Application of Value Analysis and Value Engineering for Cost Reduction of

Global Pumping Unit

Aniket Bhosle1[0000-0002-1791-7056] , Avinash Sah2[0000-0001-5267-649X], D. K. Shinde3[0000-0001-9688-8697]

1,2,
Project Management, Department of Production Engineering, VJTI Mumbai
3
Associate Professor and Head of Production Department, VJTI Mumbai

Abstract. At present, the competition in Indian retail market for fuel dispensers is leading to a constant battle for
an adequate market share. The Indian retail market for fuel dispensers is favoring the Lowest Bidder. Recent
tenders have seen aggressive bidding from all the bidders which leads to price war between different
organizations. Value Analysis and Value Engineering are the concepts which help in understanding the correct
path to proceed with improvements which will ultimately result in higher customer satisfaction or we can say
increased market shares. A case study of Global pumping Unit is taken for the research, in which the design of
components with removal of excess material and change in material have significantly reduced cost of whole
pumping unit using VAVE methodology. In this study total of three components namely Rotor, Pump Body and
Stator Housing were taken to apply VAVE which resulted in 30%, 4% and 10% of cost reduction.

Keywords: Value Analysis (VA), Value Engineering (VE), VAVE, Global Pumping Unit (GPU), Cost reduction.

1 INTRODUCTION

In the era of today’s competitive world, every organization is investing more on increasing the customer satisfaction
of their product or service. Customer mainly wants use and aesthetic functions. But sometimes to fulfill the customer
wants, the possibility of increase in cost for required changes in performance/functionality coupled with rise in
commodity prices are more while walking on this path. Hence, it is important from an organization point of view to
not only reduce the costs incurred but also constantly introduce new innovations at all levels and across all functions
in a company. L. D. Miles [1], the originator of Value Analysis and Engineering Technology in his book writes
about why so much unnecessary cost exists in everything we do. The Value methodology commonly applied under
the names Value Analysis (VA), Value Engineering (VE) and Value Management (VM) [2], helps us to identify and
eliminate these unnecessary costs. VE is an organized effort directed at analyzing the function of goods and services
for the purposes of achieving basic functions at the lowest overall cost, consistent with achieving essential
characteristics [3] while VA as defined by the Society of American Value Engineers International (SAVE
International), is “the systematic application of recognized techniques by multi-disciplined team(s) that identifies the
function of a product or service; establishes a worth for that function,; generates alternatives through the use of
creative thinking; and provide the needed functions, reliably at the lowest overall call [4]. In this study we have
applied VAVE techniques for few components of Global Pumping Unit to reduce the cost so that the Product can
easily penetrate the market needs during its life cycle.

2 VAVE application over Product Life Cycle

Value Analysis and Value Engineering are sequential steps adopted to increase the value of the product or
service. There can be a number of ways to implement a value analysis/value engineering where different changes are
made in various key drivers of the value (say performance, cost, customer satisfaction, resources etc.). VAVE is
generally taken as an internal project in an organization, specifically by cross functional departments which focuses
more on continuous improvement or value addition. However, it is very important for an organization to know
difference between value analysis and value engineering. Answers to questions such as ‘when’ and ‘how’ will make
implementation of VAVE more efficient. For any certain project, the VA and VE study is applied by a
multidisciplinary team to improve its value. SAVE International sets 6 sequential phases for performing a successful
VE study. [5] VA and VE can give extremely good results if implemented at correct time over the lifespan of
product and with systematic Job plan. It is very important to understand various key drivers of value and the
intensity of a small change on the value. VAVE projects in an organization can be adopted during any stage of the
project development cycle. Although the greatest benefit and resource savings can be typically achieved by applying
VA & VE in the appropriate phases of development cycle. To get detailed answer of ‘when to implement VA/VE?’
we need to analyze more on product life cycle and understand various phases.
Initially, the product life cycle concept centered on the need to produce a coherent framework that could
account for the relative success or failure of an individual product introduced into the market, when best to change
strategies such as pricing or product manufacture, and determining when product should be discontinued [6].
Product Life Cycle is basically divide into four main phases viz: Introduction phase, Growth Phase, Maturity &
Saturation phase and Decline Phase. As time passes product sales increase at first (Introduction phase), then more
quickly (Growth phase), then once again more slowly (Maturity & Saturation phase), and finally decrease (Decline
phase). Nowadays the focus is more on increasing the length of Maturity and saturation phase. The retention power
of a product/service depends on the continuous improvement in its value. Hence, at a point of time in product life
cycle it becomes necessity for an organization to identify and eliminate these unnecessary costs otherwise product
will be phased out before its expected life cycle.
Mathematically, value can be defined as ratio of performance or function or customer satisfaction with cost or
resources incurred to develop such level of product/service. And hence they are the key drivers for changes in the
value.
Performance / tion/Customer Satifaction
Value =
Cost /Resources
Value Engineering focus more on various engineering modes under the development of new product. It
may deal with design, functionality, aesthetics etc. of a product or service. The value engineering helps to make the
end result more efficient in comparison to cost without changing quality aspects as well as business need during the
development phase (Introduction phase) as shown in figure 1. As in this phase making changes to
design/functionality/aesthetics will be easier and can be done at least cost. Value engineering generally involves
various ways such as:
a. Part design configuration change[7]
b. Change in engineering process/methodology incorporated

Value Analysis, on the other hand give best results during the growth, maturity and Decline stage as shown
in the figure 1. Value analysis focus more on the reducing the cost of given product or service by adopting changes
(say in business process or material composition). As the business has reached in the operations, it inculcates higher
cost in changing initial designs or functionalities and hence it is advisable to go for improvement through value
analysis. This in general involves ways such as:
a. Source/Supplier substitute
b. Material substitute[7]
c. Removal of non-performing assets
d. Elimination of under-utilized human resources
 Fig. 1. : Product/Service life span [7-8]

It can be easily observed from figure 1 about various phases which a product/service undergoes during its
life. VAVE must be applied after complete involvement of owner(s) and consultant(s) decision making, to achieve
optimal results. Hence, optimum results can be expected when resources are set aside for VAVE early in the design
process, focusing on owner and consultant impact.[7] It is advisable to go for VAVE implementation as early as
possible to ensure potential savings before commitment of funds into it, approval of systems, services or designs.
Organisations look at two major things while implementing VAVE for their products, first is the investment required
to implement any change and second is resistance to change. As shown in the figure 2 the two lines are:
Acceptance Line - represents investment required to implement any change
Resistance line - represents resistance to change
From figure 2; it can be observed that as time increases the cost of investment for any change (Acceptance line)
reduces. It is highest during the Introduction phase, whereas the resistance to change (Resistance line) increases as
the product movies towards decline phase. The area between these two lines shows the savings from VE and
gradually this savings decreases as product/service get older. It is always good to adopt VE at early stage to gain
maximum savings, whereas VA can result savings but is less than as compared to VE at an early stage.

Fig. 2. : VAVE over product lifespan [8]

3 Case Study of GPU

In this paper we have discussed a case study of Global Pumping Unit (GPU), which is manufactured at Gilbarco
Veeder Root (GVR) India Pvt. Ltd., Coimbatore, Tamil Nadu (India). They also manufactures variety of fuel
dispensers. During fueling operation, the fuel line is connected to a pipe that runs to the bottom of the fuel storage
tank. Fuel is drawn up by suction (Vacuum creation), but first passes through a filter that protects the mechanism.
The pump then pressurizes the fuel to 3.5 bar (maximum) and pushes it through a gas separator, which gets vented
to atmosphere [11]. GPU is selected for case study as it is most popular and relatively fast moving product.

Fig. 3.: Global Pumping Unit

GPU is GVR pumping unit launched into the market in 2014 which is currently in growth stage of product life
cycle and is facing a cost challenge from the competitors. To address a threat posed by competitors in terms of
penetrating the market needs we have decided to apply VAVE techniques for GPU.

A cost breakup for all the parts of GPU are shown in Figure 4. We have applied Value Analysis technique for
cost reduction on following components:
A. Rotor
B. Pump body
C. Stator housing

The motivation for selection of Pump body and rotor can be easily understood by observing Figure 4. They have
been selected as both of them holds major cost of GPU and carries good scope of improvements in their value.
However, after analyzing ‘top cover’ for VE; it has been observed that savings per part were only Rs. 5-10 which is
very less compared to its original cost. Further, ‘Blade’ & ‘Main float valve assembly’ are very critical in design to
make changes and hence were not selected for VAVE. Stator housing has shown good scope of improvement in its
design by the engineering department. This made us to select this part for applying VAVE.

1400 25

1200
19.5 20
1000
Percentage

15
Cost (INR)

800
13.2
600 9.3 8.9
10.8
7.9 10
6.8 6.1
400 6.7
3.2 2.5 5
200 1.4 1.4 1.3 1.1
0 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Part Description
 Fig. 4.: Cost breakup for various parts of GPU

3.1 Rotor

Data Collection and Analysis:

It is observed that the unnecessary increase in cost is due to extra machining efforts required to achieve final
product. Therefore by application of VA technique, design Modification for rotor is suggested. As the rotor
revolves, the vanes trap fluid between the rotor and the casing, drawing the fluid through the pump. Currently the
rotor casting is made as a solid cylindrical part. There are 10 slots for vane blades which needs to be milled with 2
passes for each slot (slot width is 4.70mm). The proposal is to provide the slots in the casting with width of 4.00 mm
to broach these slots to be finished size (4.70 mm) individually. This will completely eliminate milling operation and
then broaching operation will provide a much better slot finish.
VE Job Plan: Refer Table 1.

Figure 5: Design of Rotor

Achievement: With the same function the rotor full casting as replaced by Rotor - as cast slots.

Result of VE Job Plan are:

Tool development cost
Tool development charges / piece =
No . of considered years∗No . of pieces per year

333774
=
1∗7947
= Rs. 42

Total cost per piece = Tool Development Charges / piece + Material Cost
= 42 + 243
= Rs. 285
Net savings = 403 – 285
= Rs. 118
Percentage savings in cost = 118 / 403
= 30%

3.2 Pump body

Data Collection and Analysis:

In GPU there are two major parts Top Cover and Pump body. Pump body is the major contributor in the overall
cost of GPU. Pump body houses Inlet check valve, Vane rotor cartridge, Bypass valve and the Control valve.
Currently, it is made up of aluminum die cast A413 and machined as necessary. To achieve the desired cost savings
we are changing the pump body material from A413 to A380.
VE Job Plan: Refer Table 1.

Figure 6: Design of Pump Body

Achievement:
With the same function the material of the pump body is changed.

Result of VE Job Plan are:

Current Material : Aluminum die cast A413
Proposed Material : Aluminum die cast A380
Mass of the pump body                    = 3.8 kg
Material cost per kg for A413           = Rs. 270
Material cost per kg for A380            = Rs. 250
Tool development cost
Tool development charges / piece =
No . of considered years∗No . of pieces per year
858276
=
1∗7947
= Rs. 108

Total cost per piece = Tool Development Charges / piece + Material Cost
= 108 + 892
= Rs. 1000
Net savings = 1042 – 1000
= Rs. 42
Percentage savings in cost = 42 / 1042
= 4%

3.3 Stator housing

Data Collection and Analysis:

Stator housing is used to hold the rotor and vane blade assembly. The radial wall thickness of backside boss
is reduced from 12 to 7.5mm. Because of this change the weight of the casting got reduced from 3.44Kg to 3.119Kg.

VE Job Plan: Refer Table 1.

 Figure 7: Design of Stator Housing

Achievement:
With the same function the weight of the stator housing is reduced.
Result of VE Job Plan are:
Tool development cost
Tool development charges / piece =
No . of cons idered years∗No . of pieces per year
254304
=
1∗7947
= Rs. 32
Total cost per piece = Tool Development Charges / piece + Material Cost
= 32 + 263
= Rs. 295
Net savings = 327 – 295
= Rs. 32
Percentage savings in cost = 32 / 327
= 10%

Combined results:

Figure 8: Results of various VAVE techniques applied on selected parts

 In general there are six methods by which value of the product can be increased viz. Part design configuration
change, Change in engineering process, Source/Supplier substitute, Material substitute, Removal of non-performing
assets, Elimination of under-utilized human resources. In this study we have seen Change in engineering process of
rotor resulted in cost reductions of 30%. Also Material substitute of Pump Body results in 4% of cost reduction and
Removal of non-performing assets of stator housing results in 10% of cost reduction.

4 Conclusion

After successful implementation of VAVE methodology over the products, they can now survive more on their
maturity stage of product life cycle. It increases the life of product and hence the profitability of the organization.
The VAVE projects require a team of active members who are desperate to work with innovative ideas which comes
by thinking out of the box. Here we can see the cost reduction for pump body is very less, then also organizations
look for such kind of opportunities because in the era of competitive world, a little cost reduction can help product to
capture larger area of market and hence chances of winning the tenders increases. Organization must not see VAVE
project as a destinations to reach and stop. However, organizations should motivate their employees to take efforts
and be ready with number of upcoming projects which can increase the value of their products/services. Small
change in cost may not affect much at current scenario but will always help organizations to build the brand value
and customer’s trust. Power of customer retention increases simultaneously and thus results in growth of company.

REFERENCES

[1] Miles, L.D., Techniques of Value Analysis and Engineering, McGraw-Hill, 1972
[2] SAVE International Value Standard, 2007 edition
[3] Younker, DL. Value Engineering: analysis and methodology. Marcel Dekker, 2003.
[4] Value Analysis Handbook, National Economic and Development Authority, June 2009
[5] Rochan Rachwan, Ibrahim Abotaleb, Mohmmad Elgazouli; The Influence of Value Engineering and sustainability
considerations on the project value, 2016; Egypt
[6] Hui, Cao. Product Life Cycle: the evolution of a paradigm and literature review from 1950-2009. Paul Folan, China.
[7] Aditya Shah, Prof. Jitendra Patel: Cost Reduction in residential building by application of value engineering, IJSRD,
vol. 5, issue 2, 2017; Ahmedabad, India
[8] WBDG by National Institute of Building sciences; Image- ‘Potential savings from VE application’;
https://www.wbdg.org/resources/value-engineering
[9] Product training - Mechanical, Gilbarco Veeder Root India, Pvt. Ltd.