VALUE ENGINEERING

Francis Domini Cuison

Cherry Mateo
John Lesther. Trinidad
Alfredo Ting
Ma. Eleonor Christine
Teodoro
Melvin Guevarra
Ma. Monica Del
Carmen
Loivin Reyta
Michael Jay Antonio
WHAT IS VALUE ENGINEERING?

Value engineering is used to solve problems and identify and eliminate unwanted costs, while
improving function and quality. The aim is to increase the value of products, satisfying the product’s
performance requirements at the lowest possible cost.

In construction, this involves considering the availability of materials, construction methods,

transportation issues, site limitations or restrictions, planning and organization, costs, profits, and so on.
Benefits that can be delivered include a reduction in life cycle costs, improvement in quality, reduction of
environmental impacts, and so on.

Value engineering should start at project inception where the benefits can be greatest, however
the contractor may also have a significant contribution to make as long as the changes required to the
contract do not affect the timescales, completion dates or incur additional costs that outweigh the savings
on offer

Value engineering involves:

 Identifying the main elements of a product, service or project.

 Analyzing the functions of those elements.
 Developing alternative solutions for delivering those functions.
 Assessing the alternative solutions.
 Allocating costs to the alternative solutions.
 Developing in more detail the alternatives with the highest likelihood of success.

The project manager must take a pro-active role in both giving direction and leadership in the value
engineering process, but must also ensure that time and effort is not wasted and does not have a
detrimental effect on the progress of the project

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 and costs. In most cases this practice identifies and removes unnecessary expenditures,
thereby increasing the value for the manufacturer and/or their customers.

The reasoning behind value engineering is as follows: if marketers expect a product to become
practically or stylistically obsolete within a specific length of time, they can design it to only last for that
specific lifetime. The products could be built with higher-grade components, but with value engineering
they are not because this would impose an unnecessary cost on the manufacturer, and to a limited extent
also an increased cost on the purchaser. Value engineering will reduce these costs. A company will
typically use the least expensive components that satisfy the product's lifetime projections

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VALUE ANALYSIS

Value Analysis can be defined as, a process of systematic review that is applied to existing product
designs in order to compare the function of the product required by a customer to meet their
requirements at the lowest cost consistent with the specified performance and reliability needed.

Value is the ratio between a function for customer satisfaction and the cost of that function.
Function is the effect produced by a product or by one of its elements, in order to satisfy customer needs.

Value Analysis is an effective tool for cost reduction and the results accomplished are far greater.

 It improves the effectiveness of work.

 It is an organized approach to a problem.
 It is value applied at the design stage itself.
 It reduces unnecessary costs, obvious and hidden which can be eliminated without adversely affecting
quality, efficiency, safety and other customer features.

APPLICATION OF VALUE ANALYSIS

1. Capital goods- plant, equipment, machinery, tools, etc.

2. Raw and semi-processed material, including fuel
3. Materials handling and transportation costs
4. Purchased parts, components, sub-assemblies, etc.
5. Maintenance, repairs, and operational items
6. Finishing items such as paints, oils, varnishes, etc.
7. Packing materials and packaging
8. Printing and Stationery items
9. Miscellaneous items of regular consumptions
10. Power, water supply, air, steam and other utilities (services)

OBJECTIVES OF VALUE ANALYSIS

1) To provide better value to a product/service.

2) To improve the company’s competitive position.
3) To ensure that every element of cost (Labour, Materials, Suppliers and Services) contribute equally to
the function of the product.
4) To eliminate unnecessary cost.

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STEPS CARRYING VALUE ANALYSIS

 Establish the objectives (eg., cost reduction)

 Consider a team for marketing, sales, production, purchasing, etc.
 Analyze the production process of the supplier company.
 Decompose various characteristics of purchased product.
 Hold a creative brainstorming session to explore all alternative possibilities.
 Sort the ideas to establish the cost of each.
 Select the best alternative.
 Develop a plan for implementing the change.

SIX “WHATs OF VALUE ANALYSIS”

1) What is it?
2) What does it do?
3) What does it cost?
4) What is it worth?
5) What else will do the job?
6) What does that cost?

BENEFITS TO BE ACHIEVED BY VALUE ANALYSIS

 Better purchasing techniques

 Better suppliers and manufacturing methods
 Lower operating costs
 Standardization and packaging
 Better material handling
 Better inventory control
 Lower maintenance and overhead cost

DIFFERENCE BETWEEN VALUE ENGINEERING AND VALUE ANALYSIS

What is Value Engineering?

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 Value Engineering (VE) is concerned with new products. It is applied during product development.
The focus is on reducing costs, improving function or both, by way of teamwork-based product evaluation
and analysis. This takes place before any capital is invested in tooling, plant or equipment.

This is very significant, because according to reports, up to 80% of a product’s costs (throughout
the rest of its life-cycle), are locked in at the design development stage. This is understandable when you
consider the design of any product determines many factors, such as tooling, plant and equipment, labor
and skills, training costs, materials, shipping, installation, maintenance, as well as decommissioning and
recycle costs.

Therefore, value engineering should be considered a crucial activity late on in the product
development process and is certainly a wise commercial investment, with regard to the time it takes. It is
strongly recommended you build value engineering into your new product development process, to make
it more robust and for sound commercial reasons.

What is Value Analysis?

Value Analysis (VA) is concerned with existing products. It involves a current product being
analyzed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis
exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These
include costs, function, alternative components and design aspects such as ease of manufacture and
assembly.

A significant part of VA is a technique called Functional Analysis, where the product is broken
down and reviewed as a number of assemblies. Here, the function is identified and defined for each
product assembly. Costs are also assigned to each one. This is assisted by designing and viewing products
as assemblies (or modules). As with VE, VA is a group activity that involves brainstorming improvements
and alternatives to improve the value of the product, particular to the customer. Note: Many refer to
Value Management as an umbrella term, which encompasses value engineering and value analysis.

VA enables improvements to be made to the product in a variety of areas, such as design and
engineering, material selection, testing, manufacturing, assembly, shipping, installation, use by the
customer, service, maintenance and recycling.

Difference between Value Engineering and Value Analysis

Value Engineering

 Improvement
 It is always done by a specific product design (engineers team)
 Early stage process
 Application on the product at its design stage
 Preventive Process
 Requires special technical knowledge
 Provide better engineering results

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Value Analysis

 Remedial process
 Done after the birth of the product
 Application to the product that is into manufacturing
 Worked out mostly with the help of knowledge and experience
 Cost reduction
 All factors come together including workers, subcontractors, engineer make a team with total
experience and knowledge
 Done to have a better optimized commercial output

Value analysis is "A Systematic and objective evaluation of the value of a goods or service,
focusing on analysis of function relative to the cost of manufacturing or providing the items or service".
Value analysis provides insight into the inherent worth of final goods or service, possibly altering
specifications and quality requirements that could reduce costs without impairing functional suitability.

Value engineering is "Value analysis conducted at the design engineering stage of the product
development process." In summary value analysis refers to the analysis of an existing product, service or
administrative process while Value engineering refers to the same analysis applied to the product, services
or administrative processes that are under design and have not been finalized.

HISTORY OF VALUE ENGINEERING

Creator of Value Engineering

Lawrence Delos Miles (April 21, 1904 – August 1, 1985) was an American engineer, and the creator of
Value engineering.

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Worked as a design engineer at GE under W.C. White, Manager of the Vacuum Tube Engineering Dept. In
six years, he earned twelve patents for his new designs of vacuum tubes and related circuits. In December
1947, the basic Value Analysis Functional Approach was born. In 1961 Miles wrote the definitive book,
Techniques of Value Analysis and Engineering, McGraw Hill Co. publishers. It is now in its 3rd edition and
is printed in twelve languages. In 2017 Techniques of Value Analysis and Engineering has been released in
a Kindle edition and is available on Amazon.com

History

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, Jerry Leftow, 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".

Value Engineering Application and Examples

Value Engineering (VE) or Value Analysis is a methodology by which we try to find substitutes for
a product or an operation.
The concept of value engineering originated during the Second World War. It was developed by
the General Electric Corporations (GEC). Value Engineering has gained popularity due to its potential for
gaining high Returns on Investment (ROI). This methodology is widely used in business re-engineering,
government projects, automakers, transportation and distribution, industrial equipment, construction,
assembling and machining processes, health care and environmental engineering, and many others. Value
engineering process calls for a deep study of a product and the purpose for which it is used, such as, the
raw materials used; the processes of transformation; the equipment needed, and many others. It also
questions whether what is being used is the most appropriate and economical. This applies to all aspects
of the product.
Simplification of processes reduces the cost of manufacturing. Every piece of material and the
process should add value to the product so as to render the best performance. Thus, there is an
opportunity at every stage of the manufacturing and delivery process to find alternatives which will
increase the functionality or reduce cost in terms of material, process, and time.
The different aspects of value engineering can be encapsulated into a sequence of steps known
as a ‘Job Plan’. Value Engineering in organizations helps to identify:

 The problem or situation that needs to be changed/improved

 All that is good about the existing situation
 The improvements required in the situation
 The functions to be performed
 The ways of performing each function
 The best ways among the selected functions
 The steps to be followed to implement the function
 The person who executes the function

It should be remembered that we are not seeking a cost reduction sacrificing quality. It has been found
that there will be an improvement in quality when systematic value analysis principles are employed.

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Examples of Value Engineering

 Russian liquid-fuel rocket motors are intentionally designed to permit ugly (though leak-free)
welding. This reduces costs by eliminating grinding and finishing operations that do not help the
motor function better.
 Some Japanese disk brakes have parts tolerance to three millimeters, an easy-to-meet precision.
When combined with crude statistical process controls, this assures that less than one in a million
parts will fail to fit.
 Many vehicle manufacturers have active programs to reduce the numbers and types of fasteners
in their product, to reduce inventory, tooling and assembly costs.
 Often a premium forming process (like “near net shape” forming) can eliminate hundreds of low-
precision machining or drilling steps. Precision transfer stamping can quickly produce hundreds
of high quality parts from generic rolls of steel and aluminum. Die casting is used to produce metal
parts from aluminum or sturdy tin alloys (they’re often about as strong as mild steels). Plastic
injection molding is a powerful technique, especially if the part’s special properties are
supplemented with inserts of brass or steel.
 When a product incorporates a computer, it replaces many parts with software that fits into a
single light-weight, low-power memory part or microcontroller. As computers grow faster, digital
signal processing software is beginning to replace many analog electronic circuits for audio and
sometimes radio frequency processing.
 On some printed circuit boards (itself a producibility technique), the conductors are intentionally
sized to act as delay lines, resistors and inductors to reduce the parts count. An important recent
innovation was to eliminate the leads of “surface mounted” components. At one stroke, this
eliminated the need to drill most holes in a printed cricuit board, as well as clip off the leads after
soldering.
 In Japan (the land where manufacturing engineers are most valued), it is a standard process to
design printed circuit boards of inexpensive phenolic resin and paper, and reduce the number of
copper layers to one or two to lower costs without harming specifications.

IMPORTANCE

“Value engineering can be defined as an organized effort directed at analyzing designed building features,
systems, equipment, and material selections for the purpose of achieving essential functions at the lowest
life cycle cost consistent with required performance, quality, reliability, and safety.”

Value engineering can be taught within industrial engineering or project management. It’s a form of
engineering that offers a mixture of optimal costs and performances within any system output. It can
identify and remove any type of unwanted expenses as well as increase value for customers and
manufacturers, alike.

Value engineering applies strategic improvement of quality, planning, management, manufacturing and
construction. The benefits of implementing value engineering include the following:

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  Works well because of its specific methodology
 Offers multidisciplinary
 Is function based

Using value engineering in your particular industry can offer the following, as well:

 Use resources more effectively

 Increase employee involvement
 Enhance employee contributions
 Reduce operating and product costs

In addition to other fields and industries, value engineering is important to the government. The website
gsa.gov states that value engineering is beneficial to the government sector because, “In the design phase
of federal building development, properly applied value engineering considers alternative design
solutions to optimize the expected cost/worth ratio of projects at completion. Value engineering elicits
ideas on ways of maintaining or enhancing results while reducing life cycle costs. In the construction
phase, GSA PBS contractors are encouraged through shared savings to draw on their special ‘know-how’
to propose changes that cut costs while maintaining or enhancing quality, value, and functional
performance.”

 Better work scope

 Decrease costs
 Decrease waste
 Offer direction to team members in order to complete projects in a timely and organized manner
 Expand consensus
 Help keep costs within set budgeting

The goal of value engineering is to ensure that the client receives full value for every dollar spent on the
project. Waiting until there’s a problem to focus on this concept is the wrong approach. That’s only cost
cutting–looking at what can be changed or deleted from work that is yet to be done. Value engineering is
properly used to reduce costs while maintaining quality and function. That’s a lofty goal and not easily
achieved.

What are the benefits of Value Engineering?

Value Engineering helps your organization in:

 Lowering O & M costs

 Improving quality management
 Improving resource efficiency
 Simplifying procedures
 Minimizing paperwork
 Lowering staff costs
 Increasing procedural efficiency

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  Optimizing construction expenditures
 Developing value attitudes in staff
 Competing more successfully in marketplace

Value Engineering helps you to learn how to:

 Improve your career skills

 Separate "Symptoms" from "problems"
 Solve "root cause" problems and capture opportunities
 Become more competitive by improving "benchmarking" process
 Take command of a powerful problem solving methodology to use in any situation

CONCEPT OF VALUE, COST AND PRICE

Value is an imprecise word, its meaning depends both on the user and on the context. In
an engineering context the distinction can be important, as any change brought about by
Value Analysis or by means of any other techniques are waste of time if the total product
is unacceptable to the market. The minimum money which has to be expended in
purchasing or manufacturing a product to create the appropriate use of esteem factors.

The reasoning behind value engineering is as follows: if marketers expect a product to

become practically or stylistically obsolete within a specific length of time, they can design
it to only last for that specific lifetime. The products could be built with higher-grade
components, but with value engineering they are not because this would impose an
unnecessary cost on the manufacturer, and to a limited extent also an increased cost on
the purchaser. Value engineering will reduce these costs. A company will typically use
the least expensive components that satisfy the product's lifetime projections.

Due to the very short life spans, however, which is often a result of this "value engineering
technique", planned obsolescence has become associated with product deterioration and
inferior quality

𝐹𝑈𝑁𝐶𝑇𝐼𝑂𝑁 𝑂𝑅 𝑃𝑅𝑂𝐷𝑈𝐶𝑇𝐼𝑂𝑁
𝑉𝐴𝐿𝑈𝐸 =
𝐶𝑂𝑆𝑇

Value engineering (VE) is a systematic method to improve the "value" of goods or

products and services by using an examination of function. Value, as defined, is the ratio

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of function to cost. Value can therefore be manipulated by either improving the function
or reducing the cost. It is a primary tenet of value engineering that basic functions be
preserved and not be reduced as a consequence of pursuing value improvements. On
the other hand, Price is the monetary value of a good, service or resource established
during a transaction.

VALUE ENGINEERING MULTISTAGE 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:

1. Preparation
2. Information
3. Analysis
4. Creation
5. Evaluation
6. Development
7. Presentation
8. Follow-up

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HOW VALUE ENGINEERING IS DONE?

Value engineering is used to solve problems and identify and eliminate unwanted costs, while
improving function and quality. The aim is to increase the value of products, satisfying the product’s
performance requirements at the lowest possible cost.

In construction, this involves considering the availability of materials, methods,

transportation issues, site limitations or restrictions, planning and organization, costs, profits, and so on.
Benefits that can be delivered include a reduction in life cycle costs, improvement in quality, reduction of
environmental impacts, and so on.

Value engineering should start at project inception where the benefits can be greatest, however
the contractor may also have a significant contribution to make as long as the changes required to
the contract do not affect the timescales, completion dates or incur additional costs that outweigh the
savings on offer.

Value engineering involves:

 Identifying the main elements of a product, service or project.

 Analyzing the functions of those elements.
 Developing alternative solutions for delivering those functions.
 Assessing the alternative solutions.
 Allocating costs to the alternative solutions.
 Developing in more detail the alternatives with the highest likelihood of success.

Value engineering is an exercise that involves most of the project team as the project develops. It is about
taking a wider view and looking at the selection of materials, plant,equipment and processes to see if a
more cost-effective solution exists that will achieve the same project objectives.

The 'results accelerators' originally proposed by Miles still act as useful guides to value engineering. Key
to this is remembering the relationship between cost and value – value is function divided by cost.
Concentration on the function of the project or product will avoid mere cost cutting.

Result accelerators:

 Avoid generalities.
 Get all available costs.
 Use information from the best source.
 Blast, create and refine.
 Be creative.
 Identify and overcome road blocks.
 Use industry experts.

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  Price key tolerances.
 Use standard products.
 Use (and pay for) expert advice.
 Use specialists processes.

The project manager must take a pro-active role in both giving direction and leadership in the
value process, but must also ensure that time and effort is not wasted and does not have a detrimental
effect on the progress of the project.

Value engineering process calls for a deep study of a product and the purpose for which it is used,
such as, the raw materials used; the processes of transformation; the equipment needed, and many
others. It also questions whether what is being used is the most appropriate and economical. This applies
to all aspects of the product.
Simplification of processes reduces the cost of manufacturing. Every piece of material and the
process should add value to the product so as to render the best performance. Thus, there is an
opportunity at every stage of the manufacturing and delivery process to find alternatives which will
increase the functionality or reduce cost in terms of material, process, and time.

The different aspects of value engineering can be encapsulated into a sequence of steps known as a ‘Job
Plan’. Value Engineering in organizations helps to identify:

 The problem or situation that needs to be changed/improved

 All that is good about the existing situation
 The improvements required in the situation
 The functions to be performed
 The ways of performing each function
 The best ways among the selected functions
 The steps to be followed to implement the function
 The person who executes the function
It should be remembered that we are not seeking a cost reduction sacrificing quality. It has been found
that there will be an improvement in quality when systematic value analysis principles are employed.

BENEFITS OF VALUE ENGINEERING IN THE FIELD OF PHILIPPINE CONSTRUCTION

1. It can reduce the cost of the project.

2. VE can saves time. It can also fast track the progress of a certain project.
3. It can improve the quality of the project.
4. It can isolate the design which has a deficiency.
5. It can satisfy customer.

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 6. VE can build a good teamwork.
7. It can capture more opportunities.
8. By the use of VE the project will be more competent in the market.
9. It can improve resource efficiency.
10. It can simplify the procedure of the certain project.
11. It can improve the quality management.
12. It can minimize the paper works.
13. It can value the attitude in staff.
14. It can lower the staff cost.

CONCLUSION

Value analysis is a technique with immense possibilities, and systematically employed, it can achieve great
economies and increased efficiency. Although good results have been obtained in several individual cases
in some industries, only a large scale and systematic application of this technique in all industries, and in
production, can result in substantial economies on a national scale. To conclude, we can say that benefits
of value analysis include, reduced production cost, materials and distribution cost, improved profit
margin, and increased customer satisfaction.

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