By: D. B. Kulkarni Day - 1

INRODUCTION TO VALUE
ENGINEERING – VALUE ANALYSIS
By : D. B. Kulkarni
Day - 1
7/4/2018
7/4/2018
INTRODUCTION TO VALUE ENGINEERING – VALUE ANALYSIS
INDEX
1. Introduction 3
2. Types of values 24
3. What is VE and what is VA? 43
4. A few myths about VE 47
5. Product costing process 54
6. Product VE or Process VE? 63
7. Group Exercise - 1 68
8. Value Engineering Methodology 72
9. Orientation Phase 81
11. Information Phase 100
12. Functional Analysis Phase 111
13. FAST Diagram 122
15. Case Study 135
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1. INTRODUCTION
o INTRODUCTION TO VALUE ENGINEERING

 A product goes through the typical standard
stages of development of the product.
1) Development of the product
2) Launching of the product
3) Slow increase of the sales
4) Stabilizing of the product in market
5) Depending on the type of the product the
sales continues or plunges
THE TYPICAL LIFE CYCLE OF PRODUCT

Declining
Gradually Stable Demand
Increasing Sales Demand
Product Development
Product Life
Product Launch
The plot shows that in the initial increasing sales period
• The product has to compete with other similar products
• Keep leadership by various means
• Keep the profitability to get the returns on investment
• Keep the quality as high as possible
This all needs continuous improvement in the product
 Means to achieve Continuous Improvement,
the most accepted and successful way is
 “VALUE ENGINEERING
A SIMPLE DEFINITION OF VALUE ENGINEERING
A systematic application of recognized techniques which
1) Identify the function of a product or service
2) Establish monetary value for the function and
3) Provide the necessary functions
4) As well as the Functional Reliability
at the Lowest Overall Cost
 Value Engineering originated in the U.S. industrial

community in the 1940s.
 As a result of World War II, there was shortage of
Skilled Labor, Raw Material and Component Parts.
 As per some literature, two engineers at GE,
looked at acceptable substitutes.
 These engineers observed that these acceptable
substitutes resulted in REDUCED COST and / or
improved the product.
 This process started as necessity turned in to a
systematic process. This was named as “Value
Analysis”.
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 It has since evolved into a powerful tool for solving problems
and improving value in terms of cost, quality and performance.
 It can be used for any item or activity in business and industry.
 The US army has recognized the VE as one routing process to
1) Reduce costs
2) Increase productivity
3) Improving quality-related features such as durability,
reliability, and maintainability
 There has been a VE program in the Department of Defense
(DoD), US Army for over forty years.
 VE is part of Federal aided projects in US.
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 Video on VE – US Dept Of Transport

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 Cost of the Product Development and V E Implementation
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It can be seen from the graph
1) The VE carried out at the design / drawing stage results in

maximum savings.
2) The VE carried out at the construction or manufacturing

stage results in quite good amount of savings.
3) The VE carried out after the manufacturing / erection results

in very small or negative savings.
4) However, the lessons learnt can help in future projects.
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 Other names of the term “Value Engineering” and
general applications are
 Value Analysis - Applies to Existing Products
 Value Engineering - Applies to New Products
 Value Management – Applies to Other Areas
All the above are universally referred as
“VALUE ENGINEERING”
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PRICE & VALUE
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What is PRICE and what is VALUE ?
 PRICE is determined by the manufacturer and
is driven by the market.
 VALUE is determined by the customer - or the
user and is driven by his needs.
 Let us understand more on the two.
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Comparison of PRICE and VALUE
PRICE Vs VALUE
Price :
Amount for which the manufacturer is
willing to sell his product (includes cost +
profit).
SELLING Price of a – Car

Watch
TV
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PRICE Vs VALUE
Value :
What the customer thinks the product is
worth to meet his minimum specific
requirements.
Cost of BUYING a new – Car

Watch
TV
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PRICE Vs VALUE
Manufacturer preference is
PRICE
Customer preference is
VALUE
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 Value Engineering (VE) is an intensive,

interdisciplinary problem solving
activity that focuses on improving the
value of the functions that are
required to accomplish the goal, or
objective of any product, process,
service, or organization.
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What is value?
To get more VALUE

1) Increase FUNCTIONALITY of product
AND / OR
2) Reduce the cost – actually WASTE
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2. TYPES OF VALUES
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Types of Values and definitions
USE VALUE :
Performance or meeting the required function
Example: Bicycle
Basic Mobile handset
Definition: “Equal to the functions performed”
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COST VALUE :
Cost of Production (Material +Labor + Overheads)

Example: Scooter / Motor Cycle
Selling price of Mobile handset
Definition: “All costs associated to produce an
item or provide a service”
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ESTEEM VALUE :
Add prestige
Example: Apple smart phone i”N”

Harley Davidson Bike
Definition: “Attributes that create desire to

possess the product or service but not
necessarily required to function intended service”
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EXCHANGE VALUE :
Re-salability of product
Example: Bajaj scooter in 1970s
Definition: “Properties or qualities allowing resale

in the future.”
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Advantages of Value Engineering
1) Increases the profits without affecting the
quality
2) Makes the processing simpler
3) Reduces the processing time
4) Increases the product usage
5) Enhances the product life span
6) Stays ahead in competition
7) Increasing the efficiency of the organization
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Necessity of Value Engineering

1) Increased competition can lead to reduced profits
2) The time to market determines the product market share
3) Added advantages increases acceptance of product in market
4) Reduction in inventory and invest ment
5) Increases the production
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• There is always a question posed to the

engineers by management:
 What is better?
• Standardization
Or
• Custom made part
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 To understand let us see an example of Value

Engineering
• An example of Value Engineering – Duct
Fittings
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 Important leanings from the case study

1) Value Engineering leads to increased profits.
2) Value Engineering can reduce the work
involved keeping functionality & quality same.
3) Value Engineering can be lead to higher
benefits compared to standardization
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 Video on Surface Water Project
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 The most important aspect of VE is to understand
 What is VE?
AND
 What VE is NOT?
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 Value Engineering is NOT

 Simple Cost Reduction
 Tradeoff between cost and performance
 Only good Design Engineering
 Applied only during initial design
 Different when applied to administrative functions
VE is not simple cost reduction
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 Value Engineering IS
 Reliability
 Maintainability
 Producibility
 Human Factors
 Parts Availability
 Cycle Time Reduction
 Quality
 Weight Reduction
 Logistics simplification
 Performance enhancement
 Packaging simplification
VE is a all round improvement of product

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o How to select V E Projects – Few Guidelines
• Theoretically any process / component / equipment
can be taken up for VE project.
• However selection of the project should be done with
care to maximize the benefits.
• Here are a few guide lines for selection of value
engineering projects.
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• Every company has a policy for “Improvement” or
“Cost Reduction”.
• Projects for VE can be selected from these category
depending on the size and/or complexity of the
project.
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• As a thumb rule, any process, component, equipment, activity
involving high amount – this amount varies from company to
company and can be decided by the management – should
undergo a value engineering process.
• In addition to the cost, other issues adding to the complexity of
the project design should be considered in the selection process.
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 These complexities may include
1) Critical constraints
2) Difficult technical issues
3) Expensive solutions
4) External influences
5) Complicated functional requirements
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• The types of projects that usually provide the highest potential
for value improvement are:
• Critical Equipment / processes
• Projects with alternate solutions which vary the scope and
cost
• Projects with extensive or expensive environmental or
geotechnical requirements
• Difficult materials requirements or inferior material sources
• Projects with multiple stages
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3. What is VE and what is VA
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 Thus
 Value Engineering is generally applied during New Product
Development – NPD – stage.
 Value Analysis is carried out for existing products /
components that are manufactured and are in service.
 The process followed remains the same!
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4. A Few Myths about VE
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 Myths about Value Engineering
 There are a few myths about VE that need to be cleared before we
proceed.
 A few of them are discussed here
1. Value engineering is just about cost-cutting.
2. You should save value engineering for the end of a project.
3. The most cost savings can be found in finishes and fixtures.
4. It’s easy to switch out an expensive lighting fixture for a cheaper one
later in the design.
5. Value engineering stifles creativity.
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1. Myth No. 1:
 Value engineering is just about cost-cutting.
 Fact: Successful value engineering isn’t necessarily about cost-
cutting – it’s about prioritizing.
 Its most scientific and structured activity.
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2. Myth No: 2
 You should save value engineering for the end of a project
 Fact: Postponing value engineering until the product release
phase is a money-losing proposition
 Reason:
 There is an inverse relationship between time (schedule) and
money.
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3. Myth No: 3
 The most cost savings can be found in finishes and fixtures.
 Fact: In today’s scenario, a lot of budget goes to all parts of the
project that the client will likely never see, but which are
fundamental to success of project.
 Hence it makes sense, to bringing on knowledgeable engineers
early in the process, frees up a big chunk of your budget for
other things.
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4. Myth No: 4
 It’s easy to switch out an expensive tooling / fixture for a
cheaper one later in the design.
 Fact: Tooling and fixtures can have long lead times as well as
costly.
 Easy to operate and simple tooling and fixture introduced at the
initial stage can be very useful to expand / modify and diversify.
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5. Myth No: 5
 Value engineering stifles creativity.
 Fact: Design professionals understand that every project has a
set of parameters it must meet, and that clients don’t have
endless budgets.
 Anyone can create a fantastic project given unlimited funds.
 A good design team will incorporate value engineering into the
creative process, seeing it as a challenge instead of a limitation.
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5. PRODUCT COSTING PROCESS
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• One most important question that comes up is
• HOW TO CARRYOUT COSTING OF PRODUCT?
• Various organizations have different models of costing the
product.
• In general, the product cost consists of various parts like
1. Direct Material Cost
2. Direct Labor Cost
3. Overhead Cost
4. Profit
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 The components can be classified in:

 Direct cost
 Easily and conveniently traceable to the cost object
 Indirect
 Not easily or conveniently traceable
 Cost is shared among cost objects
 No apparent “link” between cost & object
 Not cost effective to trace
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 In short:
Direct material
Product costs
Prime costs
Direct labor
Conversion costs
Overhead
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1. Direct Material Cost :
 This is also referred as “Material Content”
 Generally for engineering products it varies between 50% to
70% of total product cost.
 Most VE programs are aimed to reduce this part of the cost!
 However, it should be noted that the VE should be aimed at
“Waste Elimination” rather than “Cost Reduction”!
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2. Direct Labor Cost :
 The raw material conversion or processing the input is generally
carried out by labor.
 This consists of anywhere 10 to 20%
 New methods, new processes are always introduced to reduce
this part.
 VE applied to process results generally reduction in labor cost.
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3. Overhead Cost :
 The cost related to establishment, factory, land, facilities like
transport and canteen etc are part of the overhead cost.
 The perks and perquisites are part of this – referred as ERE –
Employee Related Expanses.
 This “Overhead Cost” is location dependent.
 Generally the overheads are huge in metros and less in small
cities.
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4. Profit :
 Entire industry is build on the concept of “PROFIT”.
 The profit is part of the earnings minus the material cost, labor
cost and over head cost.
 Generally it is referred as “EBITDA” – Earnings before Interest,
Taxes, Depreciation and Amortization.
 A EBITDA of 10 % – 14 % is supposed to be healthy.
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 Cost Break - up:
 These are general figures for manufacturing industries.
 The actual values may vary depending on the industry.
 For service oriented industries the material content is very low.
 For BPO and ITES, employee related expanses are high.
 The area to address depends on the industry type and
management guidelines.
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6. PRODUCT VE OR PROCESS VE?
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• We have already seen that VE is not simple cost reduction but
waste elimination.
• Also VE can be carried out on
• Product
• Process
• The next questions to be answered are
• Whether to carryout VE on PRODUCT or PROCESS ?
• How to carryout the VE
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• The VE carried out on product can show direct results

on bottom line, whole the process VE can reduce the
overhead related expanses and is reflected in balance
sheet.
• The area to be selected for VE depends on various

factors like product, quantity etc.
• The following are the guidelines for VE process to be

followed.
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1. Product VE:
 As the VE carried out on product can show direct results, a
small amount of savings can lead to large savings with higher
volumes of product
 It always pays to carryout VE on mass produced product.
 A small amount of VE, that does not impact the overall process
and industry layout is also welcome.
 It is also recommended to carryout incremental VE on various
new product as it gives a confidence to the designers as well as
the management
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2. Process VE:
 VE in the area of process is a little bit slow and expensive.
 This also needs investment and change in layout many times.
 The process VE savings are not easily seen.
 The process VE can however result in product quality
improvement.
 The process VE needs, clear understanding of processes.
 In case of process industry this yields good results.
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7. Group Exercise - 1
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VE Project Area Identification
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GROUP EXERCISE -1
 Make groups of 5 each.
 The team should have participants preferably from different
areas of work.
 Identify pain areas.
 Discuss amongst yourself and come out with specific ideas /
areas for improvement.
 Each team to identify at least 3 such areas.
 IDENTIFY AREAS ONLY, NO SOLUTIONS AT THIS TIME!
 Time Limit : 1) 35 Minutes for workout
2) 5 Minutes each team for presentation /
discussion
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8. VALUE ENGINEERING
METHODOLOGY
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Value Engineering Methodology

• After decades, the introduction of Value Engineering, it has
been developed in a scientific methodology.
• Generally Management in consultation with operational persons
identify the areas.
• Let us see a video on the VE process that is being followed in
US Department of Defense – supply procurement
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• US Dept. of Defense – supply procurement

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• VE is a “TIME BOUND” activity with set goals and target dates.

• Where as the video talks a monitory limit of $ 20/- million, it
can be applied to projects of smaller values.
• In fact for smaller organizations, there is no need to fix any
monitory limit on the project.
• Classically VE process today consists of 8 phases.
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Phases in VE Methodology
There are eight classical phases in the VE methodology.
1. Orientation Phase
2. Information Phase
3. Functional Analysis Phase
4. Creative Phase
5. Evaluation Phase
6. Investigation Phase
7. Recommendation Phase
8. Implementation Phase
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Few 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 toleranced 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.
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 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.
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 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 circuit
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.
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 Let us take a small

multiple choice quiz on
the topics discussed
today.
 Click here for quiz .
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9. Phases in VE Methodology Phase

One : Orientation Phase
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1. Orientation Phase :
• The need for the VE is always felt in an organization.
• However, the formal identification of the same,
making a team and fixing the goals need to be done
systematically.
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 The orientation phase involves following main tasks.

1) Identification of Problem
2) Formation of Teams – Cross Functional
3) Laying down Objectives and Targets
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 VE can be carried out on
 Product
 Process
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 Input for the VE comes from the following sources
A) Marketing
B) Production
C) Erection and Commissioning
D) Quality Assurance
E) Servicing
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A) Marketing
• Marketing has to sell the product in the market and gets the
instant feedback from the customer.
• Marketing comes to know the prices of the competitors, the
plus and minus points of the products and customer opinion
about the product.
• All this data needs to be collected, analyzed and zeroed in to
arrive at the identification of VE projects.
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B ) Production
• Production department is the one who has to manufacture the
machine.
• The production department comes across various problems
during manufacturing and can list out major areas for
improvement
• The pain areas of Production are the most important
opportunities for VE.
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C) Erection and Commissioning

• After the Production department manufactures machine, it is
the turn of E & C department, who faces most difficulties
during erection.
• Feedback from E & C normally identifies susceptible VE areas.
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D) Quality Assurance
• The Quality Assurance department normally knows the pain
areas of the product.
• The QA has to inspect and test the product for the
functionality.
• The feed back from Q A can identify areas which need an
improvement
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E) Servicing
• As the saying goes “Proof of Pudding is in eating”, the servicing
has to face the customer and make the product functional.
• The pain areas identified by Servicing are the ones that are the
ones to be attacked first.
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• The objectives of the VE projects are chosen

and quantified in specific terms.
• The quantification is a must for VE projects.
Targets should be quantified WRT present.
• Next important action is to form a TEAM.
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To achieve a
difficult task,
individual efforts
are not always
sufficient!
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Team can achieve a

difficult task
effectively!
Formation of VE
project team and
deciding the
target is 1st
phase
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 The team formed should have representatives form

all the departments like
• Design
• Purchase
• Manufacture / Production
• Quality Assurance
• Marketing
 Formation of VE project team & deciding target is 1st
phase
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 Orientation Phase
• Let us discuss pain areas experienced by
participants for which VE projects can be
taken up.
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10.Group Exercise - 2
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 The Project Identification

 After identification of pain areas, it is next phase to identify
actual projects that will give maximum benefits.
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GROUP EXERCISE – 2
 The earlier formed groups have identified pain areas.
 Each team will discuss the areas, the reason for selecting the
areas, probable benefits
 No discussions on the SOLUTIONS AT THIS TIME!
 Time Limit : 1) 15 Minutes for workout
2) 5 Minutes each team for presentation /
discussion
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11.Phases in VE Methodology
Phase Two : Information Phase
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2 Information Phase: Introduction

• Second stage after Orientation Phase is to collect information.
• The success of the VE project depends on the DATA or the
information available, hence collection of maximum
information is a must.
• Data Collection of related information is most important step.
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 It is required to collect the Information like

1) Drawings
2) Technical Specifications
3) Manufacturing Processes
4) Detailed Cost Break up
5) Quality requirements
6) Product History including Field Performance
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 Types of DATA
1. Technical Data
• Drawings
• Technical Specifications
• Specifications
• BOM
• Process Sheets
• Standards
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2. Marketing Related Data
• Product Sale History
• Cost Details
• Tax / Duty structure
• Sale Price
• Competitor’s information – Catalogue etc
• Market trend and customer expectations
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3. Cost Related data
• Detailed cost break – up
• Cost of subassemblies
• Cost of Bought out and manufactured items
• Overheads
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4. Material Management related data
• Information on Bought out items
• Information on sub-contracted items
• Material cost details with tax / duties
• Cost of imported items
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5. Quality related data
• Quality related issues
• Manufacturing / Subcontractor issues
• Failure records
• Collect Facts - Don’t Go by Hearsay
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6. Manufacturing data
• Problems faced
• Bottlenecks faced by Manufacturing
• Limitations faced
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• This all data should be compiled and made ready to
all the members.
• Today Internet is one of the major source of
information
• The VE project is a time bound and hence need to
collect as much as possible data and that too “fast”.
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12.Phases in VE Methodology
Phase Three : Functional Analysis Phase
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3 Functional Analysis Phase: Introduction

• The heart of the VE process lies in the “Functional Analysis Phase”.
• This is the phase where the team needs to spend more time as a
team, analyze the problem and come out with solutions.
• The VE problem is broken down in various sub problems, its
functions are analyzed and alternate solutions arrived at.
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 Steps
1) Define functions of Main assembly of interest
2) Repeat the same for Sub-assembly and components
3) Establish the “Cost of Providing” the function
4) Establish the “Worth” of the function.
5) Identify the
1) Value Gap = (Function Cost – Function Worth)
or
2) Value Index = Function Worth / Function Cost
6) The areas with “Positive or Highest” Value Gap and with a Value
Index lower than 0.6 are the right areas for VE.
113 D. B. Kulkarni 7/4/2018

 Types of Functions
Each product / sub assembly has a
“Primary / Basic / Essential Function”

and
“Secondary Function”
114 D. B. Kulkarni 7/4/2018

The answer to the question
What MUST it do?
gives
“Primary / Basic / Essential Function”
115 D. B. Kulkarni 7/4/2018

The answer to the question
What ELSE does it do?
gives
“Secondary Function”
Secondary function can be
DESIRABLE and / or UNDESIRABLE
116 D. B. Kulkarni 7/4/2018

o How to carry out the Functional Analysis

 Define all functions – main assembly
 Repeat for all components / sub assemblies
 Follow A/B/C classification
 Find Function Cost
 Find Function Value (worth)
 Find Value Gap / Value Index
 Rank in descending order
 Items with max potential to be selected
117 D. B. Kulkarni 7/4/2018

 CASE STUDY - Functional Analysis example:

Overhead Projector
• Functions of an overhead projector
 Create Heat
 Provide Decoration
 Consume Energy
 Facilitate Portability
 Project Image
 Facilitate Easy Operation
 Create Noise
 Enlarge Image
118 D. B. Kulkarni 7/4/2018

 Functional Analysis example – Overhead Projector
 Primary Functions
 Project Image
 Enlarge Image
119 D. B. Kulkarni 7/4/2018

• Example of Over Head Projector

• Secondary Functions
• Desirable
• Provide Decoration
• Facilitate Portability
• Facilitate Easy Operation
• Un-desirable
• Create Heat
• Consume Energy
• Create Noise
120 D. B. Kulkarni 7/4/2018
 VE project is aimed to
 Reduce the Value Gap or increase the Value Ratio as
near to 1 as possible
 Maximize the Primary Function
 Eliminate or minimize the “Undesirable Secondary"
Functions
121 D. B. Kulkarni 7/4/2018

13.FAST Diagram
122 D. B. Kulkarni 7/4/2018

 Introduction to FAST – Functional Analysis System

Technique
 A problem well stated is problem half solved.
 FAST was developed during 60’s.
 It is a rigorous method for understanding the complex system
by converting the activities performed in a system to the
functions performed by the system for it’s customers.
123 D. B. Kulkarni 7/4/2018

 Why is the Function Analysis System Technique important?
 The Function Analysis System Technique aids in thinking about the
problem objectively and in identifying the scope of the project by
showing the logical relationships between functions.
 The organization of the functions into a function-logic, FAST diagram
enables participants to identify of all the required functions.
 The FAST diagram can be used to verify if, and illustrate how, a
proposed solution achieves the needs of the project, and to identify
unnecessary, duplicated or missing functions.
124 D. B. Kulkarni 7/4/2018

 Benefits of the Function Analysis System Technique:
 The development of a FAST diagram is a creative thought process which
supports communication between team members.
 The development of a FAST diagram helps teams to:
• Develop a shared understanding of the project
• Identify missing functions.
• Define, simplify and clarify the problem.
• Organize and understand the relationships between functions.
• Identify the basic function of the project, process or product.
• Improve communication and consensus.
• Stimulate creativity.
125 D. B. Kulkarni 7/4/2018

 How To Create a FAST Diagram
 Three key questions are addressed in a FAST Diagram:
• How do you achieve this function?
• Why do you do this function?
• When you do this function, what other functions must you do?
126 D. B. Kulkarni 7/4/2018

127 D. B. Kulkarni 7/4/2018

 Steps in constructing the FAST Diagram
 Start with the Functions as identified using Function Analysis:
• Expand the functions in the "How" and "Why" directions:
• Build along the "How" path by asking 'how is the function achieved'?
• Place the answer to the right in terms of an active verb and
measurable noun.
• Test the logic in the direction of the "Why" path (right to left) by
asking 'why is this function undertaken?'
• When the logic does not work, identify any missing or redundant
functions or adjust the order.
• To identify functions that happen at the same time, ask "when this
function is done, what else is done or caused by the function?"
• The higher order functions (functions towards the left on the FAST
Diagram) describe what is being accomplished and lower order
functions (functions towards the right on the FAST Diagram)
describe how they are being accomplished.
• "When" does not refer to time as measured by a clock, but functions
that occur together with or as a result of each other.
128 D. B. Kulkarni 7/4/2018

129 D. B. Kulkarni 7/4/2018

130 D. B. Kulkarni 7/4/2018

14.Group Exercise - 3
On the VE - Functional Analysis of
the VE Project
131 D. B. Kulkarni 7/4/2018

EXERCISE – 3
 Make groups of 5 each.
 The team should have participants from different
areas of work.
 Select a machine / component of interest.
 Carryout functional analysis.
 Identify all possible functions.
 Time Limit : 10 Minutes
132 D. B. Kulkarni 7/4/2018

 Classify in to
1) Primary Functions
2) Secondary functions – down to
• Desirable
• Undesirable
o Time limit: 10 Minutes
 Each group to present /read out the findings.
 Group discussions
 Time : 15 Minutes
 Conclusion:
 Time : 5 Minutes
133 D. B. Kulkarni 7/4/2018

134 D. B. Kulkarni 7/4/2018

15.CASE STUDY
135 D. B. Kulkarni 7/4/2018

 Here is one classic case study

 BIRBAL AND AKBAR – A CASE STUDY
136 D. B. Kulkarni 7/4/2018

 Let us take a small multiple
choice quiz on the topics
discussed today.
 Click here for quiz .
137 D.B.Kulkarni 7/4/2018

END OF DAY 1
138 D. B. Kulkarni 7/4/2018

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INRODUCTION TO VALUE

ENGINEERING – VALUE ANALYSIS

o INTRODUCTION TO VALUE ENGINEERING

THE TYPICAL LIFE CYCLE OF PRODUCT

The plot shows that in the initial increasing sales period

• The product has to compete with other similar products

• Keep leadership by various means

• Keep the profitability to get the returns on investment

• Keep the quality as high as possible

This all needs continuous improvement in the product

 Means to achieve Continuous Improvement,

the most accepted and successful way is

A SIMPLE DEFINITION OF VALUE ENGINEERING

A systematic application of recognized techniques which

1) Identify the function of a product or service

2) Establish monetary value for the function and

3) Provide the necessary functions

4) As well as the Functional Reliability

at the Lowest Overall Cost

 Value Engineering originated in the U.S. industrial

 Video on VE – US Dept Of Transport

It can be seen from the graph

1) The VE carried out at the design / drawing stage results in

2) The VE carried out at the construction or manufacturing

3) The VE carried out after the manufacturing / erection results

4) However, the lessons learnt can help in future projects.

PRICE & VALUE

Comparison of PRICE and VALUE

SELLING Price of a – Car

Comparison of PRICE and VALUE

Cost of BUYING a new – Car

Comparison of PRICE and VALUE

 Value Engineering (VE) is an intensive,

To get more VALUE

Performance or meeting the required function

Definition: “Equal to the functions performed”

Cost of Production (Material +Labor + Overheads)

Example: Apple smart phone i”N”

Definition: “Attributes that create desire to

Example: Bajaj scooter in 1970s

Definition: “Properties or qualities allowing resale

Necessity of Value Engineering

• There is always a question posed to the

 To understand let us see an example of Value

 Important leanings from the case study

 Video on Surface Water Project

 Value Engineering is NOT

 Tradeoff between cost and performance

 Only good Design Engineering

 Applied only during initial design

 Different when applied to administrative functions

VE is not simple cost reduction

VE is a all round improvement of product

3. What is VE and what is VA

4. A Few Myths about VE

5. PRODUCT COSTING PROCESS

 The components can be classified in:

6. PRODUCT VE OR PROCESS VE?

• The VE carried out on product can show direct results

• The area to be selected for VE depends on various

• The following are the guidelines for VE process to be

VE Project Area Identification

Value Engineering Methodology