You run a manufacturing facility that makes monster trucks. Every time you receive a shipment of parts, the guy driving the forklift drives in a circle three times before he takes the items off the shipping deck and puts them into the warehouse. Are the three spins adding to final product? Or does the forklift guy just...have issues?
Time for a little process value analysis. It's a formalized process of looking at what everyone at the company is doing, and then deciding whether it adds to the final product.
Managers utilize PVA to judge the processes involved in producing a company's goods or services. The goal is to identify activities that don't add value to the process (and eliminate them), or find procedures that could be made more efficient.
Basically, the managers look at each of the firm's business operations and assign all the company's costs to the various tasks. That way, they can see where productivity improvements can be made, where they can eliminate steps (like spinning a few forklift donuts before moving shipments into the warehouse), and where more resources should be invested.
Related or Semi-related Video
Econ: What is Positive v. Normative Anal...6 Views
And finance Allah shmoop What is positive versus normative analysis
All right people when you're talking positive economics you're talking
objective data and facts You're quantifying things with numbers analyzing
potential causal relationships with rigorous statistical analysis and pointing out
the way things are in everyone's shared reality When you're
talking normative economics you're talking opinions and ideology Maybe you
think it's unfair Some people are working two jobs on
minimum wage barely getting by while a handful of people
are rolling in dough Or maybe you think it's unjust
to redistribute money that people earned no matter what their
income is Well maybe you think Mohr government regulation and
social programs will make things better Or maybe you think
small government or no government is the key to making
things better depending on the well whatever better looks like
for you assuming we're all in the same universe and
talking about reality while positive economic statements are things everyone
should be willing to agree upon for instance inflation in
the United States in nineteen forty six was eighteen point
one percent That's a positive economic statement derived from positive
analysis You can think positively correct to help you remember
right If you also thought an inflation rate of eighteen
point one percent Wow that blows That's a normative economic
analysis You just did there because well you're thinking well
it's normal toe have opinions because it is with are
you know monkey brains So why is knowing the difference
between positive in normative economic statements so important you can
think of positive economic analysis as the tool that people
use you know the fax To try to implement what
they want to see based on their normative economic opinion
liberal congressman will seek out liberal positive economics that support
their normative ideology Just as conservative congressman seek out positive
economics that support their conservative ideology to make sure you
know the facts that are positively true it's good to
know where they're coming from right For instance would you
trust a study that was funded by the Coca Cola
Company that says excess sugar is actually good for your
health Well we wouldn't blame you for wanting to believe
all of this is true whoever you're rooting for But
hopefully all the other positive analysis that's been done out
there on the health problems caused by having a you
know Coca Cola Sugar Party all day every day That
would raise your skepticism even if you didn't know who
funded the study So don't worry You can totally have
a Norman of economic ideology Just make sure your economic
evidence is in the positive economic realm And just know
that when you're talking to someone on the other side
unquote someone from a different political economic tribe positive analysis
might get you somewhere while Norman of statements probably won't
And again this is just how our monkey brains role 00:02:52.6 --> [endTime] keeping it real Who
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