What is Value Engineering – Steps in Value Engineering

What is Value Engineering?
Value Engineering is “the systematic application of recognized techniques by a multi-disciplined team which identifies the function of a product or service; establishes a worth for that function; generates alternatives through the use of creative thinking; and provides the needed functions reliably at the lowest overall cost.” VE is an effective technique for reducing costs, increasing productivity, and improving quality. It can be applied to hardware and software; development, production, and manufacturing; specifications, standards and contract requirements. It can also be applied to other acquisition program documentation; facilities design and construction. It may be successfully introduced at any point in the life cycle of products, systems, or procedures. The VE technique is directed towards analyzing the functions of an item or process to determine “best value” or the best relationship between worth and cost. In other words, “best value” is represented by an item or process that consistently performs the required basic function and has the lowest total cost. It helps people creatively generate alternatives to secure essential functions more cost effectively. VE uses a job plan, is function based, and requires that a product be generated as a result of the study. The term Value Engineering is also synonymous with Value Analysis, Value Management, and Value Planning. To summarize, Value Engineering:

• helps customer retain value
• addresses hidden costs and obvious ones
• is function-oriented and focuses on performance
• is procedural

Process of Value Engineering

1. Functional Analysis
2. Standardization of Components and Parts
3. Alternatives of Functions
4. Value-cost Analysis
5. Re-engineering Areas of Value Engineering
6. Improvements in product designs
7. Changes in materials’ specifications
8. Modification in process methods
9. Decision to make or buy a componentValue = Function/Cost

   Function is what the product or service is supposed to do.

The steps for Value Analysis process

Value Analysis is based on the application of a systematic work plan that may be divided in six steps.

Steps involved in the application of Value Analysis

1. Orientation/preparation

   Identify what is to be analysed. This will typically be one of:

   • A manufactured item. This can be anything from a screw to an engine, although a more complex item is likely to result in a more complex and time-consuming analysis.
   • A process or service. Again, all levels can be analysed, from a hand assembly process to a complete customer service organisation.
2. Information
   • This may include external customers, such as ‘auto suppliers’ and internal customers, such as ‘finance manager’.
   • Note that external customers are usually more important than internal customers, and that seniority does not necessarily equate with priority. A customer’s preference for a product feature should be more important than the opinion of a senior designer.
3. Analysis
   • In this phase the functions of the product are analyzed by Functional Analysis, which is aimed at identifying functions given by a product or part of it.
   • Functions have an importance (weight) and a cost. These costs are quantified and this leads to a list of functions ordered by their importance and value.
   • This means that there is an analysis of how each function satisfies customer needs, and then, an analysis of what the cost of those functions is.
   • This phase of Value Analysis may be considered as the key one of the whole methodology as it represents the translation of needs to functions.
4. Innovation/creativity
   • For this phase it is necessary to use creative techniques that generate alternatives. Starting from the analysis of functions and costs, there is a search for means that allow elimination, change or improvement of components and functions.
   • It is important to look for different ways of satisfying the basic functions, even if it means rejecting the current approach and starting again with a clean drawing board. This requires the product or process to be ‘mentally destroyed’ and then rebuild a new one.
5. Evaluation
   • It represents a confrontation of ideas, a collection of information about the feasibility and cost of those ideas, and measures the value of the best alternatives.
   • This analysis or evaluation uses the same techniques of value measurement that have been used in previous steps. At this point an examination is done about the grade of functional accomplishment and the economic analysis of those alternatives that offer the higher value. Some of the techniques are well-known such as Cash-flow analysis and break-even point.
   • The team involved in Value Analysis needs an objective analysis of the ideas generated through the innovation phase. The evaluation phase is carried out in two main steps:
     • A qualitative analysis of value regarding objectives in design, cost, implementation facilities, etc.
     • A quantitative analysis using numerical techniques of value measurement that leads to a few alternatives of high value that will be analysed in depth.
   • This process usually involves determining the cost and selects those ideas that can be practically implemented. This may include work to develop and refine promising ideas into practical and optimum solutions.
6. Implementation and monitoring
   • In this phase it is necessary to prepare a report that summarizes the work that has been done, including conclusions and specific proposals.
   • It will be also necessary to describe actions plans for implementation, in which project management techniques would be useful.
   • Finally a plan should be included for monitoring of the actions. This should be based in the accomplishment of objectives.
   • The application of Value Analysis only needs to make use of Basic Techniques such as matrixes, pare to chart, pert and Gantt diagrams, etc., in most of the Value Analysis steps.

Benefits of Using Value Methodology
The value methodology is a powerful problem-solving tool that can reduce costs while maintaining or improving performance and quality requirements. It is a function-oriented, systematic team approach to providing value in a product or service.

The value methodology helps organizations compete more effectively in local, national and international markets by:

1. Decreasing costs
2. Increasing profits
3. Improving quality
4. Expanding market share
5. Saving time
6. Solving problems
7. Using resources more effectively

Value methodology easily produces savings of 30 percent of the estimated cost for manufacturing a product, constructing a project or providing a service. The return on investment that public and private organizations derive from implementing VM programs averages 10 to1. Value methodology can increase customer satisfaction and add value to an organization’s investment in any business or economic setting. Value practitioners can apply the value methodology to products and services in manufacturing, construction, transportation, government, health care, environmental and engineering sectors.

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