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Engr. Ped Salvador, Ph.D. Management Consultant August 2, 2012
Definition of VALUE
Desired Performance (P)
Value = Overall Costs (C)
Value can be increased by either improving the performance or reducing the cost.
What are We Defining – Cost, Worth or Value?
Best Value Worth ≈ Function + Performance + Quality Cost
•Function, Performance and Quality Must Meet the Owners Minimum Requirements •“Best Value Worth “ can be Defined as the Least Cost to Accomplish the Function to an Acceptable Degree •Note that Increased Costs Lowers Best Value Worth - Unless there is an Equal or Greater Increase in Function, Performance or Quality
•Also note that Funding Limits and Shortfalls May Stop Progress, Delay Schedules or End Project Implementation
• Value Methodology (also called Value Engineering, Value Analysis or Value Management) is a powerful problem-solving tool that can reduce costs while maintaining or improving performance and quality requirements. • It is a function-oriented, systematic team approach to providing value in a product or service.
Continued…. • The value methodology helps organizations compete more effectively in local. national and international markets by: – – – – – – Improving quality Decreasing costs Increasing profits Expanding market share Saving time Solving problems Using resources more effectively 6 .
typically the earlier it is applied the higher the return on the time and effort invested. However. 7 . • VE can be applied at any point in a project. • First utilized in the manufacturing industry during World War II.Value Engineering in Construction Projects • Value Engineering is a conscious and explicit set of disciplined procedures designed to seek out optimum value for both initial and long-term investment. and it has been widely used in the construction industry for many years.
organized effort. which analyzes the requirements of a project for the purpose of achieving the essential functions at the lowest total costs (capital.Value Engineering (VE) is not a design/peer review or a cost-cutting exercise. value and economy are improved through the study of alternate design concepts. maintenance) over the life of the project. materials. energy. VE is a creative. staffing. Through a group investigation. using experienced. multi-disciplinary teams. and methods without compromising the functional and value objectives of the client. 8 .
Potential Savings Benefit 9 .
VAVE Benefits Government Projects 12 .
to establish a monetary value for that function . maintainability. . 13 . system or service. -to identify the functions of a product. process.then provide the desired function at an overall minimum cost without affecting any of the existing parameters like quality. safety and other performance characteristics.VALUE ANALYSIS VA is a step by step approach. productivity. .
14 .VALUE ENGINEERING • Value Engineering is where the value of all the components used in the construction of a house or building from design to final delivery stage are completely analyzed and pursued.
Cost Reduction of a Mechanical Bracket via Value Engineering 15 .
Electronic Component Diode Design 16 .
or reducing the project cost. cost. 17 . and objectives of a design or construction project with the purpose of improving the value (function) of the design of its components.Value Engineering in Project Management Value Engineering (VE) is a means of evaluating the function.
improved the product. and component parts. 18 . raw materials. during World War II. • Lawrence Miles and Harry Erlicher at G. there were shortages of skilled labor. What started out as an accident of necessity was turned into a systematic process.E. They called their technique as “Value Analysis”. They noticed that these substitutions often reduced costs. looked for acceptable substitutes. Because of the war. or both.HISTORY • Value Engineering began at General Electric Co.
They named it as “Value Engineering”. 19 .e. US Navy Bureau of ships adopted same technique in their effort at „cost avoidance‟ during the design stage and saved millions of dollars. VE follows thought process that is based exclusively on “function”.HISTORY In the year 1954. what something „does‟ not what it is. i.
engineers to make a team with total experience and knowledge VALUE ENGINEERING • Indicates application on the product at its design stage. 20 . • All factors come together including workers.DIFFERENCE BETWEEN VALUE ANALYSIS AND VALUE ENGINEERING VALUE ANALYSIS • Indicates application on the product that is into manufacturing or construction stage. • It is always done by a specific product design (engineers) team. subcontractors.
• It requires specific technical knowledge.DIFFERENCE BETWEEN VALUE ANALYSIS AND VALUE ENGINEERING VALUE ANALYSIS • It may change the present stage of the product or operation • It is worked out mostly with help of knowledge and experience VALUE ENGINEERING • the changes are executed at the initial stages only. 21 .
• For a producer overall cost is the summation of all the elements of the cost required to produce a product or service such as labor.WHAT IS THE MEANING OF OVERALL COSTS? • Overall costs means different to different people. overhead. • For a consumer overall cost is the monetary sum (price) for which the products or services are purchased in the market. 22 . etc. material.
2.The value of a function can be increased by four methods 1. Decrease the cost and increase the performance 4. 3. Decrease the cost while ensuring the same level of performance. Increase both performance and cost ensuring that performance increases more than the increment in the cost. 23 . Enhance the performance at the same cost.
VALUE ANALYSIS TESTS • • • • Does its use contribute value? Is its cost proportional to its usefulness? Does it need all its features? Is there anything better for the intended use? Can a usable part be made by a lower cost method? • 24 .
VALUE ANALYSIS TESTS • Can a standard product be found which will be usable? • Is it made on proper tooling. overhead. reasonable labor. and profit total its cost? • Will another dependable supplier provide it for less? • Is anyone buying it for less? 25 . considering quantities used? • Do materials.
• In a perfectly value engineered product. then using a material that lasts thirty years is wasteful.Unnecessarily expensive inputs can sometimes be replaced by less expensive ones that function just as well. • If a product has a life span of ten years.Cost Optimization Strategy Value engineering reduces costs by eliminating wasteful practices. • Material substitutions . 26 . every component of that product will function perfectly until the product is no longer useful. at which time all components will deteriorate.
and unnecessary production operations can lower costs and increase manufacturability. reliability.More efficient processes can be used and the product can be redesigned so that it is easier to produce. 27 . Process engineering can be used to increase process efficiency. and profits.Cost Optimization Strategy • Process efficiency and producibility . unnecessary precision. • Reducing unnecessary parts.
This component can be produced. 28 . • For example. a typical tape-player has a precision injection-molded tape-deck compartment.Cost Optimization Strategy • Modularity . assembled and tested by an independent manufacturer and sold to numerous companies as a subassembly.Subassemblies that are designed and developed once and reused in many slightly different products can reduce a project's engineering and design costs. The tooling and design expense for the tape deck is shared over many products that can look quite different.
• Customers will be paying for features that they don’t want to pay for.A product with more features than customers want is inefficient. these can be sold as options. 29 . • Value engineering can determine how to produce a product that exactly matches the wants of a major segment of the market. When a customer needs more features.Cost Optimization Strategy • Market driven product improvements .
transportation vehicles. and other systems that use much energy.Value can be created by making a product or process more energy efficient for the user. 30 . industrial equipment. This is particularly true in heating and air conditioning systems.Cost Optimization Strategy • Energy efficiency . • Green building designs are now also very prevalent in all Architectural designs for housings. condominiums and buildings to serve energy.
• When referring to consumer products. Individual expenditures must be discounted to reflect the time value of money.Total Life Cycle Cost vs Direct Cost • When value engineers talk about reducing costs. This measure of cost is most applicable to expensive capital equipment. the direct cost of production is more typically used. • Total life cycle costs are the total expenditures over the whole life span of the product. and includes manufacturing costs. installation costs. maintenance costs. and decommissioning costs. 31 . This measure is limited to the costs directly associated with manufacturing the product. they are usually referring to either total life cycle costs or the direct costs of production.
FUNCTION OF VA/VE FUNCTION HERE MEANS NEED .
THE VARIOUS TYPES OF FUNCTION ARE AS FOLLOWS: • Use function and Aesthetic function • Primary function and secondary function • Higher order and secondary function 33 .
expressed in passive or nonmeasurable tone 34 . expresses in active tone • Aesthetic function-Pleases customer.USE FUNCTION AND AESTHETIC FUNCTION • Use function-Performs some action.
Basic purpose for which a product exists • Secondary function .Arises out of specific design chosen to fulfill the primary function 35 .Primary function and secondary function • Primary function .
Means of achieving the basic function 36 .Reason of satisfying the basic function • Lower order function .Higher order and secondary function • Higher order function .
EXAMPLE Function of a Flash Light WHY? GIVE LIGHT FACILITATE VIEWING HOW ? LIGHT THE BULB HOW ? SUPPLY CURRENT HOW ? INSERT BATTERY 37 .
THE VA PROCESS Orientation Functional identification Functional analysis Creative alternatives Analysis & evaluation implementation 38 .
Recommendation 7.Implementation 8.Evaluation 6.Function 4.Orientation 2.Creation 5.Information 3.Audit/Follow up 39 .Job Plan with Specific Phases 1.
for selection of project Formation of team of experts from various functions 40 . Pareto Analysis etc.Orientation Phase To create awareness and learn the methodology of tools Training sessions for all supervisory and managerial staff on VA & VE Exposure to techniques like Brainstorming.1.
Work is done on specifics. rather than on generalities. In this phase . The resistance to change needs to be overcome.It is the most demanding phase of a VA job plan. emphasis is placed on human interaction to seek co-operation of the team. It creates the right environment for successful VA. 41 .
Information Phase To collect all the information pertaining to the project (product) Work can be divided among team members Lack of information Most people who design a product are quite often not too sure of the real needs of a user and usually over-design the product by providing it with features that the user just does not use. 42 .2.
They create obsolescence in respect of the old processes. In the face of competition the royal road to ruin is to adopt the methods of yesterday to the business of today. 43 . new materials and new processes are coming up almost every day.Importance of Information The world is advancing exceedingly fast and new technology. Costs which were considered satisfactory yesterday become unnecessary today. new products.
44 . production data are considered. a relationship is established between cost and specification or requirements. The cost data and work specifications are secured. The product or project is studied in detail and all important facts are gathered and considered. the engineering drawings. Facts in the form of technical specifications or environmental specifications. production sample. Finally. Consumer preferences are jotted down and testing are studied and quantities and scrap are taken into account. an attempt is made to assess the potential of value improvement.Information phase : In this phase.
45 .Function Phase To develop FAST diagram Start from basic function and probe further with WHY? And HOW? List down all the functions for all the parts Estimated cost of each component is assigned A Function Analysis System Technique(FAST) diagram is prepared to help team members visualize the need for and role of each major component.3.
Fast as VE Technique • This technique is developed by Charles W Bytheway(1965). • • • • • • • • . 2) These functions are written on small cards. The following step are followed for construction FAST 1) Use verb and noun for describing functions. : (i) How is the function performed? (ii) Why is it performed? (iii) When is it performed? The logical sequence of function (basic and secondary) generate a critical function path. It consist of only critical functions. 3) First select the basic function card. It is an interaction between function and cost. FAST is a visual representation of functions and identifies the areas of greatest impact of these function on costs.
verb-noun functions to describe complex systems. 48 . Use of a verb focuses attention on doing something and precludes fuzzy wishes and objectives becoming activities. on the facility or component that is to be changed or affected by the action of the verb. • FAST builds upon VA by linking the simply expressed. • FAST permits people with dissimilar technical back grounds to effectively communicate and resolve issues that require multi-disciplined considerations. a physical reality. Examples are excavate soil or treat waste.FUNCTION ANALYSIS SYSTEM TECHNIQUE – (FAST) • Function Analysis System Technique is an evolution of the value analysis process. Use of a noun focuses attention on an object.
• It allows multi-disciplined team members to contribute equally and communicate with one another while addressing the problem objectively without bias or preconceived conclusions. forming the basis for a wide variety of subsequent approaches and analysis techniques. •It describes the item or system under study and causes the team to think through the functions that the item or system performs. there are no right or wrong model or result. but rather a beginning. 49 .FUNCTION ANALYSIS SYSTEM TECHNIQUE – (FAST) •FAST is not an end product or result. • With FAST.
Generating a Function Picture Function Analysis System Technique Verb-Noun Function Verb-Noun Function Verb-Noun Function Verb-Noun Function “F.S.T. Diagram” .A.
Diagram” Happen All the Time: Higher Order Function Required Secondary Function Required Secondary Function Beyond Study Scope When Functions that happen all the time and/or are caused by some other functions Scope of Problem Under Study .S.How Design Objectives: Basic Function Functions that Why “F.A.T.
FUNCTION ANALYSIS SYSTEM TECHNIQUE – (FAST)
The right scope line identifies the beginning of study and separates the input function(s) from the scope of the study . The objective or goal of the study is called the "Highest Order Function", located to left of the basic function(s) and outside of the left scope line. Any function to the left another function is a "higher order function", Functions to the right and outside of right scope line represent the input side that "turn on" or initiate the subject under study and are known as lowest order functions. Any function to the right of another function is a "lower order" function and represents a method selected to carry out the function being addressed.
FUNCTION ANALYSIS SYSTEM TECHNIQUE – (FAST)
•There are normally two types of FAST diagrams, the technical FAST diagram and the customer FAST diagram. •A technical FAST diagram is used to understand the technical aspects of a specific portion of a total product.
•A customer FAST diagram focuses on the aspects of a product that the customer cares about and does not delve into the technicalities, mechanics or physics of the product. A customer FAST diagram is usually applied to a total product.
an attempt is made to define functions with only two words ---A verb and noun. These functions are co-related with cost and their worth.In this phase the product is defined in terms of its functions. and of its performance expectations. 56 . Most of the times. It makes the definition more easier to understand.
Some function Definitions product Tea cup Light bulb Gas lighter Fan regulator Match box Mirror Brake House function Hold tea (liquid) Emit light Provide ignition Regulator speed Provide ignition Reflect light Arrest motion Safeguard Human .
project components with a high cost are also subjects for subsequent VE evaluation.Important Notes during Functional Analysis • Project components that are found to make little or no difference to overall project objectives will become subjects for further investigation in the subsequent VE phases. 58 . • Similarly.
Creation Phase To develop alternate means to achieve these functions Brainstorming sessions to generate ideas 59 .4.
but if it does not. The facilitator is responsible for writing down each and every idea that is suggested. as long as ideas are still being generated. forced statement of ideas usually get things going. In order to elicit ideas. This first. 60 . then go around the table two or three times. Some VE teams are more conservative and slow to generate ideas. asked each person in turn to suggest at least one idea.Brainstorming involves the free flow of ideas. Some VE teams get going at this point and spontaneously generate long lists of ideas.
Creative ideas are also developed by a number of check-lists and idea-stimulators. 61 . We jump at the first ideas that work and usually do not bother to find out if better methods are possible. positive thinking is encouraged. To nurture creativity. To fill with creative ideas.Lack of ideas Most of us want previously tried out materials. designs processes and procedures. brainstorming technique is used.
Will it work? Is it less costlier than the present design? Is it feasible to implement? 62 .Evaluation Phase The objective of this is to select for further analysis of the most promising of the ideas generated during the creative phase and to subject the ideas to a preliminary screening to identify those which satisfy the following criteria.5.
Develop function alternatives: Mould the individual functional solutions into total solutions. 63 . Evaluate by comparison: Once the rough total solutions and their related estimates of costs have been established. they are compared to determine which one will provide the greatest value advantage.There are four techniques associated with this phase: Refine and combine ideas: The ideas must be practicable and to make them so we may have to refine an idea or combine two or more than two ideas Establish cost on all ideas: calculating potential costs of implementing the ideas.
Ideas accepted are here converted into acceptable and workable solution to perform the desired function at the least cost. to consult vendors and specialists. processes and procedures. It may be necessary to standardize. and to use specialty products. 64 .
Recommendation Phase To submit the details about the proposed changes with financial implications. 7.6. To execute the proposed/ accepted changes list down all the activities and fix up the time frame for each. reasons of changing. Implementation Phase Selected value alternative is here presented for acceptance. Make the entire team responsible for all the activities. Acceptance is the key to success of VA. new investments and annual savings. 65 . Report includes proposed changes. All the relevant data are kept for management decision.
66 .Audit / Follow up Phase To compare the actual results with that of expected. This is the responsibility of top management alone . It can be done only after complete execution of the project.8.
Summary 67 .
• The VA function can be organization –its size.It can be administered by staff at the corporate office or it may be run on decentralized basis or a balanced combination of both. The VA also requires team work. • A decentralized and local VA group is accepted as a helpful service.Organizational Aspects of VA • VA required top management support top management support. This is specially effective when manufacturing units are set up on production line basis and are autonomous cost and profit centers. operations. product-line etc. .
VA is also affected by the management level to which it reportsit must be wide enough to cover all areas affecting the validity of the study. high enough to communicate with decision-making responsible for implementation.VA however is not as firmly entrenched as marketing. There are frequent resistance problems to VA. finance and other corporate functions. powerful enough to communication with decision-makers responsible for implementation. powerful enough to control and take responsibility for the administration and assignment of VA group. 70 . Its endorsement at the top level leads to acceptance at the lower levels.
THE RED POINTER AND RED INK .
• Developing alternatives to reduce costs. a strip of bright metal containing a red pointer was mounted. • The value audit of the product showed that $20000 was spent each year on the production of 1 million pieces. • Function: knob conceals the screw and provides the appearance which the customer wished.ABOUT THE PRODUCT • On an appliance knob. . • A polished stainless steel part was one alternative which would accomplish the function and be liked by the customer as well.
were merely small stampings not using name plate technology and not limited to the sources of supply who provide name plates. such as the polished stainless steel. • Some of the other alternatives. “Why does the red pointer increase the cost so much?” • The answer was that it caused the small part to become a “name plate”. which imposed certain costs and restrictions on its manufacture and procurement. .FINDING WHERE TO CUT DOWN ON COSTS • The industrial stylist asked.
000 of unnecessary cost . both improving the customer appearance value of the product and eliminating 815. 74 . the red arrow was not good.Instructions by stylist: to take out the red pointer and use polished stainless steel. that it caused the product to look more like a toy and less the mature and he never had liked the red color The change was made.
000 cash each year ($1250 each month) for the design life of three to four years shows the benefits of an optimum problem solving system for simple as well as involved matters. • An organized creative approach to efficiently identify unnecessary costs . and a group of learned skills. a body of knowledge. and the thinking process seen simple. • Value analysis is a problem-solving system implemented by the use of a specific set of techniques.Effective Solution : Value Analysis • Although the answer . once developed. $15.
Leads to orderly utilization of better approaches. newer processes. alternative materials. and abilities of specialized suppliers. 76 . Step by step procedures for accomplishing its objectives efficiently with assurance. It focuses engineering. manufacturing and purchasing attention on one objective-equivalent performance for lower cost.
77 . All rights reserved.Value Engineering Case Studies Copyright © 2012 Adroit Construction.
All rights reserved. 78 .Copyright Novum Structures 2010.
End 80 .
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