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Value Engineering (VE) is usually defined as the systematic identification of the basic function of a product of service, arriving at a worth for that function and then deciding the better way to satisfactorily meet the necessary function at the most economical cost. Value programs are not a panacea for controlling costs, but the approach has been demonstrated to be more successful than conventional cost reduction programs. A recent research study shows that the functional approach produces about fifteen percent more savings than traditional cost reduction programs. VE need not replace other programs such as Work Simplification, Methods Improvement, etc. Many companies are using both programs. VE can be complementary to existing programs and need not be competitive. Many managers believe their organization is already using the value approach, only under another name. Continuous and positive management support, well-trained VE personnel, realistic plans and objectives, managers receptive to change, and a commonly shared goal for improvement, all are vital components for success.

The article discusses the surrogate measure for the firm's investment in human resources and considers the two major factors causing inter-firm wage differentials: employee training and indirect compensation. Employee training, including college courses, is borne by both firms and employees, and in cases in which it is paid by the firm, employees may expect below-average wages. Examples of wage differentials caused by indirect employee compensation include cases in which firms provide subsidized housing, health care benefits, education loans, and children's benefits for employees. The measure of a firm's investment in human resources is based on firm versus market wages. The firm's return on investment in human resources is the difference between the firm's actual wages and the market wage.

The loss-cost function for control schemes using np charts is derived and the loss-cost surface is investigated. Numerical examples of minimum cost designs are studied to see how variation in the various risk and cost factors affects the economic optimum. [ABSTRACT FROM AUTHOR]

This paper analyses a multi-stage cyclic queueing system in which there are alternate service and transit stages. The service times are negative exponentially distributed, but it is shown that the transit time distributions may be any of a whole range of types, from constant to negative exponential. It is also shown that the production rate of the system does not depend on the individual mean transit times, but only on the sum of these mean transit times. An explicit expression for the average production rate is derived and used in two examples, (i) a two-stage earthmoving project, and (ii) a four-stage asphalt paving project, to obtain regions of optimal haul fleet size, in the parameter space, so as to minimize the cost of the system. [ABSTRACT FROM AUTHOR]

The impact of order on the overall cost of a product manufactured by independent serial processes is well known. Process improvement and subsequent cost reduction is always an objective. Constrained financial resources are usually the case. This paper combines these three aspects to give direction to the use of financial resources to optimize the cost reductions in a serial process. In the paper it is shown that a non-optimal sequence may have the most potential when the resources are properly applied. [ABSTRACT FROM AUTHOR]

Combined attitude change and operant conditioning procedures to improve operative worker performance were investigated. Results indicate no attitude change, no quality change, quantity improvement, and cost reduction. Based on this study, it is concluded that operant conditioning procedures did not provide an alternative to Zero Defects type quality motivation programs. [ABSTRACT FROM AUTHOR]

This article provides empirical evidence on the structure of corporate debt management and the accompanying decision rules utilized by corporations. The authors examine how companies determine the optimal balance of short- and long-term debt in order to minimize their costs and control their risks. This risk is largely the result of uncertainty of future interest rates. Two situations are presented that highlight how this uncertainty can financially impact corporations. The findings indicate that firms attempt to achieve a rational, best case debt scenario and that growth of assets are typically financed with long-term obligations.

The article focuses on the cost implications of fluctuating demand. It states that in a market characterized by fluctuations in demand, businesses need to minimize total cost functions associated with probability distribution production and produce a probability distribution of outputs. It suggests that using a static total cost function would thus be different from a cost function that resulted from production of a stable level of output and would also overstate the total costs of suboptimum and superoptimum outputs. It claims that pricing policies and profit maximizing decisions should reflect the cost effects from output variability.

A large-scale computer model was developed which integrated an empirically based model of work groups and foremen with a behavioral theory of the firm. This model was then used to investigate a set of hypotheses about the effects of managerial climate on organizational performance. The results indicate that under specific dimensions of managerial climate work groups can have marked effects on organizational performance, suggesting the need for further research on the incorporation of models of the lower levels of organizations in a behavioral theory of the firm. [ABSTRACT FROM AUTHOR]

The article discusses the technique of controlling costs by cost variance analysis. The goal of this research is to develop a distribution of cost variance that is noncontrollable and then use this distribution to look at expected earnings. A standard cost accounting system is presented as are calculations that can be used to determine standard and actual cost. The article concludes that cost variance is insufficient for deciding whether or not to investigate cost variance. It is suggested that cost variance should be divided into controllable and noncontrollable groups to be used to create a probability distribution.

The article examines the control system approach bases the intervention decision on information obtained from the process variance. The author develops means for making the cost-deviation investigation decision that incorporate both the cost of investigation and the expected savings. He explains that the case where there exist two levels of investigation with different characteristics is considered and the concept of the value of information is discussed from the standpoint of its implications for record keeping and decisions.

The article assesses the significance of accounting variances. The author discusses the consideration of the aspects of control problem and the distinction between costs and probability distributions. The author stats that one of the problems that frequently arises in the control of a large decentralized corporation is the assessment, of periodic financial reports issued by its various operating divisions and departments. The article also discusses the implementation of digital computers and also provides several equations. [ABSTRACT FROM AUTHOR]

This article examines the new phenomenon of à la carte advertising in which an advertiser acts as coordinator and purchases various services from independent operations. A la carte advertising is mainly motivated by a desire on the part of cost conscious advertisers to reduce costs of advertising. In the long run this move may be more costly to the advertiser, especially in terms of reduced profitability derived from less effective advertising. Full-service agencies make the most sense for most advertisers and can even provide effective service on an à la carte or modular basis if so desired. [ABSTRACT FROM AUTHOR]

The article analyzes the industrial implications of atomic energy. A series of industry analyses was conducted to study the possible economic impact of atomic energy worldwide. There were three issues asked, including the possibility of cost reductions in energy industries, the possibility of atomic energy to encourage the introduction of a new production technique, and the possibility of changes in manufacturers location due to geographical equalization of power costs. The study concluded that the nuclear district heating might be available only at a cost low enough to compete and the substitution of nuclear district heating would not provide large cost savings.

The article presents a diagnostic review of the PERT (Program Evaluation and Review Technique) technique. The article defines the technique and outlines some of the problematic aspects of designing a PERT Cost system that may have an impact on schedule and cost performance. The article discusses observations on the construction of proposal networks and pitfalls in networking, such as the sophistry of the black boxes, the vendor nose constraining the vertical fin design, grouping of engineering releases, waiting time, the reversal of constraints, acceptable level of technical risk, and updating of subsidiary networks. The author reminds users of the PERT technique that a sound, synthesized system design is complex and necessitates adherence to the prescribed procedures.

A computer analysis of inputs supplied by interviewers provides a set of management statistics that explains reasons for high-cost interviewer performance. [ABSTRACT FROM AUTHOR]

The rise in interviewing costs has been a major concern to users of survey research. This article suggests methods for controlling field expenditures based on experiments at the National Opinion Research Center and the Census Bureau. In addition, a new method for paying interviewers is outlined, based on the controls which are developed. [ABSTRACT FROM AUTHOR]

This paper deals with a theoretical programming method for determining conditions of unit cost reductions of dynamic technological processes. The mathematical model has been adopted for use as a dynamic programming procedure. The necessary assumptions needed to use the procedure have been formulated.
The more important part of the work is the optimum principle, enabling the solution of a wider class of problems than is possible with the commonly applied R. Bellman's Principle. In place of the assumptions on critical functional additivity (i.e. the additive nature of costs) due to several trajectory elements (e.g. technological operations), more general moments were introduced. These can be stated as 'the costs of the functional value of the first part of the trajectory causes an increase of the functional value for the entire trajectory, regardless of its second part' and 'each intermediate state required in reaching the optimum of the whole process, is to be reached in an optimal manner'. [ABSTRACT FROM AUTHOR]

Optimization is rightly claimed to be the most significant factor distinguishing the modern approach to machining processes from the orthodox one. Practical results can be obtained from the application of mathematical modelling and optimization techniques.
The paper presents a procedure for solution of machining process optimization problems, with the use of theory of graphs and Bellman's optimum principle.
The finite graph G=(N, A) (where N denoted a set of nodes and A the set of arcs) here presents the set of feasible solutions. Each arc represents a corresponding machining operation and each path the feasible machining process.
A number can be associated with each are the increment of criterion for optimality. Using the optimum principle we can find the shortest possible path in the graph, thus solving given problems of choice for the optimal machining process.
There is a variety of ways in which the performance criterion can be formulated. In this paper only those performance measures having sufficient economical justification are considered. We may minimize the costs of machining processes, or optimize economical effectiveness of capital engaged.
The method presented can be applied with every additive criterion, as well as with some non-additive ones. A practical example illustrates the field of possible application of this method. [ABSTRACT FROM AUTHOR]

The basic problems of production planning are described and the objectives of the planner considered in relation to the published mathematical attempts to solve his problems. The advent of terminal connections to computers has made it possible for the production planner to find acceptance solutions to his problem which may be non-optimal but which are at a lower cost than he would otherwise obtain. [ABSTRACT FROM AUTHOR]

The article discusses the need for human resource accounting through which positional replacement cost is measured. A great deal of the research previously done in human resource accounting has focused upon the problem of accounting for human resource costs, especially historical costs. Although some previous work has been devoted to the replacement cost of human resources, this area has received relatively little systematic investigation. Two of the major applications involve their use in planning and controlling the use of human resources and in developing surrogate measures of an individual's value to a formal organization which, in turn, has additional implications for the management of people. The need for measures of positional replacement cost, has developed a normative model for its measurement, which has presented the results of a study to apply the model in an insurance company, and has suggested some of the implications of measuring such data for management. Accounting systems are designed to measure and communicate data.

The purpose of this paper is threefold: (1) to point out that what has been dubbed the weighted average cost of capital is only the average cost of capital for a firm that is expected to earn a constant amount forever, i.e., a perpetuity; (2) to show that the components of the weighted average after-tax cost of capital have been incorrectly specified; and (3) to prove that the capital structure that minimizes the weighted average after-tax cost of capital is a non-optimal one. It should be emphasized that this study focuses on the use of the weighted average cost of capital as it relates to the capital structure problem and not, except for a footnote, on its appropriateness as a cutoff rate in the investment decision. [ABSTRACT FROM AUTHOR]

The article focuses on the economic policies surrounding the reduction of debt management costs within the U.S. Department of the Treasury. Despite not being of primary importance, the virtues of studying Treasury interest payment structures are outlined. An alternative debt-marketing technique is presented, asking whether the sealed-bid auctioning off of long-term securities could provide for a more efficient system. A history of the method as seen in U.S. economic policy is given and commonly raised objections are discussed. Conclusions are offered suggesting the system could be efficient in times of growth.

Little attention has been paid to negotiation cost planning for large corporate level sales. Often in industrial selling, negotiation costs represent a significant percentage of a firm's sales. This article suggests a relatively simple technique that can increase the industrial marketing manager's ability to plan his corporate level sales both more effectively and more efficiently. [ABSTRACT FROM AUTHOR]

This article presents an algorithm for selecting the activities which should be expedited to minimize the total cost of achieving a particular total project duration. The author comments on "The Costs of Crashing" which appeared in the July, 1970 issue of the JOURNAL OF MARKETING. [ABSTRACT FROM AUTHOR]

One means for reducing the costs and risks associated with developing marketing strategies is simultaneous concept testing. This article explores one technique for simultaneous concept testing--computer-controlled behavioral experiments. [ABSTRACT FROM AUTHOR]

The application of the critical path method to a sales promotion effort is one approach for effective utilization of the talent and facilities budgeted for marketing support functions. [ABSTRACT FROM AUTHOR]

Can low-cost media models be built for industrial advertisers? These advertisers typically have small media budgets and are faced with specialized audience groups about which little is known. What problems are encountered in building a low-cost media model? What results can be obtained through the use of such a model? The authors attempt to answer these and related questions through the use of case history. [ABSTRACT FROM AUTHOR]

The article reports on the practice of competitive bidding in the business world. The author questions whether or not competitive bidding is an efficient way to secure marketing research. It is suggested that the bidding process, including the drawing up of contracts, be modified to simplify the competitive purchasing process. Methods that may be employed to alleviate costs associated with purchasing practices, including marketing personnel costs, are recommended. The author evaluates bidding processes employed by the ABC Company. The professional relationship between buyer and supplier is also discussed.

The article presents information about different kinds of corporate objectives, focusing on overriding or "broader" corporate objectives as opposed to sub-objectives used to accomplish a larger objective. Conflicting or mismanaged corporate objectives can lead to the suboptimization of company resources and the author advocates the presence of a governing objective to increase the efficiency of corporate problem-solving. Categories of objectives discussed include the utilization of resources, production concerns, and personnel management.

Feedback is essential to modern control--we could not get a rocket to the moon without it. And what is useful for the scientific world also holds true for the managerial world. Can techniques of feedback be applied to improved forecasting of costs over the fiscal year, or to improved forecasting of contractual commitments? This article develops the basis for feedback forecasting, as well as the establishment of control limits for determining which forecasts depart significantly from plan. [ABSTRACT FROM AUTHOR]

Improving the design of routes and thereby reducing delivery costs is a major marketing problem. Here is a practical case study in which hundreds of trucks and thousands of customers were involved and with interesting results. [ABSTRACT FROM AUTHOR]

How can concept testing be used to reduce the risk of advertising failures? For which specific purposes is concept testing well-suited; for which is it ill-suited? The author examines the logic of four specific rationales and techniques, and provides some interesting answers. [ABSTRACT FROM AUTHOR]

Determination of the cost implications of alternate field procedures and sample designs has been a thorny problem for those conducting field surveys. This article shows how computer simulation can provide a fast, accurate, and inexpensive solution to these kinds of problems. [ABSTRACT FROM AUTHOR]

The article presents a list of research papers related to market research and research techniques. They include "A Guide to Gathering Marketing Intelligence," by William J. Guyton, published in the March 1962 issue of the journal "Industrial Marketing." "Characteristics of the Audience of Sunset Magazine," by Arthur Kroeger, and "Newspaper Research, U.S.A.," by Bruce H. Westley.

The discount house is the latest American marketing innovation to be exported and to be met with the cry "it can't happen here." In an article in the April, 1962 "Journal of Marketing," the author generalized that marketing activities that would work in the United States would usually work in Australia. Here he examines the discount house against the Australia marketing scene and in Mexico, another market which has shown some willingness to accept American marketing ideas but not without resistance. [ABSTRACT FROM AUTHOR]

Substantial progress has been made in reducing the costs of production and manufacturing activities. But similar cost reductions in marketing--activities particularly those associated with physical distribution--have failed to keep pace. The author shows the values of looking at marketing activities as an integrated whole, rather than as separate functional parts. The author wishes to acknowledge the aid of Canadair of Montreal, a subsidiary of General Dynamics, and of the Flying Tiger Line of Burbank, California. [ABSTRACT FROM AUTHOR]

The economic history of the railroads and the problems faced by them are in many ways unique. However, many of the railroads' problems are the outgrowth of failure to apply pricing principles which have a universal applicability. Faulty pricing practices, including inadequate attention to customer alternatives, pricing improperly related to the railroad's own costs, and failure to use price as a sales incentive to reduce costs explain many of the railroads' present difficulties. Dr. Dean shows how adoption of sound pricing principles could bring about competitive changes with far-reaching effects. [ABSTRACT FROM AUTHOR]

By use of time study and cost analysis, the delivery operations of a Baltimore wholesale grocer were analyzed to determine whether, and to what extent, the costs of these operations might be reduced. It had been previously determined that the efficiency of the firm's wholesaling operations was reasonably representative of other independent wholesalers doing about the same volume of business and serving the same general type of market area. Numerous instances were found of errors in trip routing, inadequate use of delivery equipment, excessive overtime hours by drivers and helpers, and faulty methods of loading and unloading. Specific recommendations were made for reducing or entirely eliminating these causes of high delivery costs. These same kinds of recommendations are equally applicable to other wholesalers as a means of reducing their delivery costs. [ABSTRACT FROM AUTHOR]

The article presents marketing strategies for businesses operating under conditions of imperfect competition. Reasons for variations of supply are primarily: equipment, production methods, market research, manufacturing resources and differences in quality control. The article states the purpose of some marketing campaigns is to bring a convergence of consumers' preferences towards the promotion of a single product. In some cases, product differentiation within a company is undesireable. An explanation of product diversity and its causational factors is provided. The need for marketers to recognize market segmentation and diverging demand are expressed. The need for managing total costs with respect to the combined management of production and marketing is expressed.

The article evaluates how public policy should treat industries that are dominated by a few very large companies. The questions addressed in this paper include what are the advantages large firms have over smaller ones? Would consumers benefit if oligopolies were weakened and the marketplace had higher numbers of small and medium size firms? Do large firms exhibit an economy of scale which may be preferable in certain industries or services? Topics such as unit cost, minimum market share for optimum output and the practicality of deconcentrating certain industries are covered.

Generalization of the Method As many business problems will yield to similar methods of analysis, the particular approach found useful here may be generalized as a sequence of steps as follows: (1) Following a study to determine the economics of the problem, a measure of effectiveness was selected. (2) A mathematical model of the problem was built around this measure of effectiveness and included, those variables which most appeared to influence the measure of effectiveness. (3) The coefficients in the model were chosen by mathematical manipulation (multiple regression) to make it as accurate a symbolic description as possible. (4) The model was "tested" by statistical means (correlation coefficient). (5) Again by a mathematical manipulation (differentiation), the model was minimized with respect to the factor to be used in the decision rule. That is, an expression for area was determined, which should give the minimum warehousing cost per dollar's worth of goods distributed in each particular area. (6) In the special case of the plant wares house area, an equation of marginal analysis was employed to establish the optimum radius to be served directly from the plant. Variations Within the Method Some variations within the same general framework of analysis might be considered. (a) The measure of effectiveness might have been cast per pound of goods distributed or some other similar criterion (b) The model might have included more variables such as warehouse design, etc. (c) The coefficients in the model might have been determined from an engineering or cost accounting type, of approach. From a chart of accounts and past records and budgets, a, b, c, etc., might have been determined. This type of approach is more common in business today. However, by definition (the statistician's), these values could have been no better and might have been poorer. (d) A tabular or graphical comparison of costs "predicted" by the model to actual warehouse costs might have been used rather than the correlation coefficient. (e) A tabular, graphical, or trial and error method might have been used to determine the A (area) which minimized the cost expression. However, this would vary with K--the sales density--and, therefore, it would have been necessary to repeat this procedure for selected values of K. (f) Rather than set up an equation for marginal analysis in the special case of the plant warehouse, it would again have been possible to tabulate, graph, or try many radius distances with their associated costs to determine the best one. Implications of the Method The length of time necessary and the accuracy of results for these different methods of analysis would probably vary with the person using them. It is suspected that the more conventional approach would have been substantially more time consuming and probably less precise. Possibly the best advice is: if the more elegant shoe fits, wear it. [ABSTRACT FROM AUTHOR]

This article focuses on the relationship between expense and gross margin to retail drug store characteristics. Price policies among individual stores are limited by resale price maintenance, competition, tradition, and by similarity of purchase prices. Store pricing policies are probably a minor factor in variation of gross margins. The basic data were taken from 1,948 profit-and-loss statements from 303 drug stores, mostly service independents in most areas of the United States. Factors affecting gross margin, expense, sales volume and the impact of city size are evaluated.

This article discusses the preferred time in reporting for the survey technique known as the consumer purchase panel. The author believes that while weekly reporting of purchasing is preferable, it is not always practical. Many panels report on a monthly basis to minimize cost, to get a better understanding of purchasing trends, and minimize missed reports. A further factor the author believes that affects the preferred reporting period involves the continuity of the report. He feels that the reduced cost associated with monthly reporting may allow a firm to keep more continuous reports. The author believes that while more research is needed in the area of the reporting period for a consumer purchase panel, early research tends to favor continuous reporting over discontinuous.

The article presents the proceedings of an American Marketing Association business meeting that was held June 18, 1952 in Cincinnati, Ohio. The secretary's report consisted of information regarding membership numbers and chapter information. Also included are plans for increased advertising sales, promotion of subscription and a reduction in operating costs for the "Journal of Marketing."

The article reports on methods of distribution cost allocation and their applications in the field of marketing. The author focuses on evaluating methods used to allocate costs and determining whether or not those methods aid in the decision making processes of marketing management. It is suggested that there are two ways of measuring distribution cost allocation, one way is inspectional and the other analytical. Cost allocation applications for marketing and distribution expenses including transportation, selling, and storage are discussed. It is further recommended that tests be conducted to establish the relationship between cost and result in any allocation procedure.

Determination of revenues adequate to provide proper service is the outstanding problem facing the nation's railroads today. Good service at reasonable cost can be supplied the shipping public only if the railroads have sufficient capital to maintain and improve their facilities. As long as the present system of private ownership and operation continues, the bulk of funds needed will probably come from private sources, thus sustained future earning power is necessary for the carriers to attract capital in competition with other forms of transportation and with other industries. Rising operational costs required increases in the rail freight level between 1946 and 1949, and rate advances on agricultural products averaged slightly less than the overall percentage increase on all commodities. In some cases, the advances were of a nature which created competitive disadvantages to the long-distance shipper, while in others an attempt was made to hold down competitive hardships. In spite of the difficulty in measuring demand elasticity for transportation service, it seems that a substantial volume of agricultural rail traffic has been diverted to common, contract, and private water and motor carriers to an extent which could prove serious to the railroads in the future unless railroad management gives more attention to the possibility of competitive rate scales. [ABSTRACT FROM AUTHOR]

The article presents an analysis of the wholesale trade in the United States. A discussion is presented about the scope of wholesaling, which distributes between two-thirds and three-quarters of the U.S. gross national product. The author reports on the large gaps in the knowledge of wholesaling and the relatively small amount of wholesaling research available. Methods of reducing operating expenses at distribution facilities by upgrading equipment and reducing or eliminating services are presented. The author also provides information about selling, profits, and economic planning for wholesalers.

The article presents information about the changing role of wholesale trade in the selling of consumer goods in the United States. A discussion is presented about the wholesaler's position as a middleman and the tendency of retailers and manufacturers to eliminate this position through direct selling. Details related to wholesale marketing methods and ways of improving the efficiency of wholesale facilities in order to reduce cost and provide better service to the consumer are presented. The author looks at how lower margins, better market research, and intense brand promotion will have an effect on future market trends.

The article reports on distribution cost analysis and cost accounting, which can be applied to justify price differentials under the Robinson-Patman Act. The author reports that marketing expenses are typically aligned with the number of customers or orders, and not the volume of sales. The goal of distribution cost analysis is to determine which sales are unprofitable. The procedures for determining individual product sales profitability are presented. Management interpretation of distribution cost analysis is discussed and the author suggests management will use this data to maximize profits in either the short or long term.