Value Analysis: The Secret Formula For Substitutions

Value Analysis: The Secret Formula For Substitutions

It’s my understanding that supply chain shortages are still a big problem in healthcare due to the effects of the pandemic. Further, we are hearing from our community that substitutes are now one of the prime responsibilities of value analysis professionals to come up with acceptable alternatives on the run to fix these shortages. We have found that the best way to address this challenge is with value analysis. For you see, the reason value analysis was created by Larry Miles was due to shortages during World War II.

At the time, Miles worked for General Electric (known as GE today) and was given the responsibility to find substitutes for materials that were being rationed (metal, paper, rubber, etc.) during the war, but were needed by General Electric for domestic consumption. That’s when Miles came up with the technique of value analysis or functional analysis. By definition, VA is the study of function and the search for equal or better lower cost alternatives or substitutions. That’s why I call value analysis the secret formula for substitutions!

Function (or what a product, service, or technology does) in the classic value analytics model is defined with an active verb and measurable noun. For example, the primary function of a paper towel is to “dry hands.” It also has secondary functions, such as to clean spills, wipe windows, cover shelves, etc., and aesthetic functions (size, color, length, width, etc.)  which may or may not be needed to meet your customer’s exact requirements.

Based on the above specifications, you can now brainstorm individually or with your value analysis team to search for equal or better alternatives or substitutions for hand towels. Some substitution ideas could be a cloth towel, hand dryer, liquid hand sanitizer, etc. Once your brainstorming session is over, you can then select the best lower cost alternative that meets all of your customer’s requirements. In this case, I believe cloth towels will meet all of the functional requirements outlined in the specifications that were developed in our functional analysis phase.

Although this substitution formula example is simplistic, you can apply the value analysis alternative selection process to just about any product, service, or technology you are now buying. Try it and I can assure you that you will be surprised how many alternatives you will devise and how many secondary and aesthetic functions you can do away with that aren’t absolutely necessary.

About Robert T. Yokl, Founder & Chief Value Strategist for SVAH Solutions
Robert T. Yokl is President and Chief Value Strategist at SVAH Solutions. He has four decades of experience as a healthcare supply chain manager and consultant, and also is the co-creator of the Clinitrack Value Analysis Software and Utilizer Clinical Utilization Management Dashboard that moves beyond price for even deeper and broader clinical supply utilization savings. Yokl is a member of Bellwether League’s Bellwether Class of 2018.

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