Value Engineering (VE) is a management technique focused on finding an optimal balance between cost, reliability, and performance in products, projects, processes, or services. Value Engineering can be an invaluable asset when used for problem-solving; its goal is to reduce expenses while maintaining or even improving quality and performance.
By optimizing resource use, VE helps its clients make decisions that maximize expenditure while meeting required functions and quality levels. Their success lies in finding opportunities to reduce unnecessary expenses while assuring quality, reliability and performance meet or surpass customer expectations.
VE is the practice of conducting an in-depth examination of functions to meet user needs with quality products at the lowest life cycle cost possible. Various tools and techniques such as FAST diagrams, creative thinking methods, life cycle costing and weighted scoring techniques may be employed during this process.
Table of contents
What Is Value Engineering (VE)?
Value engineering (VE) is a systematic and organized method for increasing the value of projects by examining its functions to find cost-cutting measures without compromising performance. Value engineering aims to meet customer needs at minimal costs without compromising quality, reliability or performance standards.
Background
Lawrence D. Miles first introduced value analysis (VA) in 1961 in his book, “Techniques of Value Analysis and Engineering.” VA was defined by Lawrence as an organized approach designed to identify and eliminate unnecessary costs.
Key Concepts of Value Engineering
- Function Over Form: Focuses on the necessary functions of components and materials, not their physical attributes.
- Cost Reduction: Substitutes less expensive materials and methods while maintaining functionality.
- Value Ratio: Value is defined as the ratio of function to cost. Improving value involves enhancing function, reducing cost, or both.
- Systematic Process: Uses a structured analysis to identify and eliminate unnecessary costs.
The Value Equation
Value analysis evaluates products using three key parameters. These values include price, features and performance.
- Utility Value: Evaluate how useful or functional a product is.
- Esteem Value: Represents customers’ perceived worth in non-functional attributes like aesthetics and subjective preferences that should not be neglected or compromised upon.
- Market Value: The price that the market is willing to pay for your product or service.
The equation is:
Market Value = Utility Value + Esteem Value
Objectives of Value Engineering
- Determining Best Design Alternatives: Value engineering can be used to identify the most optimal design alternatives for projects, ensuring efficient use of resources while meeting project objectives successfully.
- Cost Reduction: Value Engineering can identify opportunities for cost reduction within existing projects, helping organizations meet budgetary goals while also improving financial efficiency.
- Improving Quality and Reliability: At VE, we aim to enhance product or service quality, availability and reliability – ultimately leading to increased customer satisfaction and loyalty.
- Enhancing Organizational Performance: By streamlining processes and procedures, VE assists organizations in enhancing overall organizational performance, productivity, and competitiveness.
- Risk Reduction: VE helps identify and reduce risks associated with projects, thus limiting potential disruptions while guaranteeing smoother project execution.
- Issue Identification and Solution Development: VE is an invaluable resource for quickly identifying problems within projects, suggesting solutions, fostering innovation, and encouraging continuous improvement.
Uses of Value Engineering
- Cost Prevention and Elimination: Reduces the product’s cost by preventing and eliminating unnecessary expenses.
- Employee Development: Enhances employees’ understanding of their roles and fosters creative thinking.
- Cost-Performance Balance: Ensures a balanced relationship between cost and performance.
- Prevents Over-Design: Avoids the unnecessary complexity and over-engineering of components.
- Encourages Creativity: Motivates employees to generate innovative ideas.
- Profit Increase and Cost Reduction: Boosts profits while lowering costs.
- Customer Satisfaction: Enhances customer satisfaction with the company’s products.
Difference Between Value Analysis and Value Engineering
Value Analysis (VA)
Primarily utilized on existing products or services to increase profitability while simultaneously cutting costs by identifying and eliminating unnecessary expenditure. VA is considered a process which uses various techniques to maximize current applications’ profits and profitability.
Value Engineering (VE)
Value engineering is an approach applied at the design stage for new products that identifies and addresses any value mismatches that occur during concept development, design, prototyping, or manufacturing. This practice seeks to identify functional breakthroughs while optimizing product value before manufacturing begins.
Value Analysis Vs Engineering
| Basis | Value Analysis (VA) | Value Engineering (VE) |
| Timing | Applied to existing products or services (“after the fact”). | Applied at the design stage or pre-manufacturing stages (“before the fact”). |
| Focus | Addresses post-product release problems and process improvement innovation. | Targets value mismatches during product, process, and project design to create functional breakthroughs. |
| Application | Used for analyzing existing products or services to improve profitability and reduce unnecessary costs. | Used for new product development, including concept development, design, and prototyping. |
| Nature | Considered a process because it is an organized approach to improving profitability and utilizes various techniques. | Refers to the application of VA principles and techniques to the pre-manufacturing stages. |
| Objective | Primarily aimed at reducing costs and improving existing operations and product performance. | Focuses on creating functional breakthroughs by identifying and addressing value mismatches during the design stage. |
| Techniques | Utilizes common techniques for all VA exercises and some specific techniques appropriate for the product under consideration. | Applies the same principles and techniques of VA but focuses on the design and concept stages. |
| Scope of Application | Can be used to analyze any existing products or services offered by manufacturing companies and service providers. | Can be applied with equal success to any cost-generating areas during the design and pre-manufacturing stages. |
| Alternative Names | Also known as Value Management, Value Planning, etc. | Also known as Value Management, Value Planning, etc. |
| Methodology | Involves function analysis, focusing on improving the profitability of existing product applications by eliminating unnecessary costs. | Involves function analysis, focusing on identifying and resolving value mismatches during the design stage to enhance product value before production. |
| Change Management | A powerful change management and problem-solving tool with a century-long track record of application. | A powerful change management and problem-solving tool with a century-long track record of application. |
Methodology
Value Engineering (VE), more commonly referred to as “job planning,” is a structured approach to solving problems or improving processes. It guides projects from their inception through completion, making sure all relevant aspects are considered.
While job plans divide studies into specific phases, adaptation may be required depending on available resources and desired outcomes.
Here’s an overview of all eight phases of job plan creation:
Orientation Phase: In this stage, problem statement refinement, data gathering and value study preparation take place simultaneously in order to create an efficient study.
Information Phase: Sets out to outline issues, improvement targets and evaluation factors while building team cohesion.
Function Analysis Phase: Pinpoints areas that would benefit most from further study by analyzing functions.
Creative Phase: Explores various ideas to perform each identified function alternatively and generates numerous possible solutions.
Evaluation Phase: Further refine and select the most promising ideas before developing specific recommendations to enhance value creation.
Development Phase: Determines the most promising alternatives for presentation to decision-makers.
Presentation Phase: Present recommendations for improvement to decision-makers and obtain their commitment for following an agreed upon course of action.
Implementation Phase: Monitors the approval process and facilitates implementation of action plans following final approval.
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Case Study
Large Garage for a Trucking Firm
Problem: Reduce the construction cost of a large garage.
Function: Protect trucks.
Explanation and Solution: The company’s initial plan was to build a large garage complex for its truck fleet. However, VE analysis revealed that trucks were on the road for about 20 out of 24 hours, indicating that a large garage was not necessary.
The real requirement was identified as a need for a large parking area and a smaller maintenance building. By addressing the actual usage patterns and needs, the construction cost was significantly reduced without compromising the function of protecting the trucks.
Entrances to Classified Areas
Problem: Reduce the number of guards by combining entrances.
Function: Monitor doors.
Explanation and Solution: It was initially challenging to reduce the number of entrances to classified areas due to security requirements.
VE analysis found that each guard could effectively monitor and control two entrance doors by using closed-circuit television (CCTV) and electric door locks. This solution maintained security standards while reducing the number of guards needed, thus cutting operational costs.
Manufacturing Cost of Gasoline Tanks for Aircraft
Problem: Reduce the manufacturing cost of gasoline tanks.
Function: Hold gasoline.
Explanation and Solution: The initial design for the gasoline tanks was inherently costly. VE analysis discovered that standard 55-gallon steel drums, which were readily available and inexpensive, could be modified and coated to serve as gasoline tanks.
This approach drastically reduced manufacturing costs while still meeting the functional requirements of holding gasoline for the aircraft.
Manufacturing Cost of Oil Dipsticks
Problem: Reduce the manufacturing cost of oil dipsticks.
Function: Measure oil.
Explanation and Solution: The in-house manufacturing of oil dipsticks was found to be costly. VE analysis suggested that purchasing standard dipsticks in large quantities from external vendors would be more economical. This change reduced costs without affecting the quality or functionality of the dipsticks.
Advantages of Value Engineering
Value Engineering offers several advantages beyond cost reduction:
- Product Suitability: Through thorough analysis, Value Engineering ensures that products meet customer requirements effectively. This leads to the manufacturing of products that are more suitable and aligned with customer needs.
- Cost Optimization: Special emphasis is placed on simplifying processes, standardizing components, and improving production methods, all of which contribute to lowering manufacturing costs. This focus on cost reduction helps in producing products at the lowest possible cost without compromising quality.
- Quality Assurance: Value Engineering prioritizes maintaining quality standards. Cost-cutting measures are not pursued at the expense of quality, ensuring that products meet desired quality levels and customer expectations are consistently met.
- Management Efficiency: The principle underlying Value Engineering is that management effectiveness can be measured by cost savings. Therefore, any cost-saving initiatives are seen as indicators of increased efficiency within the organization.
- Continuous Improvement: Value Engineering promotes a culture of continuous improvement. By constantly seeking ways to enhance processes, products, and services, organizations can achieve greater overall efficiency and competitiveness.
- Employee Involvement: Value Engineering encourages employee involvement and engagement in the improvement process. Methods like the suggestion box allow employees to contribute ideas and suggestions, fostering a sense of ownership and empowerment within the workforce.
Final Words
Value engineering (VE) is an effective strategy for optimizing the cost-effectiveness and performance of products, services, and systems.
By systematically examining functions and exploring cost-saving alternatives, value engineering helps organizations deliver high-quality, reliable products at minimal costs while still enhancing product quality or performance.
VE requires careful thought when applied in practice in order to balance cost reduction with maintaining or even improving quality and performance levels.
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