Department of Industrial and Production Engineering

IP43614 - Product Management

Unit - 3

Value Engineering

Sumit Dwivedi
Assistant Professor
IPE Department, SGSITS, Indore
Basic Concepts in Value Engineering
Value Engineering and Value Analysis:

 Value Engineering (VE) or Value Analysis (VA) is an important and powerful approach for
improvement in the performance of the products, systems or procedures and reduction in costs without
jeopardizing their function. The terms VE and VA are used almost interchangeably. Other terms used to
convey the same concepts are Value Assurance and Value Management (VM).

 L.D. Miles defined Value Analysis in his book Techniques of Value Analysis and Engineering (1961) as
"an organized creative approach which has for its purpose the efficient identification of unnecessary
cost i.e., cost which provides neither quality, nor use, nor life, nor appearance, nor customer features".
Basic Concepts in Value Engineering
 Various other definitions are proposed such as "an organized systematic study of the function of a
material, component, product or service, with the objective of yielding value improvement through the
ability to accomplish the desired function at the lowest cost without degradation in quality".

 Thus the basic objective of VE/VA is to achieve equivalent or better performance at a lower cost while
maintaining all functional and quality requirements. It does this largely by identifying and eliminating
hidden, invisible and unnecessary costs.

 We may simply perceive VE as the systematic application of recognized techniques to identify the
functions of a product or service and provide those functions at the lowest total cost.
Basic Concepts in Value Engineering
 Value Engineering should not be treated as a mere cost reduction technique or cheapening of the
product.

 It is more comprehensive and the improvement in value is attained without any sacrifice in quality,
reliability, maintainability, availability, aesthetics, etc.

 It was traditionally applied in the area of hardware projects, such as product design, though these
concepts are equally applicable in software projects, in the systems and procedures. Recently these
concepts have been applied to nontraditional areas `such as urban slum development program, staff
welfare motivation enhancement and courtesy improvement plans.
Basic Concepts in Value Engineering
Reasons for Poor Value:

 One of the important reasons behind poor value in products, systems and procedures that we come
across is the lack of organized effort in devising such systems. Many times the designs are created
under highly compressed time frame and the designer may play safe by giving product designs with
sole emphasis on technical feasibility and may prescribe thicker, costlier materials and other
unnecessary features which are not needed by the customer.

 Sometimes, ad hoc decisions get permanency due to lack of review of product designs. Often lack, of
consultation with others contributes to poor value.

 Lack of information, wrong beliefs, habits and attitudes are some of the other reasons.
Function and Value
Functions:

 VE discipline deals with the functions of items, products, systems and procedures. It is a functional
approach, a customer-oriented approach.

 Identification of the functions, therefore, constitutes an important aspect of VE. The term `function' is
used to mean the purpose or use of a product.

Types of function: Functions can be of two types:

a) Basic functions: The primary purpose of a product.

b) Secondary functions: Other purposes not directly accomplishing the primary purpose but supporting
it or resulting from a specific design approach. Note: Many a time poor value may result in because the
functions have not been precisely understood and
redundant or unnecessary functions have been imposed.
Function and Value
Value:

 The term `Value' is used in many different ways and is frequently confused with the monetary price or
cost of an item. However value is not synonymous with cost.

 Value may be perceived as the ratio of the sum of positive and negative aspects of an object.

 Thus value can be considered as a composite of quality and cost. It is more in terms of worth or utility.

 Thus a ratio of quality to cost can be treated as the value of a product.

 If its costs can be reduced for same quality or quality can be improved with same cost, then the value
improvement can be said to occur.
Function and Value
Types of Value:

The term value can be divided into following types:

a) Use Value: The properties and qualities which accomplish a useful purpose or service.

b) Esteem Value: The properties, features or attractiveness which cause us to want or own it.

c) Cost Value: The sum of labour, material and various other costs required to produce it.

d) Exchange Value: The properties or qualities which enable us to exchange it for something else we
want.
Value Tests
VE is essentially a questioning attitude looking at the function and costs. L.D. Miles designed a set of
value tests to ascertain whether there is a scope for value improvement. If these value tests are honestly
applied, there is bound to be room for improvement in most of the products, systems and procedures that
we come across. Some of these questions which can work as thought-starters for developing better value
alternatives could be as follows:

 Can the design be changed to eliminate the part?

 Can you purchase it at lower cost?

 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?

Value Tests
 Can a standard part be used?

 Is it made on proper tooling considering the quantities involved?

 Are there any newly developed materials that can be used?

 Can two or more parts be combined into one?

 Can any specifications be changed to effect cost reduction?

Value Engineering Job Plan
Value Engineering Process:

 As mentioned earlier, the major advantage of the approach is that it is a systematic and organized
approach that examines all aspects of a problem employing a questioning attitude. Thus a formal
approach has to be adopted to go through the VE Programme. This formal procedural model of VE
process is called VE Job Plan.

 In the beginning, when Miles proposed VE Job Plan, it was, just a modified form of the steps involved
in work study. Subsequently, it has been modified and a number of approaches have emerged which are
essentially similar.
Value Engineering Job Plan
VA process is called VA job plan. Later, several approaches have emerged. Some typical steps of a job
plan are:

 Preparation

 Problem selection,

 Information

 Evaluation

 Creation

 Selection and presentation

 Implementation and Follow-up

Value Engineering Job Plan
The job is divided in the following seven steps:

(1) General phase (2) Information phase (3) Function phase (4) Creation phase, (5) Evaluation phase,
(6) Investigation phase and (7) Recommendation phase.

Each phase has a set of techniques, carried in the work sheets. VA is to be applied for those products where
cost reduction potential is substantially high. It is the general phase which acts as a frame work for other
phases. The brief description of these phases follows:
Value Engineering Job Plan
The brief description of these phases are as follows:

The resistance is generally of the following types:

 We tried this couple of years ago but it was not successful.

 It can’t be done.

 The customer is satisfied with the price as it is.

 Sampling is not as accurate as 100% inspection.

 This way processing would produce too many rejects to the specification.

 There is no other technique. People have a natural resistance to change which may be further conditioned
by experience, but favorable experience will help to reduce the resistance.
Value Engineering Job Plan
While thinking of doing VA, we must exercise good business judgment by being resourceful, thinking and
innovative. The general phase is the foundation. We then enter the next phase the information phase.

1) General Phase: It is the most demanding phase of a VA Job Plan. It creates the right environment for
successful VA. In this phase, emphasis is placed on human interaction to seek co-operation of the team to
implement VA. Work is done on specifies, rather than on generalities. The resistance to change is to be
overcome. Some typical beliefs, habits and attitudes are given below:
 It will set a nasty precedent.  Why change it – it works.
 It won’t work.  There is no other source of supply.
 Cost too much.  That is not our responsibility.
 The Public won’t touch it.  The management will not accept it.
 It is impracticable.  It’s company policy.
 The Production Department will have none of this.
Value Engineering Job Plan
2) Information Phase: Here an attempt is made to assess the potential of value improvement.

 Project is studied in detail and all important facts are gathered and considered.

 In this phase, facts which are in the form of technical specifications or environmental specification are
considered. Also, the engineering drawings, production sample, production data are all kept in mind.

 The cost data and work specification are secured. Consumer preferences are jotted down. Development
and testing are studied.

 Quantities and scrap are taken into account. A relationship is to be established between costs and
specifications or requirements.
Value Engineering Job Plan
3) Functions phase: You will appreciate that lack of information is overcome in this phase.

 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.

 One of the facts of the manager community is that they lack cost information. Most of them feel that they
have a rough idea, but how rough is rough?

 The world is advancing exceedingly fast and new technology, new products, new materials and new
processes are coming up almost every day. They create obsolescence in respect of the old materials or
processes. Costs which were considered satisfactory yesterday become unnecessary today. In the face of
competition the royal road to ruin is to adopt the methods of yesterday to the business of today.
Value Engineering Job Plan
4) Creation Phase: Lack of Ideas

 A survey done in the United States show that most people use less than 5% of their creative abilities.
They have hardly any time (to think?).

 Most of us want previously tried out materials, designs, processes and procedures. We jump at the first
ideas that work and usually do not bother to find out if better methods are possible.

 These days to give a fillip to creative ideas brainstorming techniques are used. To nurture creativity,
positive thinking is established. Creative ideas are also developed by a number of check-lists and idea
stimulators.
Value Engineering Job Plan
5) Evaluation Phase:

 Creative ideas generated during the above phase are screened for their feasibility, cost effectiveness and
practicability at this stage.

 For this purpose, ideas are further refined or combined together.

 Cost of all ideas and savings resulting from their implementing are studied. Decision matrix can be set
up evaluate on the basis of various criteria.
Value Engineering Job Plan
6) Investigation Phase:

 It is a virtual extension of the previous phase. Ideas accepted are here converted into acceptable and
workable solutions to perform the desired functions at the least cost. It may be necessary to standardize,
to consult vendors and specialists, and to use specialty products, processes and procedures.

7) Recommendation Phase:

 It is the ultimate phase of VA. Finally selected value alternative here in presented for implementation on
acceptance. Acceptance is the key to success of VA. Sometimes, acceptance is a result of presentation, or
a combination of both. All the relevant data is kept before management to enable it to take suitable
decision.
Value Engineering Job Plan
Alternatives of Job Plan: Instead of the above described method, we can adopt

 FAST (Function Analysis System Technique)

 DARSARI, which is an acronym for Data Collection (D), Analysis (A), Record of ideas (R), Speculation
(S), Investigation (I), Recommendation (R) , and Implementation (I).

All these steps have been explained above. So let us now concentrate on FAST (Functional Analysis
System Techniques) as a value engineering technique.
Value Engineering Job Plan
FAST as VE Technique: Developed by Charles W. Bytheway (1965), FAST is a visual representation of
functions and identifies the areas of greatest impact of these functions on costs. It is an interaction between
function and cost. FAST is like a network diagram

The following steps are followed for construction FAST:

Use verb and noun for describing functions

These functions are written on small cards

First select the Basic Function card. Arrange other cards by answering the following questions:

a) How is this function performed? The logical sequence of functions (basic and
secondary) generates a critical function path. It
b) Why is it performed?
consists of only critical functions. FAST is bounded on
c) When is it performed?
both ends by scope lines.
The 3’S
 The 3’s refer to standardization, simplification and specialization.

 The three related, which are at the roof of any economic analysis of product design.

 The three process are usually linked together and develop as a logical sequence. From a wide range of
requirement it is first necessary to sort out the essential features, define terms and then scientific manner
the minimum variety required, to meet these essentials.

 The process of simplification can be carried out with a view to reducing the variety of products or
materials that are produced or purchased.

 This is both an economic and engineering process.

 Specialization is one of its natural outcomes.

Standardization
The process of defining and applying the “conditions” to ensure that a given range of requirements can
normally be met with a minimum of variety and in reproducible and economic manner on the basis of the
best techniques.

Examples:

 Piston Industry: Standard sizes of piston are produced for different products, like federal mougal is
producing piston for many industries like Maruti, SsangYong Motors as well as the large scale
manufacturers like BMW etc.

 Nut & bolt industry: Standard nut and bolts are produced so that they can be easily available in market
in case of requirement .
Standardization Procedure
Step involved:

 With the help of market research, sales statistics, etc. decides what to sell in future.

 Then, define a standard range of products.

 From the range, ask the designer to develop minimum variety of component to match the range.

Classification of materials and components parts:

 Classification aims at, systematically grouping item, together by their common feature and subdividing
them by their features.

 A system of classification and coding is necessary for the design of new products within a range defined.
Standardization Procedure
Classification procedure:

 Define all terms.

 Classify each item according to its basic characteristics.

 Identify each item by allocating to it some meaningful code number.

Advantages and Disadvantages:

 Design Department.  Reduction of Choices.

 Manufacturing Department.  Less Flexibility.
 Marketing Department.  Small Ranges.
 Production Planning Section.  Obstacle to Progress.
 Production Control Department.
Simplification
 It is known for variety reduction.

 It makes a process much simple.

 The availability of suitable standards assists in simplification.

Features:

 Simplification is a constant source of disagreement between the market department and the production
personal.

 Simplification removes the superfluous. It decreases variety for sizes, for example a garment factory
making tea shirts sizes 16, 1614 , 1634 etc.
Simplification
Variety Reduction:

 Variety reduction consists in identifying the exist variety and then removing unnecessary items from the
system.

 Classification and coding.

Advantages:

 Improve Quality.  Reduce required technical Personnel.

 Quick Delivery.  Simplify Inspection an D Control.
 Better after Sale Services.  Save Storage Space.
 Reduces Price.
 Eliminate Ordinary Queues.
Specialization
 Natural outcome of simplification and standardization.

 It means concentrating effort on a particular field of action.

Characteristics:

 Specialization as applied to human activities on shop floor can be defined as “division of labour”.

 Division of labour is defined as measure taken to decide the different workers according to their to the
task they performed and all are very skilled as well as experienced.

 A set of labour only perform certain set of operations instead of completing the full products.

 Like teacher are specialized in their subject they teach.

 Doctors are also specialized these days like neurologist, cardiologist etc.
Specialization
Advantages:

 Worker achieve a high state and proficiency.

 Smaller time to complete the activity.

 Raise their salaries.

Limitations:

 Specialized labour and equipment are not flexible.

 Monotonicity.
Renard Series (Preferred Numbers)
 Renard series are a system of preferred numbers dividing an interval from 1 to 10 into 5, 10, 20, or 40
steps. This set of preferred numbers was proposed in 1877 by French army engineer Colonel Charles
Renard. His system was adopted by the ISO in 1949 to form the ISO Recommendation R3, first
published in 1953 or 1954, which evolved into the international standard ISO 3.

 The factor between two consecutive numbers in a Renard series is approximately constant namely the
5th, 10th, 20th, or 40th root of 10 (approximately 1.58, 1.26, 1.12, and 1.06, respectively), which leads to
a geometric sequence. This way, the maximum relative error is minimized if an arbitrary number is
replaced by the nearest Renard number multiplied by the appropriate power of 10.

 Objects are often manufactured in a series of sizes of increasing magnitude. The manufacturer must
decide what those sizes should be.
Renard Series (Preferred Numbers)
 An example of such a series is one often used for money and packaging: 1, 2, 5, 10. The appeal of the
series is its relation to decimalized currency; all the numbers divide evenly into ten.

 One application of the Renard series of numbers is to current rating of electric fuses. Another common
use is the voltage rating of capacitors (e.g. 100 V, 160 V, 250 V, 400 V, 630 V).

 In selecting the numbers for a series, people like numbers easily expressed in words; whole numbers for
example. Formerly there was also a strong preference that the highest number in a series have a lot of
prime factors, as 12 or 60 do, but the spread of numeracy and especially electronics have diluted this
preference.

 Decimals have won out. Before the 20th century, many series of sizes proceeded by doubling, but the
original, 18th century rules for the use of the metric system did not permit common fractions to be used
with its units, though everyone does it (half a kilo, for example, is universal).
Renard Series (Preferred Numbers)
 People also expect the difference between adjacent sizes to be constant. For this reason, if a series of
sizes must cover a vast range, people are likely to want adjacent sizes to differ by a constant factor,
making a geometrical or exponential series, such as 3, 6, 12.

 The alternative is a series in which adjacent numbers differ by a constant amount (an arithmetic series,
such as 3, 5, 7). Shoe sizes, for example, are an arithmetic series in all cultures simply because feet vary
only over a small range.
Renard Series (Preferred Numbers)
If the first size is 10, a geometrical series can
reach 100 in 5 steps by making adjacent sizes
5
differ by the factor of 10 , that is multiply the
preceding size by about 1.58.

If the first size is 10, an arithmetical series can

reach 100 in 5 steps by making adjacent sizes
differ by 18, that is, add 18 to the preceding
size.
Renard Series (Preferred Numbers)
An arithmetical series of sizes results in small
sizes that are too far apart, and big sizes that are
too close together.
Renard Series (Preferred Numbers)
Internationally Standardized Series:
 In 1877 a French military engineer, Col. Charles Renard (1849–1905) was given the job of improving
captive balloons. (In those days armies used such balloons to observe the enemies' position).
 He discovered that 425 different sizes of cable were being used to moor the balloons, a logistical
nightmare, and set about determining how best to reduce these to a smaller number of sizes.
 After determining that the relevant characteristic of the cable was its mass per unit length, Renard
succeeded in replacing the 425 sizes with 17 sizes that covered the same range.
 To do this he made the sizes a geometric series in which by every fifth step the mass per unit length of
the cable increased by a factor of ten:
𝟓 𝟓 𝟓 𝟓
a, a( 𝟏𝟎)𝟏 , a( 𝟏𝟎)𝟐 , a( 𝟏𝟎)𝟑 , a( 𝟏𝟎)𝟒 , 10a
which gives,
a, 1.5848a, 2.5119a, 3.9811a, 6.3096a, 10a
Renard Series (Preferred Numbers)
If we let a = 10 and round off to whole numbers, we get the series,
10, 16, 25, 40, 63, 100
To users of a decimally-oriented system of units, such as SI, Renard series is much more useful than these
other geometric series, because it begins on 10 and ends on 100. The ISO adopted Renard series as the
basis of the preferred numbers for use in setting metric sizes. The designations of the series they have
defined begin with “R” as a tribute to Renard, and the series are called “Renard series.”
The ISO has defined four basic series of preferred numbers:
R5: 10, 16, 25, 40, 63, 100.
R10: 10, 12.5, 16, 20, 25, 31.5, 40, 50, 63, 80, 100.
R20: 10, 11.2 12.5, 14, 16, 18, 20, 22.4, 25, 28, 31.5, 35.5, 40, 45, 50, 56, 63, 71, 80, 90, 100.
R40: 10, 10.6, 11.2, 11.8, 12.5, 13.2, 14, 15, 16, 17, 18, 19, 20, 21.2, 22.4, 23.6, 25, 26.5, 28, 30, 31.5,
33.5, 35.5, 37.5, 40, 42.5, 45, 47.5, 50, 53, 56, 60, 63, 67, 71, 75, 80, 85, 90, 95, 100.
Renard Series (Preferred Numbers)
Examples:
 If some design constraints were assumed so that two screws in a gadget should be placed between
32 mm and 55 mm apart, the resulting length would be 40 mm, because 4 is in the R5 series of
preferred numbers.
 If a set of nails with lengths between roughly 15 and 300 mm should be produced, then the application
of the R5 series would lead to a product of 16 mm, 25 mm, 40 mm, 63 mm, 100 mm, 160 mm, and
250 mm long nails.
 If traditional English wine cask sizes had been metricated, the rundlet (18 gallons, ca 68
liters), barrel (31.5 gal., ca 119 liters), tierce (42 gal., ca 159 liters), hogshead (63 gal., ca 239
liters), puncheon (84 gal., ca 318 liters), butt (126 gal., ca 477 liters) and tun (252 gal., ca 954 liters)
could have become 63 (or 60 by R5), 100, 160 (or 150), 250, 400, 630 (or 600) and 1000 liters,
respectively.
Patents, copyright and Intellectual Property Rights
So firstly what is property?
 Property is anything owned.
 If you have the right to something because you purchased it, was given it or it comes to be your
possession in any other way.
 We think of possessions as tangible items.
 We sometimes think of property as a house, mainly because that will normally be the most expensive
item we buy.
Patents, Copyright and Intellectual Property Rights
SO WHY DON’T PEOPLE JUST TAKE IT?
Law and general views:
 There are penalties for stealing.
 Both legally and socially.
 Everybody doesn’t like this.
 You may tell the police.
Patents, Copyright and Intellectual Property Rights
Patent: Patents protect the features and processes that make things work. This lets inventors profit from
their inventions.
 Protect how things work, how its made and what from.
 Apply to UK Intellectual Property Office.
 Lasts 20 years.
 Can sell the rights of the patent.
 Costs £200.
Patents must be,
 New, not known anywhere in the world prior to filing.
 Have an inventive step, not obvious or a simple adaptation or combination of existing products.
 Be capable of industrial application, having a technical effect.
 Normally to do with technology.
Patents, Copyright and Intellectual Property Rights
Examples:
 Any design with new functions.
 Original designs.
Patents, Copyright and Intellectual Property Rights
Copyright:
 Automatically granted to artists, musicians, authors.
 Only protects original work.
 Lasts lifetime of artist.
 Artist may have to prove the date of creation.
 Fee of charge.
 Examples: Music and painting, drawings and writings, any artwork etc.
Patents, Copyright and Intellectual Property Rights
Intellectual Property Rights:
 Intellectual Property is a property that arises from the human intellect. It is a product of human creation.
 Intellectual Property comprises 2 distinct forms:
 Literary & Artistic Works:
 Industrial Property:
Patents, Copyright and Intellectual Property Rights
 Literary & Artistic Works: They are books, paintings, musical compositions, plays, movies, radio/tv
programs, performances, & other artistic works.
How are they Protected?
 Protected by “COPYRIGHT”.
 Industrial Property: Industrial Property describes physical matter that is the product of an idea or
concept for commercial purposes.
How are they Protected?
 By Patented objects.  By Trade Secrets.
 By Trademarks.  By Layout-designs.
 By Industrial Designs.  By Geographical Indications.