Value engineering

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Value Engineering is a systematic method to improve the "Value" of goods and services by using an examination of FUNCTION. Value, as defined, is the ratio of Function to Cost. Value can therefore be increased by either improving the Function or reducing the cost. It is a primary tenet of Value Engineering that quality not be reduced as a consequence of pursuing Value improvements.

In the United States, Value Engineering is specifically called out in Public Law 104-106, which states “Each executive agency shall establish and maintain cost-effective Value Engineering procedures and processes.”

Value Engineering is sometimes taught within the Project Management or industrial engineering body of knowledge as a technique in which the value of a system’s outputs is optimized by crafting a mix of performance (Function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers.

Value Engineering uses intuitive logic (a unique "how" - "why" questioning technique) and the analysis of Function to identify relationships that increase Value. It is considered a quantitative method similar to the Scientific Method, which focuses on Hypothesis - Conclusion to test relationships, and Operations Research, which uses model building to identify predictive relationships.

Value Engineering is also referred to as "Value Methodology".

Contents

0.1 The Origins of Value Engineering
0.2 The Job Plan

1 How does it work?

1.1 Cost Optimization
1.2 Examples of Value Engineering
1.3 See also

The Origins of Value Engineering

Value engineering began at General Electric Co. during World War II. Because of the war, there were shortages of skilled labour, raw materials, and component parts. Lawrence Miles and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved the product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique “value analysis”.

As others adopted the technique, the name gradually changed to Value Engineering. Va / Ve has been rehashed over the years into various other programs like lean, tqm and business process re-engineering.

The Job Plan

Value Engineering is often done by systematically following a multi-stage Job Plan. Larry Miles' original system was a six-step procedure which he called the Value Analysis Job Plan. Others have varied the Job Plan to fit their constraints. Depending on the application, there may be four, five, six, or more stages. One modern version has the following eight steps:

PREPARATION
INFORMATION
ANALYSIS
CREATION
EVALUATION
DEVELOPMENT
PRESENTATION
FOLLOW-UP

Four basic steps in the Job Plan are:

Information gathering - This asks what the requirements are for the object. Function analysis, an important technique in value engineering, is usually done in this initial stage. It tries to determine what functions or performance characteristics are important. It asks questions like; What does the object do? What must it do? What should it do? What could it do? What must it not do?
Alternative generation (Creation) - In this stage value engineers ask; What are the various alternative ways of meeting requirements? What else will perform the desired function?
Evaluation - In this stage all the alternatives are assessed by evaluating how well they meet the required functions and how great will the cost savings be.
Presentation - In the final stage, the best alternative will be chosen and presented to the client for final decision.

How does it work?

VE follows a structured thought process to evaluate options. Every VE session goes through a number of steps: 1. Gather information What is being done now?

2. Measure Performance How will the alternatives be measured?

3. Analyse Functions What must be done? What does it Cost?

4. Generate Ideas (Brainstorming) What else will do the job?

5. Evaluate and Rank Ideas Which Ideas are the best?

6. Develop and Expand Ideas What are the impacts? What is the cost? What is the performance?

7. Present Ideas Sell Alternatives

Cost Optimization

Value engineering reduces costs by eliminating wasteful practices. This can be done in several areas:

Material substitutions - Unnecessarily expensive inputs can sometimes be replaced by less expensive ones that function just as well. If a product has a life span of ten years, then using a material that lasts thirty years is wasteful. In a perfectly value engineered product, every component of that product will function perfectly until the product is no longer useful, at which time all components will deteriorate.
Process efficiency and producibility - More efficient processes can be used and the product can be redesigned so that it is easier to produce. Reducing unnecessary parts, unnecessary precision, and unnecessary production operations can lower costs and increase manufacturability, reliability, and profits. Process engineering can be used to increase process efficiency.
Modularity - Subassemblies that are designed and developed once and reused in many slightly different products can reduce a project's engineering and design costs. For example, a typical tape-player has a precision injection-molded tape-deck compartment. This component can be produced, assembled and tested by an independent manufacturer and sold to numerous companies as a subassembly. The tooling and design expense for the tape deck is shared over many products that can look quite different.
Market driven product improvements - A product with more features than customers want is inefficient. Customers will be paying for features that they don’t want to pay for. Value engineering can determine how to produce a product that exactly matches the wants of a major segment of the market. When a customer needs more features, these can be sold as options.
Energy efficiency - Value can be created by making a product or process more energy efficient for the user. This is particularly true in heating and air conditioning systems, transportation vehicles, industrial equipment, and other systems that use much energy.

When value engineers talk about reducing costs, they are usually referring to either total life cycle costs or the direct costs of production. Total life cycle costs are the total expenditures over the whole life span of the product. This measure of cost is most applicable to expensive capital equipment, and includes manufacturing costs, installation costs, maintenance costs, and decommissioning costs. Individual expenditures must be discounted to reflect the time value of money. When referring to consumer products, the direct cost of production is more typically used. This measure is limited to the costs directly associated with manufacturing the product.

Examples of Value Engineering