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Cost Reduction of A Product Through Value Analysis Value Engineering PDF
Cost Reduction of A Product Through Value Analysis Value Engineering PDF
of a product
through value
analysis & value
engineering
The current business scenario is very demanding with a continuous
demand from the market forces to reduce the product price. The pricing
as demanded by the market, forces the businesses to reduce product
development and manufacturing costs to remain competitive.
Ajitanath Patil
QuEST Global
contents
1.0 Introduction 03
6.0 Conclusion 07
7.0 Acronym 07
Introduction
The current business scenario is very demanding with a Product engineers are constantly faced with the
continuous demand from the market forces to reduce the following challenges:
product price. The pricing as demanded by the market,
• Reduce production cost
forces the businesses to reduce product development
and manufacturing costs to remain competitive. • Reduce the material cost
Manufacturing costs of a product can be broadly Value Analysis & Value Engineering (VAVE) methods
categorized in the following heads: are very important and useful in driving down the product
cost which helps companies retain market share and
• Raw material
sustain their profitability.
• Labor
• Process that is technology driven
What is VAVE ?
Value engineering began at General Electric Co. during and quality requirements of the product. The key
World War II. Because of the war, there were shortages metric/factor is to achieve the desired results without
of skilled labor and raw materials. Lawrence Miles and compromising on quality and performance of the
Harry Erlicher at GE looked for acceptable substitutes product.
for materials. They noticed that these substitutions often
Projects that use Value Engineering in the early
reduced costs, improved the product, and in some
development or conceptual stages are generally more
cases, both. What started out as an experiment driven
successful due to common understanding of the
by necessity was turned into a systematic process. They
objectives, deliverables, and requirements. At this point,
called their technique “Value Analysis”. As others
major design and development resources have not yet
adopted the technique, the name gradually changed to
been committed and the manner in which the basic
Value Engineering.
function of the project is to perform has not been
VAVE is a systematic process used by a multidisciplinary established, so alternative ways may be identified and
team, directed at analyzing the functions of a project, considered. Applied with flexibility and creativity, Value
product, process, system, design, or service for the Engineering is almost unlimited in its ability to identify
purpose of achieving the essential functions at the areas of potential savings.
lowest life cycle cost consistent with required
An important aspect of Value Engineering lies in its
performance, reliability, availability, quality and safety.
ability to respond with timeliness, flexibility, and
VAVE is the process of reducing costs in a development creativity. It can be used for new or existing programs, all
project. This process is achieved by assessing phases of a project, and for organizational processes.
materials, processes and or products and offering Value Engineering can be used to improve quality,
alternatives. The outcome should result in savings to the achieve lower costs, assure compliance, improve
client / end user without compromising the intent of the efficiency, build teamwork and reduce risks.
design, i.e. by maintaining or improving performance
3
© 2010, QuEST Global Services
Cost Reduction of a product through Value Analysis & Value Engineering
VAVE Approach
At QuEST, we uncover those projects of our customer System Technique (FAST). FAST applies intuitive logic
which have a good potential to improve profits. QuEST to test functions, create a common language for a team,
has a team of engineers who specialize in VAVE to and test the validity of the functions in the project.
achieve cost reductions of products.
Creative: Generate a quantity of ideas related to other
A typical VAVE exercise could reduce the total cost of a ways to perform the functions.
product by 5-40%. The typical elements of a VAVE
Evaluation: Reduce the quantity of ideas that have
exercise are as follows :
been identified to a short list of ideas with the greatest
Information: Understand the current state of the project potential to improve the project and meet the Value
and constraints / requirements. Engineering study objective.
Function Analysis: Understand the project from a Development: Further analyze and develop the short
functional perspective; what must the project do, rather list of ideas and develop those with merit into value
than how the project is currently conceived. The function alternatives.
describes what something does and function analysis is
Presentation Phase / Implementation: Present value
the process where the team reviews the project's
alternatives to management team and other project
functions to determine those that could be improved.
stakeholders or decision makers.
Function Analysis can be enhanced through the use of a
graphical mapping tool known as the Function Analysis
Typical Flowchart
4
© 2010, QuEST Global Services
Cost Reduction of a product through Value Analysis & Value Engineering
An Example
The approach to a real life problem and the methodology CTQ (Critical to Quality)
followed by QuEST to reduce the product cost is
demonstrated through the following example. Matches basic function and performance
characteristics
Background and Problem statement
One to one module replacement
One of the customers of QuEST is a leading
Same Outer dimensions for the modules
manufacturer of industrial components for control
applications. This unit is very popular in high end Logic/Software compatibility with field units
applications. No modification in standardized parts in
Product family.
The customer wanted to develop a unit that not only
Design must match existing housings and
costs 25% less but whose performance exceeds that of connectors
the existing product. Reduce the cost of direct material by 25% or
Challenges more.
Bill of Material with Cost
• Redesign of parts considering minimum impact on
existing tooling ID Part Description
Cost for No. of items
Item cost
Cost unit Cost Percentage
Class
100 units unit Subtotal of Cost
1 PART - 1 658.50 2 3.29 6 .5 9
• Redesigned modules should enable field replacement 2 PART - 2 566.13 1 5.66 5 .6 6
3
4
PART - 3
PART - 4
422.15
402.11
1
1
4.22
4.02
4 .2 2
4 .0 2
56.78 73.8% A
• Logic/Software compatibility with field units
5 PART - 5 388.99 1 3.89 3 .8 9
6 PART - 6 150.01 1 1.50 1 .5 0
7 PART - 7 146.26 1 1.46 1 .4 6
8 PART - 8 146.01 1 1.46 1 .4 6
• Ease of assembly 9 PART - 9 146.00 1 1.46 1 .4 6
10
11
PART - 10
PART - 11
145.75
104.00
1
2
1.46
0.52
1 .4 6
1 .0 4
12.81 16.7% B
• Design must match existing housings and connectors 12
13
PART - 12
PART - 13
272.96
37.89
8
1
0.34
0. 38
2 .7 3
0.3 8
14 PART - 14 37.16 4 0.09 0.3 7
15 PART - 15 35.19 4 0.09 0.3 5
• No modification of standardized parts in the product 16
17
PART - 16
PART - 17
34.77
31.86
1
6
0.35
0.05
0.3 5
0.3 2
family 18
19
PART - 18
PART - 19
28.34
28.34
1
1
0.28
0.28
0.2 8
0.2 8
20 PART - 20 28.12 2 0.14 0.2 8
5
© 2010, QuEST Global Services
Cost Reduction of a product through Value Analysis & Value Engineering
overall product + + +
Return on Investment - between 3K to 5K
parts
designs.
Pugh Matrix – n2
• One of the guiding principles of lean design is to + = Better alternative Compare current
made common with other parts in the product, without Comarison Criteria
Brief explanation
Existing Mounting options as in field units to
- S S S - -
compromising FFF (Form Fit & Function). This
match
Total # of "+" 1 2 6 1 3 2
6
© 2010, QuEST Global Services
Cost Reduction of a product through Value Analysis & Value Engineering
Conclusion
QuEST ‘Value Engineering team’ achieved 38% of development is very essential to achieve the desired
savings in direct material cost and reduced part count by objective. VAVE tools and techniques, if applied
34% in this project. properly, with trained & experienced resources will
provide an extremely powerful suite to improve
Having a Paint brush does not make one a painter. While
productivity, lower cost, improve quality and also shorten
we strive to implement the different VAVE tools, we
the time-to-market.
realize that the years of experience in product design &
Acronym
7
© 2010, QuEST Global Services
Cost Reduction of a product through Value Analysis & Value Engineering
Ajitanath Patil
Ajitanath Patil is the Sr. Tech Lead at QuEST Global (Engineering
Services, Manufacturing and SEZ). Ajitanath has 16 years of work
experience in different roles within the purview of Design &
Development of SPMs. He has a Bachelor of Engineering (B.E) in
Mechanical Engineering and a PGD in Robotics &
Industrial Automation.
QuEST Global is a focused global engineering solutions QuEST partners with customers to continuously create
provider with a proven track record of over 17 years value through customer-centric culture, continuous
serving the product development & production improvement mind-set, as well as domain specific
engineering needs of high technology companies. A engineering capability. Through its local-global model,
pioneer in global engineering services, QuEST is a QuEST provides maximum value engineering
trusted, strategic and long term partner for many Fortune interactions locally, along with high quality deliveries at
500 companies in the Aero Engines, Aerospace & optimal cost from global locations. The company
Defence, Transportation, Oil & Gas, Power, Healthcare comprises of more than 7,000 passionate engineers of
and other high tech industries. The company offers nine different nationalities intent on making a positive
mechanical, electrical, electronics, embedded, impact to the business of world class customers,
engineering software, engineering analytics, transforming the way they do engineering.
manufacturing engineering and supply chain
transformative solutions across the complete
engineering lifecycle.
http://quest-global.com