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Value Engineering (VE)

Value Engineering (VE) is concerned with new products.

 It is applied during product development.
 The focus is on reducing costs, improving function or both,
by way of teamwork-based product evaluation and
analysis.
This takes place before any capital is invested in tooling,
plant or equipment.

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Value Engineering (VE)

This is very significant, because according to many reports,

up to 80% of a product’s costs (throughout the rest of its life-
cycle), are locked in at the design development stage.
This is understandable when you consider the design of any
product determines many factors, such as tooling, plant
and equipment, labour and skills, training costs, materials,
shipping, installation, maintenance, as well as
decommissioning and recycle costs.

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Value Engineering (VE)

Therefore value engineering should be considered a

crucial activity late on in the product development
process and is certainly a wise commercial investment,
with regard to the time it takes.
 It is strongly recommended you build value engineering
into your new product development process, to make it
more robust and for sound commercial reasons.
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Value Analysis (VA)

Value Analysis (VA) is concerned with existing products.

 It involves a current product being analysed and
evaluated by a team, to reduce costs, improve product
function or both.
Value Analysis exercises use a plan which step-by-step,
methodically evaluates the product in a range of areas.
These include costs, function, alternative components
and design aspects such as ease of manufacture and
assembly.
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Value Analysis (VA)

A significant part of VA is a technique called Functional

Analysis, where the product is broken down and
reviewed as a number of assemblies.
Here, the function is identified and defined for each
product assembly.
Costs are also assigned to each one.
This is assisted by designing and viewing products as
assemblies (or modules. 6
Value Analysis (VA)

As with VE, VA is a group activity that involves

brainstorming improvements and alternatives to improve
the value of the product, particular to the customer.

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Value Management

Value Management as an umbrella term, which

encompasses value engineering and value analysis.
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Reducing Costs by Using Value Engineering in Conjunction
with other World Class Manufacturing Techniques

Some of the best performers in industry often use value

analysis, in conjunction with other world class
manufacturing techniques, such as Lean Manufacturing.
 They do this in order to reduce their costs not only in
product development, but in all areas of the business,
particularly production.

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Value Engineering (VE)

value engineering’ means an analysis of the functions of

a program, project, system, product, item of equipment,
building, facility, service, or supply of an executive
agency, performed by qualified agency or contractor
personnel, directed at improving performance, reliability,
quality, safety, and life cycle costs".

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Value Engineering (VE)

Value engineering began at GE., during World War II.

 Because of the war, there were shortages of skilled
labour, raw materials, and component parts.
Substitutions often reduced costs, improved the product,
or both.
What started out as an accident of necessity was turned
into a systematic process.
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Value Engineering (VE)

A technique in which the value of a system’s outputs

is optimized by crafting a mix of performance (function)
and costs.
In most cases this practice identifies and removes
unnecessary expenditures, thereby increasing the value
for the manufacturer and/or their customers.

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Value Engineering (VE)

Value engineering (VE) is a systematic method to improve

the "value" of goods or products and services by using an
examination of function.
Value, as defined, is the ratio of function to Cost.
 Value can therefore be manipulated by either improving
the function or reducing the Cost.
 It is a primary tenet of value engineering that basic
functions be preserved and not be reduced as a
consequence of pursuing value improvements
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Value Engineering (VE)

 if marketers expect a product to become practically or

stylistically obsolete within a specific length of time, they can
design it to only last for that specific lifetime.
 The products could be built with higher-grade components,
but with value engineering they are not because this would
impose an unnecessary cost on the manufacturer, and to a
limited extent also an increased cost on the purchaser.
 Value engineering will reduce these costs.
 A company will typically use the least expensive components
that satisfy the product's lifetime projections. 14
Function Analysis

 VE follows a structured thought process that is based

exclusively on "function", i.e. what something "does" not
what it is.
For example a screw driver that is being used to stir a can
of paint has a "function" of mixing the contents of a paint
can and not the original connotation of securing a screw
into a screw-hole.
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Function Analysis

In value engineering "functions" are always described in a

two word abridgment consisting of an active verb and
measurable noun (what is being done – the verb – and
what it is being done to – the noun) and to do so in the
most non-prescriptive way possible.
In the screw driver and can of paint example, the most
basic function would be "blend liquid" which is less
prescriptive than "stir paint" which can be seen to limit the
action (by stirring) and to limit the application (only
considers paint). 16
Function Analysis

Value engineering uses rational logic (a unique "how" -

"why" questioning technique) and the analysis of function
to identify relationships that increase value.
It is considered a quantitative method similar to the
scientific method, which focuses on hypothesis-conclusion
approaches to test relationships, and operations
research, which uses model building to identify predictive
relationships.
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Reasons for Value Analysing Existing Products

VA reduces costs (in all areas such as materials, parts and
production), as well as improving product function.
Therefore, the value of the product is increased to the
customer.

Reducing the cost of products increases revenue and

profit per product. Therefore, giving your company the
option of reducing price to sell more or investing in R&D.
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Reasons for Value Analysing Existing Products

VA enables improvements to be made to the product in

a variety of areas, such as design and engineering,
material selection, testing, manufacturing, assembly,
shipping, installation, use by the customer, service,
maintenance and recycling.
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Reasons for Value Analysing Existing Products

For many manufacturing businesses their product range

has evolved over time, as a collection of solutions to meet
new customer needs, rather than being the result of
strategic planning.
Often products have been developed under tight time
constraints and as a result, a wide variety of parts and
materials have been sourced and used.
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Reasons for Value Analysing Existing Products

This leaves lots of scope for component rationalisation

across the range.
 In-turn this opens the door to cost reduction
negotiations based on ordering greater quantities
and economies of scale.
A value analysis exercise can deliver this.
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Reasons for Value Analysing Existing Products

A VA project enables your business to take commercial

advantage of the constantly falling price of some
technologies, as well as source alternative components
and materials.
The above factors all increase perceived value of the
product by all those who interact with it, throughout its
product life (including of course, the customer).

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Reasons for Value Analysing Existing Products

The prestige value of the product increases, therefore

making ownership more desirable, which should help
product sales (and indeed the process of marketing and
selling it).
A customer who perceives the value of the product as
being more prestigious is more willing to pay a premium
for it or choose it over rival products if it is priced the
same.
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Reasons for Value Analysing Existing Products

 An all-round better quality product is easier and less costly to

produce, assemble, ship, install, use, service and recycle.
 The result is to reduce all associated costs throughout the product
lifecycle (importantly, including ownership costs for the customer).
 VA, in conjunction with other world class manufacturing
techniques, can help realise substantial company-wide
improvements, thereby delivering significant competitive
advantage.
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