu, precision publishing
Co.
Meryers G. 2001, “Getting Value Engineering out of the Box “. AASHTO Value Engineering
Conference San Bugo. Calif., July 10-13, 10pp.
Miles L.D. 2006, Techniques of Value Analysis and Engineering, New York, McGraw-Hill Morgan
.J. 2003. “Value Analysis Makes a comeback,” Purchasing Magazine On-Line
http://www.purchasing com/article/CA339389. html, 20 November.
Mudge, A.E. 1971, Value Engineering: A Systematic Approach, New York, McGraw-Hill
9
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Noda. K. and Tanaka .M. 1997, “Target Cost Management for Profit Engineering System” Based on
VE in Japanese Automotive Parts Manufacturing, Kansai City Japan, University of Oulu Press.
Parker D. 1997, Value Engineering Theory, Lecturer Outline and Reading Supplement, 3rd ed.
Washington D.C. The Lawrence D. Miles Value Foundation 201 KP.
Paul A. 1998, Foundations of Rational Choice under Risk, Oxford, Oxford University Press.
Roger. H. 2001, Improving Service and Lowering Costs in E-Commerce. Boston, Harvard Business
School.
Roland R.T and Dickson. P.R. 2000, Getting Returns from Service Quality: is the Conventional
Wisdom Wrong? Cambridge, MA: marketing Services Institute.
Roy R.N. 2005, A Modern Approach to Operation Management, New Delhi, New Age International
Ltd.
Sensebrenner .J. 2001, Quality Comes to City Hall, Harvard Business Review, March-April.
Steven M., John K, Scott F. 1998, The Value Management Benchmark: A Good Practice framework
for clients and Practitioner America, Save International Prints.
Stewart R. 2003, “The Integration of the Performance Measurements within the California Department
of Transportation. AASHTON Value Engineering Conference. Tempa, Fla., July 15-128. 22pp.
Turner F.B 2003, Highway Research Centre Federal Highway Administration, Mclean, Va. pp 39-43
(Online). Available: http://www.tfhre.gov/pubreds/septoct99/val-eng.htm.
http://www.doctagov/hq/0803:pdf.
Wald A. 2001, “Contributions to the Theory of Statistical Estimation and Testing Hypotheses” Annals
of Mathematics Statistics 10 (4):299-326, doi:10. 124/doms/1177732144.MR932.
Yousefi A.L. and W. Hayden 1995, Re-Engineering Through V.M-Tom Integration: A Strategy
the Transformation, Dayton-Ohio, Save Processings.
Zemke .R. 1992, “The Emerging Art of Science Management Training,” 29 January.
http://www.dotstate.flus/projectmanagementoffice/VE%20processess/projectselection.pdf.
10
for