With a general need description in hand, the buying organization can develop the item's technical specifications. Often, the company will assign a product value analysis (PVA) engineering team to the project. Product value analysis is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production.
The PVA team will examine the high-cost components in a given product, because 20 percent of the parts usually account for 80 percent of the costs of manufacturing it. The team will also identify overdesigned product components that last longer than the product itself, then decide on the optimal product characteristics. Tightly written specifications will allow the buyer to refuse components that are too expensive or that fail to meet the specified standards. Suppliers, too, can use product value analysis as a tool for positioning themselves to win an account. By getting in early and influencing buyer specifications, a supplier can significantly increase its chances of being chosen.
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