Product by Value Analysis Product-By-Value Analysis in

Product by Value Analysis Product-by-Value Analysis In order to understand the concept of product-by-value analysis, one must first understand the correct concept of a product. A product itself is the "need-satisfying" offering of an organization, which may be defined as a good or a service. In understanding this fact, one can then gauge a deeper understanding of how these products are levied through the use of product-by-value analysis within a firm or an organization.

In dealing with product development, production, and distribution, companies must ask themselves the following question: how can we determine which products to develop? Product-by-value analysis is one such tool in terms of assessing whether or not the production of existing products within a company remains one that keeps an organization on the path to profit with a loyal consumer base. Heizer and Render (2010) note that product-by-value analysis is a concept that lists products in descending order of their individual dollar contribution to a firm (Heizer and Render, 2010, p. 64).

This strategy is used as a tool to help management evaluate alternative strategies within their own business models. In order to understand the individual dollar contribution that a firm gains from a product, companies look at the life cycle of a product in terms of the type of costs and revenue streams that the production and distribution of such a product can bring into the company.

In assessing which products cost the most money for a firm to produce in comparison with the actual financial contribution that each product brings into a company, that respective company is more capable of designing a product line that is conducive to long-term financial market success.

In viewing product-by-value analysis in terms of industry use, one must note that the use of such a tactic can help management in increasing cash flows, increasing market penetration, and reducing costs, which is something that nearly any industry can stand to benefit from (Vallabhaneni, 2009, p.49). While this tactic can be used in industries across the board in terms of the economic market, manufacturing companies that produce and distribute products in-house stand to benefit significantly from utilizing such a tool. Take, for example, the computer industry.

A company that not only produces the items in house, but markets and sells its products to consumers is looking to both maximize its profits and minimize its costs. Herein, lies the need for product-by-value analysis. As author P.N. Mikherjee (2006) notes, after the feedback about customers' requirement, conduct a critical analysis of the product-by-value analysis, and look for the possibilities of cost reduction retaining the same customer satisfaction or try to enhance the customer satisfaction at the same cost (Mikherjee, 2006, p. 153).

In doing so, companies are able to handle funding and profits in a more efficient manner in order to ensure that returning customers remain loyal and first-time customers become repeat customers. Conclusion In utilizing.