If you eliminate non-value-adding operations, the customer only benefits. Activity-based costing allows combining several procedures involved in creating consumer value. Using the cost of an operation as a starting point, the company can separate value-creating operations from those that do not create value and eliminate the latter. The chain of value-creating operations allows analysis of the value creation process. The value creation process in an automotive company includes designing and redesigning components and auxiliary functions, not just developing the main ones. And all this must be done within given costs. For example, the basic function of a car is transportation, while auxiliary functions include comfort, fuel efficiency, and safety. Each of the main and auxiliary functions creates consumer value and determines the quality and cost of the car. To conduct the analysis, a group of people involved in creating consumer value is formed. It usually includes suppliers and consumers. Their task is to identify product functions and analyze the components included in each function to ensure the necessary value and quality at given costs. TIP OF THE DAY: Eliminate non-value-adding operations. Analyze the processes underlying value-creating operations. If necessary, redesign the process.
Creating Consumer Value
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