Value Engineering Application On The Decrease Of Auto Parts Purchasing Cost

Nowadays, with the development of economic globalization, Chinese domestic auto industry is facing the unprecedented opportunities and challenges. Especially under the stimulus of favorable policies such as the unrestraint of samll-displacement vehicles,the implementation of new consumption tax,the increase of gasoline price, etc. ,which offers the good opportunity to the domestic small-displacement car manufactueres,and brings about a fierce competition rushing for a bigger market share between the small-displacement car manufactures. Being an old brand of the small-displacement autos, Charade has experienced strong impacts from both domestic autos as Cherry QQ,ChangAn Suzuki and international auto jiants heading for the mini-auto market. The price of economy cars is very sensitive and the price competition has never subsided, especially the price impact from Greely and Cherry QQ. Charade Auto has to be involved into thr price war. And once"low cost"seemed to be a substitute for the advantageous competitor.As a single brand best seller in the year of 2005, Charade has its own magic weapons---money saving,worry saving and efforts saving by which it won the sales championship. How to achieve"money saving"has always been a subject for the Charadeselves to discuss and put into in-depth practice. The preferred development direction for enterprises should be: High Quality,,Low Cost,Proper Profit. Income-Cost=Profit. That is to say, with income unchanged, cutting cost means increasing profit. It is not difficult to see that purchasing cost accounts for more than 70% of the complete body cost through analyzing the complete body cost. To control and cut purchasing cost effectively is the key to"money saving", and also it is the most direct way for the purchasing staffs to make additional value to the company. Cutting purchasing cost is not only souce of the third-profit, but also is a solid foundation for the achievement of the first profit.During the previous cost cutting activities, the purchasing department is under great pressure. Whenever the purchasing staffs receive the company's annual economic target, firstly, they are required to disassemble the targets and start arduous negotiation for prices with the auto parts suppliers, which can result in timely effects initially by this improvement method based upon pure negotiations, or commands or stimulations, however, it can not obtain good result on constan cost improvement. As time goes by, the risk of the quality of component parts is coming out and the assembling factory is facing an embarrassing alternative of cost and quality.How to pursue the scientific and effective way to cut purchasing cost? As a kind of management which combines scientific management theory with practice, value engineering has been proved to be the effective way to cut purchasing cost.In ihis article ,starting from the developing history and basic concept of value engineering , it introduces the basic principles of value engineering, describes the detailed theory and practical process in preparation, information, function, planning, plan evaluation, and implementation etc,.Value engineering is a rising engineering of economic method, it uses the idea of"value"to make the technology and economic together. Also, seeking the lowest cost obtain the necessary function. It meets user's demand, while companies and society obtain the best economic results as the limited resources operate in efficient way. Value engineering focuses on functional analysis, and strives at the cost of minimal productive cycle to achieve the object of organized creative activity.Value engineering formula:V=F/C in this formula : V(value)F(function)C(Cost)In fact, value engineering is a research of the relationship between cost and function. Then using creative thinking find the best strategy, better design, cheaper raw materials, more economical manufacturing methods, more appropriate workers, locations, equipments, etc.to achieve the required performance and quality of products at the lowest total cost. In the other way, value engineering is a way to eliminate the unnecessary cost. So the study of value engineering theory is the effective way to reduce purchasing cost of whole cars and to increase competitiveness in vehicle market.Value engineering functional analysis as the core which is a scientific, systematic and effective way of discovering the problems, analyzing the problems and solving the problems. Summed up to solve the following seven questions:①What is it?②How it works?③How much is the cost?④How much is the value?⑤Can we use other ways to achieve this function?⑥How much is the cost of a new program?⑦Does the new program be able to meet the requirements?Theory comes from practice, while it services practice. During explaining the value engineering methodology in detail, it highlights the purchasing department of Tianjin FAW uses value engineering ways to reduce purchasing cost successfully. Because there are hundreds of auto parts, I can't list every part to explain. So I will give the example of the higher cost and complex structure which is automotive air conditioning system. Taking this example, it describes the important role of value engineering on reducing the purchasing cost of auto parts and improving economic efficiency of company.Practice has proved that Tianjin FAW finds for the cost improvement another scientific and effective way to reduce cost through the application of value engineering. Value engineering activities clearly depend on the collective wisdom of organized creative activity. It should not be an individual activity or independent activities of individual departments, however it relies on the wisdom and strength organized by aspects of personnel to achieve a goal. There is leadership, according to a certain working procedures of collective activities. The application of value engineering not only achieved in reducing vehicle purchasing costs by 5% to 15%, but also used to strengthen the technical personnel of enterprises and manager in the organic combination of economic and technological concepts. It changes conventional thinking that reducing purchasing cost is only the responsibility of purchasing department.