A Proposed Quantitative Model for Cost Reduction through the Technical Bargaining between the Alliances of Production and Design Cells

Abstract

The main objective of this work is to balance value analysis and value engineering to achieve cost reduction. This work investigates cost reduction efforts through production and design cells. A quantitative model is formed to investigate the operative and non-operative integration of value analysis and value engineering approaches. The first part investigates variance analysis for controlling cost and cost reduction.  The second part relates to value analysis and cost reduction within production cells. Regarding value engineering, which aims at reducing costs generally without reducing quality or effectiveness, and the value analysis approach, the former is important in the design phase, while the latter is necessary before implementation.  The model was initially designed using the game theory to identify negotiating parties from production and design cells during negotiations on the proposed cost of new or existing products. However, the discussion showed it is difficult to end the negotiation at a certain point using only game theory. Accordingly, search theory models were used as complementary models, helping to reach an appropriate strategy to reduce cost and determine a point of abstention. Various recommendations were suggested at the end of the work.