Final Year B.Tech.

Industrial Engineering

A Presentation on Unit-2

Value Engineering

Dr. Sachin K. Patil

Associate Professor and Head, Mechanical Engineering,
Dean Academics
Kasegaon Education Society’s

RAJARAMBAPU INSTITUTE OF TECHNOLOGY,

Rajaramnagar, Dist. Sangli, Maharashtra, India 415 414.
History

Lawrence D.Miles
1904 - 1985

•Shortage of materials during world war II

•General Electric company found that many of the substitutes

have better or equal performance at less cost.
•Lawrence De Miles Launched an effort to make the concept systematic

•Establishment of Society of American Value Engineers “SAVE”

in 1959
What is Value?

• Value is the lowest price you must pay to provide a reliable

function or service (L. D. Miles)

• “The ratio of Function to Cost”

Worth Function(Utility)
Value = =
Cost Cost
Waste Cost

Why do Projects have “Unnecessary” Costs?

1. Low Time for Designing

2. Lack of information

3. Lack of Ideas

4. Negative Prejudice

5. Lack Of Experience

6. Weaknesses in human relations

7. Multi Concept

…
What Value Engineering Is!

An organized study of FUNCTIONS to

satisfy the USER’S NEEDS with a
QUALITY PRODUCT at the LOWEST
LIFE CYCLE COST through APPLIED
CREATIVITY
 Definition of Value Engineering

Terms used to describe “Value Engineering”

Value Methodology
This is the “official” term used by SAVE International. It describes the
overall body of knowledge.
Value Analysis
This was the first term used when the process was originally developed for
manufacturing
Value Engineering
The term “engineering” was used to identify the process as it is applied to
design and construction
Value Management
This less commonly used term refers to its application to business
processes
Definition of Value Engineering

The value of a function is

defined as the
relationship of cost to
performance
Performancemax
Valuemax =
Costmin
 Definition of Value Engineering

“Good” Value is the lowest cost to reliably provide the required

function with essential performance.

Value is always increased by decreasing costs while maintaining

essential performance.

Value may also be increased if the customer needs, wants, and is

willing to pay for greater performance.
 Range of Application

• VE applies to everything because

every project or process has a
function
• VE can be applied at any point of the
design or process
• VE is a problem solving technique
• VE can be used as a technique for
developing design criteria
Reasons for Poor Value…

• Lack of and/or ◼ Not enough time

poor
for project
coordination
among designers formulation and/or
• Failure to design
network with
customer – poor ◼ Failure to utilize
definition of
latest technologies
needs and wants
• Design based on
habitual ◼ Negative attitudes
thinking or
mistaken beliefs
More Reasons for Poor Value…
• Poor communication in developing project scope
• Lack of consensus among project stakeholders
with regard to project scope
• Outdated or inappropriate design standards
• Incorrect assumptions based on poor
information
• Fixation with previous design concepts
• Honest wrong beliefs
 Common Misconceptions

“VE is something we do all the time.”

No it isn’t. VE requires the application of a specialized body of knowledge at the
right time with the right people.
“VE degrades project performance.”
If applied properly, its should maintain or improve project performance.
“VE is just another management fad.”
VE was developed in 1943. It is required by federal and many state laws. It has a
professional society and maintains professional standards and accreditation.
“VE is really just cost cutting.”
Really?
VE vs. Cost Cutting/Reduction

• VE seeks to maintain or e • Cost reduction seeks to

improve performance cut INITIAL costs, often
while reducing TOTAL at the expense of project
costs. e quality.
• VE is a pre-planned • Cost reduction is usually
allocation of time and e a reaction to budget
overruns.
effort. • Cost reduction is an
• VE is a highly structured informal process.
process using a formal
e
methodology. • Cost reduction generally
• VE utilizes an objective, involves only a few
multi-disciplined team e management personnel.
and a trained facilitator. • Cost reduction does not.
• VE provides an organized
follow-up,
implementation and
reporting program.
Value Engineering Quality

Value Engineering is a
tool/method to enhance
QUALITY
Timing the VE Effort

Potential Value Engineering Cost Savings

Potential
Savings

$
Cost to
Change

Design Final Design /

Planning Construction
Development Bid Documents

Project Life Cycle

Some VE Study Objectives

• Performance Improvement
• Significant Cost Savings/Avoidance
• Optimization of Resources (Time & Money)
• Review (Technical, QA) – Optional Objective
• Coordination (In- House & Users)
• Transfer Innovative Technologies
• Have Fun!
The Value Engineering Job
Plan

• Provides a systematic
approach
• Divides the study into
distinct work
elements
Value Engineering Is:

Step 1 – Preparation/Organization

Step 2 - Information
Step 3 – Function Analysis

Step 4 – Speculation/Creativity

Step 5 – Evaluation

Step 6 - Development

Step 7 – Presentation/Report

Step 8 – Implementation & Audit

Information Phase
Purposes

• To determine user needs

• To gather and tabulate information
concerning the item as presently designed
• To build team knowledge and understanding
of the project
• To completely understand the specific use of
function requirements of the item
• To visit the site (preferable)
• Process continues throughout remainder of
the study
Information Phase
Techniques

• Get all the facts from the best possible

sources (e.g. design team)
• Develop cost models
• Determine and evaluate the function(s) of the
present design
• Prepare a FAST diagram
• Identify & define project Performance Criteria
• Develop project Performance Ratings
• Determine present design objectives &
constraints
• What does the customer want?

USE GOOD HUMAN RELATIONS

 Why is Functional Analysis Important?

• You can’t always get what you want!

• You can’t always get what you want!
• You can’t always get what you want!
• BUT – if you try, somehow you just might , from time
to time, get what you need!
• Function Analysis defines user’s needs through verb-
noun pairings
Function – The

• Specific purposes or intended use of an item (What is this?

What is it supposed to do? What else can it do?)
– Function is that which makes a product, process or project work or
sell.
– All cost is for function.
– Primary functions posses value and are required to make a product
work or sell.
– Secondary functions have no value and are present due to the current
design of the product.
• That characteristic that makes a product or service have
value
• Determine by considering the user’s actual needs
FAST Diagram
Function Analysis System Technique

How Why

Verb-Noun Verb-Noun Verb-Noun Verb-Noun

Function Function Function Function

Generating a Function Picture

Scope Line
Scope Line
 The Purpose of a FAST Diagram is

• Show specific relationships of all functions with

respect to each other
• Deepen the understanding of the problem to be solved
• Promote discussion and information gathering – team
building
• Support the process of creativity
FAST Diagrams

HOW? WHY?
Design “All The Time”
Objective Function

Higher Order Primary Secondary Secondary Assumed

Function Function Function Function Function WHEN?
Required
Secondary
Function
 Function Analysis

Fuel Storage System

Steel
Tank
Sacrificial Excavation
Anode &
Backfill
 Function Analysis

Identify the functions

Store
Protect Fuel
Tank
Hide
Tank
 Function Analysis

Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary Function
 Function Analysis

Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Tanks
Bins
Silos
Primary Function Pools
Boxes
Sacks
 Function Analysis

Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary Function
 Function Analysis

Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Manufacture
Purchase
Recycle
Primary Function Trade
Generate
Mine
 Function Analysis

Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary Function
 Function Analysis

Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Pump
Pipeline
Conveyor
Primary Function Siphon
Cable
Microwave
Speculation Phase
Purposes

• To generate a large number of

alternatives that provide the
item’s basic function(s) without
considering their practicality
Speculation Phase
Techniques

• Use creative thinking

• No rules – no limits
• Forget about scope, speculate on the FUNCTION -
not on the item
• Don’t let regulations or people control your
thinking
• If you don’t look for the second right answer, you
won’t find it
• Eliminate/simplify: modify and/or combine
alternatives
• Think – get out of the comfort zone and enjoy it!
• Keep talking, keep generating, let the juices flow!
• Its about CHANGE!
USE GOOD HUMAN RELATIONS
 We’all’in’s never done it that
way before!!
? ?

☺
Regulations What will
and my boss
Guidelines think?
are sacred!

? What if it doesn't work? ?

Creativity
Creativity
Brainstorming Rules & Objectives…

• Criticism/evaluation is prohibited (at this

time)
• Free-wheeling is welcomed and encouraged –
be uninhibited and think as a child
• Be spontaneous – rapid fire ‘gut feels’
• Quantity is desired over quality – cover the
walls
• Combine and add to ideas
• Build upon another person’s ideas
• How do others solve similar problems
• Record all ideas
 There Are No Dumb Ideas!

OK, so some of the ideas were dumb!

Which leads us to…….
Analysis Phase
Purposes

• To evaluate, criticize, and rank alternatives

• Identify advantages and disadvantages as compared
to the baseline project
• Which alternatives offer the best combination of:
– Design-ability
– Construct-ability
– Operational ease
– Quality assurance
– Customer satisfaction
– And… low life-cycle cost
• To develop alternatives that offer the greatest
increase in value
Analysis Phase
Techniques

• Prior experience
• Collective ‘Gut” feels
• Stakeholder input
• Use cost references
• Apply matrix techniques
– Define performance measures
– Weight and rank measures
– Evaluate alternatives
• Make sketches
• Consult experts
• Use your own judgment

USE GOOD HUMAN RELATIONS

 You gotta also consider…
Life Cycle Cost Analysis! (LCC)

A definition…
“The systematic evaluation
of alternative designs and
the comparison of their
projected
development/design,
construction,
 In other words, LCC is…

Simply put… Consider all the costs!

Total LCC = Initial Cost + Ownership
Cost + Salvage value/disposal costs
Deceptive… For example, security
was typically a minor cost, but can
now be a major consideration.
LCC gives decision makers a
complete awareness of Big Picture
Development Phase
Purposes

• To select the best

alternative(s)
• To develop complete
written and oral proposals
Development Phase
Techniques
• Recommend specifics, not generalities
• Make sure your report describes the disadvantages as
well as the advantages
• Gather convincing facts
– Assure technical adequacy
• Spend your client’s money as you would your own
– Complete order-of-magnitude cost estimate w/LCC
• Prepare Proposal
– Finalize FAST diagram for proposal
– Sell the idea through the justification
– You are selling something
uncomfortable to most people – CHANGE!
• Misteaks will cast doubt on your validity

USE GOOD HUMAN RELATIONS

Presentation Phase
Purposes

• To present value engineering study

proposal(s) to the decision
makers/stake holders
• To obtain approval/support
• To enhance potential
implementation
Presentation Phase
Techniques

• Again, you are selling CHANGE!

• Your enthusiasm will sell your
proposal
• Use FAST diagram as a communication
tool – Are the most important
functions satisfied?
• Be brief, pertinent and convincing
• Keep it simple

USE GOOD HUMAN RELATIONS

Presentation Phase
Techniques

• Anticipate/remove road blocks –

understand their point of view
• Network with people and gain support
• BUT – you can’t please everybody
• AND – don’t overload the cart with too
much information
USE GOOD HUMAN RELATIONS
How to find out more about VE...

A Value Engineering Professional Society

Information about becoming a Certified
Value Specialist
Professional journals, annual conference
Web site lists local chapters
Also lists VE consultants and specialists
Important Links

SAVE International
www.value-eng.org
Purpose

1. Determine the best design alternatives

2. Reduce cost

3. Improve quality

4. Increase reliability and availability

5. Enhance customer satisfaction

6. Improve organizational performance

7. Identify problems

8. Develop recommended solutions

Potential Saving From VE

Early changes are naturally less expensive than later

ones, as shown in the diagram below.
Principles

Value Engineering principles:

1 Systematic method for evaluating product performance

and value

2 The use of multi-functional teams

3 Focus on a simplified product

Case Study

Focus Adjustment Knob for Slit Lamp

Case Study

Introduce the Product

•In this presentation we have considered a medical

instrument manufacturing company, Aadarsh Instruments, located in
Ambala.

•This firm is producing different types of microscopes which

they export to various countries around the globe.

•One of their model SL250 have a component named

Focus Adjustment Knob for Slit Lamp in microscope. This
microscope has found application in the field of eye inspection.
Case Study

The steps used for this purpose are as follows:

1. Product selection plan

2. Gather information of product

3. Functional analysis

4. Creativity Worksheet

5. Evaluation sheet

6. Cost analysis

7. Result
 Case Study

1. Plan For Product Selection

• This Product is used to adjust the focus of lens for magnification purpose.
• The present specifications of this part and its material used are costlier than the average industry
cost.

• Value of this product can be increased by maintaining its functions and reducing its cost or keeping the
cost constant and increasing the functionality of the product.
Case Study

2. Obtain Product Information

i. Material – Aluminum Bronze Alloy

ii. Diameter of base plate –30 mm
iii. Thickness of plate--3 mm
iv. Cost of the scrap is – 293 rupee/Kg
v. Pieces Produced annually – 8000
vi. Process used – C.N.C. indexing milling
vii. Cycle time—2.5 min
viii. Anodizing—2/min
ix. Material cost—65 gm
x. Total Present cost – 29.99 rupee /piece

*{1$=56 rupee}*
Case Study

3. Functional Analysis of Present Functions

Case Study

4. Develop Alternate Design Or Methods

During brainstorming these ideas were listed:

i. Change design
ii. Change material
iii. Use plastic
iv. Make it lighter
v. Change the production process
vi. Use nylon indexing unit
Case Study

5. Evaluation Phase

For judging the ideas, the following designs were considered:

A. Function
B. Cost
C. Maintainability
D. Quality
E. Space

each of the above criteria was compared with others , and depending
on their relative importance, three categories were formed, major,
medium, and minor.
Case Study

Comparing this criteria according

to relative importance :
Case Study

❖ From the paired comparison we get the following result:

❖The above ideas were discussed and the

best feasible ideas were separated which were:

a)Change the material to steel

b)Use Nylon unit
c)Use existing material
Case Study

6. Cost Analysis
 Case Study

7. Result

The total savings after the implementation of value engineering are given below:

• Cost before analysis – 29.99 rupee

• Total Cost of nylon knob – 18.40 rupee
• Saving per product – 11.59 rupee
• Percentage saving per product – 38.64 %
• Annual Demand of the product – 8000
• Total Annual Saving – 92,720 rupee
• Value Improvement - 62.98 %
Conclusion

Three goals that we're looking at value engineering:

1. Identify additional functions that aren’t

attractive to customers.

2. Add attractive functions for customers.

3. Saving because of the elimination of

redundant functions.
Elemental LED
Enhancing Value of Slit Housing
using Value Engineering –
A Case Study
 Introduce the product

In this presentation we have discussed a part of the company Labotron India

Pvt. Ltd. located in Ambala which produces medical instruments.
The part considered is Slit Housing on which the value engineering job plan
is applied.
Product selected is Slit Housing which is used as a component in assembly
of microscope in the field of eye inspection at moisture free environment.
 The steps used for this purpose are as follows:

Product selection plan

Gather information of product
Functional analysis
Creativity worksheet
Evaluation sheet
Cost analysis
Result
Product information
Functional analysis of present function
 Develop alternative Design or Methods

During brainstorming these ideas were listed:-

i. Change material
ii. Change design
iii. Use ASB plastics
iv. Change the process
v. Make product through casting
 Evaluation phase

For judging the ideas, the following designs were considered:

A: Ease of operation
B: Durability
C: Maintainability D: Safety

E: Reliability
Comparing this criteria according to relative importance :
Cost analysis
 Result

The total savings after the implementation of value engineering are given below:-
➢ Total Existing Cost – Rs 155.8/-
➢ Total Proposed Cost –Rs 98.48/-
➢ Saving per product – Rs 57.32/-
➢ Percentage saving per product –36.79%
➢ Annual Demand of the product – 10,000
➢ Total Annual Saving – Rs 5,73,200/-
➢ Value Improvement - 58.20%
Three goals that we’re looking at value engineering:
1. Identify additional functions that aren’t attractive to customers.
2. Add attractive functions for customers.
3. Saving because of the elimination of redundant functions.
 Thank you
Dr. Sachin K. Patil
Dean Academics
Rajarambapu Institute of Technology,
Rajaramnagar, Islampur, Dist. Sangli,Maharashtra, India -
415414.
e-Mail : sachink.patil@ritindia.edu
Tel : - 9970700790,
Fax : - +91 - 2342 – 220989

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