Module-I of PDPT

1.4 VALUE ENGINEERING

Definition: Value Engineering (VE) is a systematic, step by step approach, intended to
achieve the desired function of a product, process, system or service at an over all
minimum cost without in anyway affecting quality, reliability, performance, delivery,
safety or the environment.
We may classify economic value into four types.
USE Value
: The properties, features and qualities which accomplish
the use, the work or the service- causing the item to perform or serve an end.
ESTEEM Value
: The properties, features or attractiveness which cause us
to yearn to posses it- causing the item to sell.
EXCAHANGE Value : The properties or qualities which enable us to exchange
an item for something else we want.
COST Value
: The total of material, labour and other costs that have to
be incurred to produce an item.
The objective of a firm is to supply a product or service of economic value to the
customer in order to make a profit. A user purchases an item or service because it will
accomplish certain functions at a cost he or she is willing to pay. He or she interprets its
value to be good, if it satisfies the needed function for low cost; poor, if it costs too much,
if it does not perform the required function, or if it creates problems while performing.
That is a product or service is generally considered to have good value, if that product or
service has the appropriate PERFORMANCE and COST.

ITEM

VALUE =
=
=
=
=

Use
Performance
Quality
Timeliness
Benefits
Facility
Serviceability
Satisfaction

VALUE

ITEM
MONEY
USE + ESTEEM
PRICE
{USE FUNCTION + ESTEEM FUNCTION } COST
{BASIC FUNCTION + SECONDARY FUNCTION } COST
{NECESSARY FUNCTION + UNNECESSARY FUNCTION } COST

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Module-I of PDPT
Another way to express value mathematically is like
VALUE (V) =

PERFORMANCE
P
=
COST
C

Needed performance is obviously decided by the customer and it would be the job of
every concerned executive to determine this as accurately as possible. The more clearly it
is spelt out the better it is. More than half the battle is won if we can find out what the
customer wants. Computing the over all cost would include cost of design, development,
manufacture (including labour, power, material, machines, etc), installation, maintenance,
any consultation fees or royalty paid for that particular equipment, custom duty, taxes
paid, & so on. In short, it would include all cost incurred during the entire life of the
product or service required to fulfill the needed functions. This is also called the life cycle
cost of the product. From the mathematical formula it is obvious that values can be
increased by several means, like
i) Decreasing costs, while ensuring same level of performance:
P
C
ii) Enhancing performance at same cost:

V=

P
C
iii) Decreasing costs and increasing performance:
V=

P
C
iv) Increasing performance and increasing costs also in such a way that performance
increases faster than costs:
P
V=
C
V=

MEHODOLOGY
There are various approaches available for VE. Some of the important ones are
MISS: Modify, substitute or subdivide or exchange/eliminate to help change.
M
I
S
S

od
fy
ubstitute
ubdivide

PROFIT : Product Return Opportunities by Function Investigation Techniques

FIRST : Functional Ideas Regarding System Techniques
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Module-I of PDPT

FACTS : Functional Analysis of Components of Total System

FAST : Functional Analysis System Technique
DARSIRI
D
A
R
S
I
R
I

ata Collection
nalysis
ecord Ideas
peculate
nnovate
eview
mplement

Blast, Create and Refine.

Out of above mentioned approaches, FAST is most popular among Value engineering
Specialists.
General Phase or
Orientation Phase

Information Phase

Function Phase

Creation Phase

Evaluation Phase

Investigation and
Evaluation Phase
Implementation
Phase
Audit Phase
Fig: 1.4.1 Value Engineering Job Plan (VEJP)
Lecture Notes of Chinmay Das

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