Value Engineering

D.S.More
Prof. A. Subash Babu
 Model of Manufacturing

Product Manufacturing
design planning

Business
functions

(a) Factory
physical Finished
Raw products
materials activities

Manufacturing (b) Information-

control processing
activities
 Functions in Manufacturing
Processing
Assembly Physical activities
that touch the product
Material handling and storage
Inspection and test
Coordinate and regulate
Control
the physical activities
Factory operations
1. Processing
Raw 2. Assembly Finished
materials 3. Material handling product
4. Inspection and test

Receiving Shipping

5.Control
 Why Do We Measure?
Because the boss says
Because we have always measured
To make sure we are under budget?
To gain visibility?
To comply?
To satisfy someone else's needs?
To solve problems?
To improve?
To change or prevent change
To monitor progress against plans
To make decisions and take actions
 Performance Criteria
If the It will If it It will
organization be supports be
is

Effective Innovation

Efficient Productive Profitable

Quality

Achieving Balance
 Effectiveness
Accomplishment of the right things,
on time, within the requirements specified

Value-Adding
Suppliers Inputs Transformation Outputs Customers

Effectiveness
 Efficiency

Resources expected to be consumed divided

by resources actually consumed

Value-Adding
Suppliers Inputs Transformation Outputs Customers

Efficiency
 Quality
". . . a predictable degree of uniformity and
dependability, at a low cost, suited to the market."
W. Edward Deming (1986)

". . . fitness for use, as judged by the user."

Joseph Juran (1989)

". . . conformance to requirements"

Phillip Crosby (1979)

". . . loss imparted to the society"

Genich Taguchi
 Quality
Defined by the customer!

Value-Adding
Suppliers Inputs Transformation Outputs Customers

Quality Quality Quality Quality Quality

 Productivity

Measures of output divided by measures of

input for a given period of time

Value-Adding
Suppliers Inputs Transformation Outputs Customers

Productivity
 Innovation
The creative process of change

Value-Adding
Suppliers Inputs Transformation Outputs Customers

Innovation
 Profitability
Relationship between revenues and costs

Suppliers Value-Adding Outputs Outcomes

Inputs Customers
Transformation

Profitability
 Meaning of value
Value means different things to different people
Different departments of the same company have

different meaning
The designer relates value with . Reliability
price paid for items
Purchase man with
costs to manufacture
Production person equate the value with ..

what customer willing to pay

Sales person with.

In short: Value is personal perspective of your willingness to pay for

the performance delivered by a product, process or projects.
PROCESS: OPENING AN ACCOUNT
Operatio Non-
Customer
nal value
Activity value
value adde
added
added d
Request account to be opened X
Gather information X
Qualify request against legal compliance X
Authorize request X
Request review X
Send incomplete requests to account rep X
Obtain account information X
Complete memo X
Request set up X
Account manager review X
Account manager approval X
Risk manager review X
Risk manager approval X
Notify account manager X
Request authorization key X
Data entry to system X
Data formatted to open account X
Distribute to various departments X
Account open X
Student receives notification X
 Quality/Performance/utility (P)
Value = -------------------------------

Cost (C)

P P
V = ------ V = ------
C C

P P
V = ------ V = ------
C C
 Definition of Value Engineering
Value analysis is a systematic and function based
approach to improving the value of products, projects,
or services and provide the necessary function
reliability at that lowest overall cost.

Value Engineering is:

A known & accepted methodology
A process that assures quality, reliability and
performance
An effort to improve value and optimize the life
cycle cost of a facility

Value Engineering is not:

A cost cutting process that reduces project
scope/quality
Principles behind VE
Involves a team approach following structured,
systematic and rigorous process.
The team approach brings various departments
together in the common goal of eliminating excess
costs.
Functionally oriented method
Organized creative approach to ensure that essential
functions of product or service are provided at
minimum overall cost without scarifying quality and
reliability.
Cost preventive technique and a powerful technique
which eliminate unnecessary cost built up into the
product.
 Synonym so will
be used
interchangeably
throughout the text

A?
V

FA
?
?
VM?
VE?

Value
Methodology
 Saturation
Introduction and Growth
Phase
Product Phase
Design
Phase
Applied at the design
stage..Ensure Focus overall
prevention rather
than elimination VA improvement
across life
cycle of the
product
VE Applied to
the existing
product with VM
a view to
improve
value
 Use of value engineering
Cost prevention as well as cost elimination
technique.reduce material use and costs.
To reduce production costs and remove non value
added steps.
To orient and motivate people towards creative
thinking
To balance the cost and performance
To increase the profit margins
To increase customer satisfaction.
 Value Engineering: Applications
Areas in which VE can be efficiently and profitably
utilized are:
o Engineering: Design, product improvement.
o Manufacturing: Material Handling, tool design and
production.
o Purchasing: Manufacturer's vendor alternative
proposals; new product information.
o Sales: Slow selling products.
o Systems and Procedures: Paperwork, forms processing,
reproduction services.
o Maintenance: Procedures, material, work scheduling.
o Energy Conversion: Procedures, life cycle costing
analysis.
o Construction: planning, scheduling, labor, consumables.
Surplus usage.
 When to apply Value Analysis

Companys products are loosing in the market

Companys products are priced higher than the
competitors
New design
Increase in cost of production
Decreasing profitability and ROI
Failing to meet the delivery commitment
 Difference between VE and Cost reduction
Techniques

Approach
Traditional techniques are post-production oriented
and concentration is on the partswhile VA is function
oriented
Cost reduction can reduce cost up to 10% whereas
30-40% cost reduction is possible with VA without
scarifying its quality and performance.
The cost reduction is cost oriented and concentrate
on finding the cheaper cost whereas VA is function
oriented and try to produce the product at lowest cost
without scarifying its quality and performance.
Steps in Value Analysis

1. Selection of product
BLAST 2. Collect relevant information
3. Define the functions

4. Create different alternatives

CREATE 5. Critically examine alternatives

6. Develop the best alternative

REFINE 7. Implementation of alternatives
 Phases of Value Analysis

1.Orientation phase
2.Information phase
3.Function Analysis Phase
4.Speculation or creative phase
5.Evaluation phase
6.Development phase
7.Recommendation phase
8.Implementation phase
9.Follow-up phase
Phases and Constituent Element of Each
Phase
1.Orientation phase
Select - Project to be handled by V.E team
Establish Priorities
Plan - Specific product
Appoint - The team
Brief Members regarding the project
Review Methodology to be followed for investigation
Prepare Teams of reference for selected project
Fix Responsibility for data collection
 Criteria for Selecting a Product or
Project
Look For:

1. Orientation Phase
High annual value or expense
Intricacy or complication in design
Low yields or high scrap
Labor intensive or time consuming processes
Complex processes with many operations
An Assembly that can be a single part
Parts that can be standardized or used in several applications
Obsolete or hard to find parts
Older raw materials that have had better substitute
materials on the market in recent years
Items with inconsistent quality or performance
2. Information phase
Locate Data from different sources

2. Information phase
Identify Facts
Arrange Facts into required form

The following information will be needed:

o All drawings and specifications.
o All cost details
o Machine and assembly details
o Features preferred by customers
o Supply details
o Failure details and service record
o Quantities involved
o All manufacturing details
oAny other relevant information pertaining to the product.
3. Function Analysis Phase

3. Function Analysis Phase

List The components or parts
Prepare Verb-noun description of functions
Establish Cost of basic functions
Estimate Worth of each basic function
Determine Value improvement potential

1.Identify the functions and their levels as

basic and secondary.
2. Construct FAST diagram.
3. Allocate proper costs to the selected function.
 3.1 Definition and Analysis of Functions

3. Function Analysis Phase

o Function Analysis is the heart of VE.
o Function is that which a product does in order
to work or sell.
o Each function must be expressed in just two words
Active verb ..Measurable Noun.

Answer the question what Answer the question what

is to be done? Or What is is it being done to ? Or
it is to do? What is it is to do?

Defines required action Tells us what is acted upon

Note: Many passive functions can be readily converted into action

functives. Simply change the noun into a verb. Example: Provide cooling
becomes Cool Space,
Examples : Active verb ..Measurable Noun

3. Function Analysis Phase

Product: Automobile Engine
 3.2 Advantage of expressing any function in

3. Function Analysis Phase

Active verb ..Measurable Noun

o Helps to state with clarity the functions

performed by a product or parts.
o Helps to break the problem in simplest form.
o Avoid faulty communication and misunderstanding.
o It is not a simple task..
 What does a computer do?
Group A Group B
o Automate Data o Aid Automation
o Store Data o Facility Storage
o Retrieve Data o Aid Designer
o Update Data o Respond Commands
o Design Structure o Activate Program
o Produce Solution o Process Input/Data
o Solve Problems

Remark: Difference in their basic understanding of the role of the

computer. Group-A does not understand the role of the computer.
 Group A
sincerely
believes that the Group B views the
computer can do computer as a tool
wonders and realize its
limitations
 Is the basic purpose or
3.3 Dividing Functions

3. Function Analysis Phase

prime reason for which
the product or process
exist.
It can not change
o Basic/primary function

Basically a result of a specific design approach

How is this achieved? Or
What other functions support
the basic functions

o Secondary/supporting Function

It support primary function

Could be modified or
eliminate to reduce product
costs
Function Analysis System Technique (FAST)

3. Function Analysis Phase

o Most important phase of VE or FA.
oFAST is not end product or result, but rather a beginning.
o An excellent communication vehicle.
oSimilar to PERT but function oriented rather than time
oriented
o Linking the simply expressed, verb-noun functions to describe
complex system.
o Two types of FAST diagram, technical FAST diagram and the
customer FAST diagram
oShows the specific relationships of all functions with
respect to each other in the analysis of an entire system,
process or complicated assembly
Function Analysis System Technique (FAST)

3. Function Analysis Phase

o Gives a better understanding of interrelationships of
functions and their costs.
oTests the validity of the functions under study
o Basically finds answers to three questions about each
functions performed by a product or service.
o How?
Each function definition answers the question, How is (it)
accomplished?.....(IT), is the function to the left in the Dig.
oWhy?
Each function definition also answers the question. Why is (IT)
accomplished? (IT), in this case, is the function to the right in the
diagram.

o When or if?
Desired and undesired functions

Desired Function Undesired Function

Pollutes the
Transport persons environment
Transport goods Wastes energy
Cause accidents

Produces
These functions are not required and heat
the user willlight
Produces normally not pay for
Waste
them. It is one of the targets energy
of the
VE to eliminate or at least, minimize
these functions
The four(4) primary directions in a FAST diagram
Along the critical path-AND logic
Along the critical path- OR logic
AND Along the WHEN Direction

The example states When you influence

the customer, you Inform the
customer AND apply
skills.

As a note of explanation. It would

appear that the same fork symbol
should be used to express AND
in the WHEN as well as the HOW-WHY
direction, giving example A this
appearance.
 Construction of FAST Diagram for a ball point pen

3. Function Analysis Phase

1. Note all the parts of the pen
2. Identify all the functions of the parts
Parts Functions Remarks
Tip Improve look, Locate Chromium Plating
part
Plastic neck Hold part, Provide grip, Step in tip
Facilitate maintenance

Spring Provide tension

Refill Contain ink, Control flow,
Restrict movement

Ink in refill Make Marks

Plastic Barrel Enclose part, Identify Hole in barrel, name
company, Air flow barrel
3. Identify basic and secondary functions

3. Function Analysis Phase

Basic Function- Provide Impression or Make mark
Secondary Function- Improve look
Provide grip
Control flow
4. Construct Fast diagram
5. Function-cost matrix or Value Analysis Matrix
o Detailed cost estimates become more important following function
analysis, when evaluation value improvement proposals.
o The total cost and % contribution of the functions of the item under
study will guide the team , or analyst , in selecting which function to
select for value improvement analysis.
oTo identify the cost of providing each function by associating the
function with component part of a product.
o This approach draw the attention of the analysts away from the cost
of components and focus their attention on the cost contribution of
the functions.
o Product function with a high cost-function ratio are identified as
opportunities for further investigation and improvement.
o Improvement opportunities are then brainstormed, analyzed and
selected.
Function-cost matrix or Value Analysis Matrix for pen
Function-cost matrix or Value Analysis Matrix for pencil
 4. Speculation or creative phase
4. Speculation or creative phase

Conduct Creative problem-solving

Generate Ideas, combine and/or rearrange them
to provide different ways to accomplish basic
functions

o To generate alternative ways of achieving functions

defined in the previous step.
o Alternatives are only listed and are not discussed or
evaluated.
o Typically completed Using Brain Storming
Techniques
 4. Speculation or creative phase
The following questions often lead to creative
thinking:

o Can we do without it?

o Why this particular shape?
o (If it is flat) can it be round? Or vice versa
o Can two parts be combined?
o Can one component be made into two?
o Why does it need to be so thick?
o Can standard part be used?
o Can we buy it at cheaper rate?
o What new processes can we use?
o Are tolerances closer than necessary?
o Such questions stimulate new ideas.
5. Evaluation phase (Analysis of solution)

Short list Creative ideas

Develop Ideas functionally/ Formulate Reasonable V.E.
Alternatives
Evaluate Ideas according to prefixed criteria
Rank Alternatives according to the cost reduction potential
Select One or more alternatives for production

o Eliminate/Combine Ideas
o Determine Advantages/ Disadvantages
o Perform Evaluation Matrix
6. Development phase (development of
solution)
Analyze The alternatives for technical requirement
Confirm The economic feasibility
Arrange The necessary test runs
Select One or two alternatives for recommendations

The development stage expands on the final

ideas to make them feasible design or procedure

7. Recommendation phase
Prepare The reports of V.A proposals
Make Presentation to the decision-making authority
Submit A definite plan for action
Secure Approval for implementation
8. Implementation phase
Obtain Approval to the proposal
Fix Responsibility for implementation
Authorize Change to convert recommendations into actions
Expedite Implementation
Resolve Problem identified during implementation
Train Workmen
Retime Jobs

9.Follow-up phase
Audit Savings and compare results with original expectations
Submit Cost savings achievement reports to the management
Evaluate The effectiveness
Recommend Change/corrective actions and awards for
contributors to value engineering proposals
Principles of Value Analysis-1
Do not use a component or part that does not
contribute to the value of the product
Do not use a component or part whose cost is not
proportional to its usefulness.
Do not provide any features to the component or
product that are not absolutely
necessary.
Accept the change if part of the required quality
can be made out of cheaper and easily
available material
If the part of required quality is made by a
process or method costing less, then do use the
alternative process or methods.
Principles of Value Analysis-2
Use standard parts wherever possible
Use proper tooling and manufacturing methods.
The cost of the component used should be proportional
to its use or function
Use the material, part best suited for the purpose
Purchase the part if suitable suppliers are available.
Have a clear target and project definition.
Open-minded, multi-functional tea, Operational, R&D,
Outside engineers.
Keep same team for VEA and Implementation
Use outside facilitator is an advantage
Supports from senior management
Limitations:
o The VEA does not replace the serious project design
work.
o It cannot provide miracle cost saving to a badly prepared
project cost estimate.
oScope/Quality- costs-Timing relationships has to be
respected
o The ides of the VEA is not to perform a cost-cutting
exercise.