Value

Engineering
What is it?
What Value Engineering Is Not!

Cost Cutting
Design Review
Project Elimination
Scope Reduction
Quality Reduction
Detailed Cost
Estimating
Redesign
What Value Engineering Is!

An organized study of FUNCTIONS to

satisfy the USERS NEEDS with a
QUALITY PRODUCT at the LOWEST LIFE
CYCLE COST through APPLIED
CREATIVITY
Definition of Value Engineering

Terms used to describe Value Engineering

Value Methodology
This is the official term used by SAVE International. It
describes the overall body of knowledge.
Value Analysis
This was the first term used when the process was
originally developed for manufacturing
Value Engineering
The term engineering was used to identify the process
as it is applied to design and construction
Value Management
This less commonly used term refers to its application to
business processes
Definition of Value Engineering

The value of a function is defined as the relationship

of cost to performance

Performancemax
Valuemax =
Costmin
Definition of Value Engineering

Good Value is the lowest cost to reliably provide

the required function with essential performance.

Value is always increased by decreasing costs while

maintaining essential performance.

Value may also be increased if the customer needs,

wants, and is willing to pay for greater performance.
Range of Application

VE applies to everything because every project or

process has a function
VE can be applied at any point of the design or
process
VE is a problem solving technique
VE can be used as a technique for developing design
criteria
Reasons for Poor Value

Not enough time

Lack of and/or poor for project
coordination among formulation
designers
and/or design
Failure to network
with customer
poor definition of Failure to utilize
needs and wants latest
Design based on technologies
habitual thinking or
mistaken beliefs
Negative
attitudes
More Reasons for Poor Value

Poor communication in developing project scope

Lack of consensus among project stakeholders with
regard to project scope
Outdated or inappropriate design standards
Incorrect assumptions based on poor information
Fixation with previous design concepts
Honest wrong beliefs
Common Misconceptions

VE is something we do all the time.

No it isnt. VE requires the application of a specialized body
of knowledge at the right time with the right people.
VE degrades project performance.
If applied properly, its should maintain or improve project
performance.
VE is just another management fad.
VE was developed in 1943. It is required by federal and many
state laws. It has a professional society and maintains
professional standards and accreditation.
VE is really just cost cutting.
Really?
VE vs. Cost Cutting/Reduction

VE seeks to maintain or
improve performance while e Cost reduction seeks to cut
reducing TOTAL costs. INITIAL costs, often at the
expense of project quality.
VE is a pre-planned allocation e
of time and effort. Cost reduction is usually a
reaction to budget overruns.
VE is a highly structured e
process using a formal Cost reduction is an informal
methodology.
process.
VE utilizes an objective, multi-
disciplined team and a trained e Cost reduction generally
facilitator. involves only a few
management personnel.
VE provides an organized
follow-up, implementation and e Cost reduction does not.
reporting program.
Value Engineering Quality
Value Engineering is a tool/method
to enhance QUALITY
Timing the VE Effort

Potential Value Engineering Cost Savings

Potential
Savings

$
Cost to
Change

Design Final Design /

Planning Construction
Development Bid Documents

Project Life Cycle

Some VE Study Objectives

Performance Improvement
Significant Cost Savings/Avoidance
Optimization of Resources (Time & Money)
Review (Technical, QA) Optional Objective
Coordination (In- House & Users)
Transfer Innovative Technologies
Have Fun!
Value Analysis and17 Value
Engineering
Value Analysis is a technique that allows to
increase the value of a product or a service
systematically, eliminating all the functions that do
not add any value or benefit to the product.
A product or process exists to fulfill a need.
This need or set of needs is termed as a function,
that the product or process satisfies.
For instance, knife exists to fulfill the need of
cutting and hence to cut is the function of knife.
What is meant by term Value?
Value is a function of Desired Performance and Cost.
Expressed as Desired Performance (P) Overall Costs (C)
Desired performance is expressed by the term worth
which is defined as the lowest cost to achieve the Use
(work) function and Aesthetic (sell) function.
How do define VA & VE

Very often the two terms Value Analysis and Value

Engineering are used synonymously.
However, difference between them will be clear
from the way they originated.
How VA originated?
During the Second World War, U.S. government
reserved certain materials from armament industry.
Therefore, General Electric Company found itself in
fix as many of their regularly used materials
suddenly became unavailable due to reservation.
 A purchase executive of the company, Lawrence D.
Miles made many substitutions in place of original
materials.
Surprisingly, the results showed that substituted
materials did not affect the quality but brought costs
down.
Later Larry developed a step by step approach for
this exercise and named the technique as Value
Analysis.
Thus it is a step by step approach to identify the
functions of a product, process, system or service;
to establish a monetary value for that function and
then provide the desired function at an overall
minimum cost without affecting any of the existing
parameters like Quality, Maintainability,
 In the year 1954, U.S. Navy Bureau of Ships
adopted same technique in their effort at cost
avoidance during the design stage and saved
million of dollars .
They named this technique as Value
Engineering.
Value Engineering is where the value of all
components used in construction of a product
from design to final delivery stage are completely
analyzed and pursued.
Thus, Value Engineering indicates application at
design stage whereas Value Analysis is the
application on the product that is into
manufacturing.
Difference between Value Analysis and Value
Engineering

Value Analysis Value Engineering

Indicates application on the Indicates application on the

product that is into manufacturing. product at its design stage

Workers, subcontractors and Done by a specific product design

engineers come together to make team (Engineers)
a team with experience and
knowledge
May change the present stage of Changes are executed at the
the product or operation initial stages only.

Worked out mostly with the help of Requires specific technical

knowledge and experience knowledge
What is the meaning of overall costs?

For a manufacturer/ producer

Overall cost is summation of all elements of the costs
required to produce or service such as labour, material,
overhead etc.
For a consumer
Overall cost is the monetary sum (price) for which the
product or service is purchased in the market.
The Value of the a function V= P/C can be
increased by four methods.
(1) Decrease the cost while ensuring the same level
of performance.
Reduce the thickness of wooden drums in case
of packing of telephone cables.
Earlier CDs and DVDs were sold at above Rs
100/- Moser Baer introduced the same at almost
half the price.
(2) Enhance the performance at the same cost
Providing a supplement of Mumbai Mirror along
with the copy of The Times of India at no extra
cost.
(3) Decrease the cost and increase the performance
Intels Pentium chip is cheaper and has much
more processing power than all its earlier chips.
(4) Increase both performance and cost ensuring
that performance increases more than the
increase in cost.
American cola giant increased quantity of soft
drink from 250 ml to 300 ml (20% more) but
increased price just by 10%
In all the above cases cost is viewed at from
customers point of view.
Value Analysis Tests

Each product or component is subjected to the following

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 lower cost method?
Can a standard product be found which will be usable?
Is it made on proper tooling, considering quantities used?
Do materials, reasonable labour, overhead, and profit total
its cost?
 Functions-Use and Aesthetics
A. Use function
- Prashant wants to go for a trek to a place 15 kms from Karjat. He wants
to purchase shoes that will protect his feet from stones and thorns etc.
Therefore he opts for Hunter shoes.
- To protect feet is called as the Use Function of the shoes.
B. Aesthetic function
- Parag is preparing for prize distribution ceremony of his college.
Dressed in blazer he will be putting on black leather shoes with good
appearance.
- To give good appearance is called as the Aesthetic Function of
shoes.
Use and Aesthetic functions are always present in all the products.
Depending on the user and the need, one function assumes
predominance over other.
 Primary Function & Secondary Function
AR Dairies is a Mumbai based milk and dairy products
company. They used to supply milk (cow and buffalo) in 500
ml glass bottles. Lately they have introduced Masala Milk in
200 ml bottles, which became an instant success. While
Masala Milk is supplied throughout the day, other type of
milk is supplied only in the morning. While going through the
audit reports, Shalini found that there is a transit loss of 2%
due to breakage of bottles. To overcome that Shalini
introduced polythene bags in place of 500 ml bottles.
However Masala Milk continued to be sold in glass bottles.
Why did Shalini not introduce polythene bags for Masala
Milk?
 The Primary Function of bottle is to hold the
liquid and Secondary Function is to facilitate
drinking.
In this case, shape of the bottle facilitates
drinking; however when primary function is
achieved by some other means i.e. polyethylene
bag then secondary function ceases to exist.
As a consumer drinks Masala Milk on the spot,
secondary function of facilitation of drinking is very
important whereas cow milk or buffalo milk is
never drunk without heating it.
Therefore Shalini could sacrifice secondary
function in case of cow & buffalo milk but not in
case of Masala Milk.
Higher Order & Lower Order Function
The basic function of a Torch is To Give Light
Let us analyze order of functions.
Give Light (why) Facilitates Viewing (How) Light the Bulb
(How) Supply Current (How) Insert Battery
When we ask question Why to the basic function; then the
answer we get is called as Higher Order function.
And when we put question How to the Higher Order Function we
get Lower Order Function.
Thus Facilitate Viewing is higher order function and Light the
Bulb is a lower order function.
As we continue asking questions How we will get functions still
lower in order.
Therefore Insert Battery is lower than Supply Current which in
turn is lower than Light the Bulb.
 Incidentally if we take any part or function and put the
question Why , then we will get functions higher in order.
Insert Battery (Why)Supply Current (Why)Light the
Bulb (Why)Facilitate Viewing.
Summary of Functions

Type of Function Meaning

Use Function Perform some action, expresses in

active tone.
Aesthetic Function Pleases customer, expressed in
passive or non-measurable tone.
Primary Function Basic purpose for which a product
exists
Secondary Function Arises out of specific design
chosen to fulfill the Primary
Function.
Higher Order Needs Reasons of satisfying the Basic
Function
Lower Order Needs Means of achieving the Basic
Function.
A product can have more than one primary function
For example, LPG cylinder apart from holding the LPG must
also withstand high pressure and must prevent leakage of
gas. Therefore any cylinder design must address all these
factors.
Many times some of the secondary functions are
unnecessary or even undesirable.
For example, Lamp used for producing image in OHP also
produces heat that calls for fan. The fan is quite
unnecessary but with present level of technology we have
not been able to produce light without heat.
Therefore, a customer has to pay for fan even though it does
not add any direct value to him.
The Value Engineering Job Plan

Provides a systematic
approach
Divides the study into
distinct work elements
Value Engineering Is:

Step 1 Preparation/Organization

Step 2 - Information
Step 3 Function Analysis

Step 4 Speculation/Creativity

Step 5 Evaluation

Step 6 - Development

Step 7 Presentation/Report

Step 8 Implementation & Audit

Information Phase
Purposes

To determine user needs

To gather and tabulate information concerning the item
as presently designed
To build team knowledge and understanding of the
project
To completely understand the specific use of function
requirements of the item
To visit the site (preferable)
Process continues throughout remainder of the study
Information Phase
Techniques

Get all the facts from the best possible sources (e.g.
design team)
Develop cost models
Determine and evaluate the function(s) of the present
design
Prepare a FAST diagram
Identify & define project Performance Criteria
Develop project Performance Ratings
Determine present design objectives & constraints
What does the customer want?

USE GOOD HUMAN RELATIONS

Why is Functional Analysis
Important?

You cant always get what you want!

You cant always get what you want!
You cant always get what you want!
BUT if you try, somehow you just might , from time
to time, get what you need!
Function Analysis defines users needs through verb-
noun pairings
Function The

Specific purposes or intended use of an item (What is

this? What is it supposed to do? What else can it do?)
Function is that which makes a product, process or project
work or sell.
All cost is for function.
Primary functions posses value and are required to make a
product work or sell.
Secondary functions have no value and are present due to
the current design of the product.
That characteristic that makes a product or service have
value
Determine by considering the users actual needs
 FAST Diagram
Function Analysis System Technique

How Why

Verb-Noun Verb-Noun Verb-Noun Verb-Noun

Function Function Function Function

Generating a Function Picture

Scope Line
Scope Line
Function Analysis

Fuel Storage System

Steel
Sacrificial Tank
Excavation
Anode &
Backfill
Function Analysis

Identify the functions

Store
Protect Fuel
Tank Hide
Tank
Function Analysis

Identify the scope

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary
Function
Function Analysis

Identify the scope

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Tanks
Bins
Silos
Primary Pools
Boxes
Function Sacks
Function Analysis

Identify the scope

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary
Function
Function Analysis

Identify the scope

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Manufacture
Purchase
Recycle
Primary Trade
Generate
Function Mine
Function Analysis

Identify the scope

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary
Function
Function Analysis

Identify the scope

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Pump
Pipeline
Conveyor
Primary Siphon
Cable
Function Microwave
The Purpose of a FAST Diagram is

Show specific relationships of all functions with

respect to each other
Deepen the understanding of the problem to be
solved
Promote discussion and information gathering team
building
Support the process of creativity
Function Analysis System Technique
Helps in a thorough understanding of the scope and
intricacies of the problem under study.
Provides a determinate logic for testing the functions.
Assists in identifying the basic, required secondary and
unwanted functions, and establishes their inter-linking in a
logical sequence.
Highlights the missing links or functions which might have
been overlooked.
Demonstrates that the problem has been thoroughly
analyzed by the team and helps in persuading the decision
makers to accept the VE team recommendations
FAST Diagramme for Pen
Part Function Remark

Head Position Refill

Locate Refill
Cylinder Provide Grip Serration on cylinder
Protect Refill
Improve Aesthetic Carry Name & Logo
Show ink-level Transparency
Tail Support Refill

Rings (Front & Back) Help Location

Cap Protect Tip

Facilitate Carrying Projection on the Cap

Refill Contain Ink

Control Flow
Ink in Refill Make Marks
The alternatives can be
(1) Eliminate head and make it part of Cylinder
(2) Eliminate Tail and make it part of Cylinder
(3) Eliminate Rings
Financials & Operational Report
(1) Design change suggested
(2) Reason for change
(3) Additional expenditure required for new die, advertising
expenses etc.
(4) Savings (cost of rings, elimination of one process etc.)
 FUNCTION ANALYSIS SYSTEM TECHNIQUE FAST
DIAGRAM PENCIL

WHY
W HOW
H Display
E information
N
Improve
appearance
Maintain Information

Record Make Deposit Apply Support Protect

Keep records

information Marks Medium pressure lead wood

Secure Transmit Accommodate Hold

Eraser force grip pencil

Correct Remove Absorb Apply

information Marks Medium Pressure

Rub
eraser
Speculation Phase
Purposes

To generate a large number of

alternatives that provide the items
basic function(s) without considering
their practicality
Speculation Phase
Techniques

Use creative thinking

No rules no limits
Forget about scope, speculate on the FUNCTION - not on the item
Dont let regulations or people control your thinking
If you dont look for the second right answer, you wont find it
Eliminate/simplify: modify and/or combine alternatives
Think get out of the comfort zone and enjoy it!
Keep talking, keep generating, let the juices flow!
Its about CHANGE!
USE GOOD HUMAN RELATIONS
 Weallins never done it that
way before!!
? ?

Regulations What will
and my boss
Guidelines think?
are sacred!

? What if it doesn't work? ?

Creativity
Creativity
Brainstorming Rules & Objectives

Criticism/evaluation is prohibited (at this time)

Free-wheeling is welcomed and encouraged be uninhibited and think
as a child
Be spontaneous rapid fire gut feels
Quantity is desired over quality cover the walls
Combine and add to ideas
Build upon another persons ideas
How do others solve similar problems
Record all ideas
There Are No Dumb Ideas!

OK, so some of the ideas were dumb! Which

leads us to.
Analysis Phase
Purposes

To evaluate, criticize, and rank alternatives

Identify advantages and disadvantages as compared to the
baseline project
Which alternatives offer the best combination of:
Design-ability
Construct-ability
Operational ease
Quality assurance
Customer satisfaction
And low life-cycle cost
To develop alternatives that offer the greatest increase in
value
Analysis Phase
Techniques

Prior experience
Collective Gut feels
Stakeholder input
Use cost references
Apply matrix techniques
Define performance measures
Weight and rank measures
Evaluate alternatives
Make sketches
Consult experts
Use your own judgment

USE GOOD HUMAN RELATIONS

 You gotta also consider
Life Cycle Cost Analysis! (LCC)

A definition
The systematic evaluation of alternative designs and
the comparison of their projected development/design,
construction, operation/maintenance and disposal
costs or salvage value over a specified time period.
In other words, LCC is

Simply put Consider all the costs!

Total LCC = Initial Cost + Ownership Cost + Salvage
value/disposal costs
Deceptive For example, security was typically a
minor cost, but can now be a major consideration.
LCC gives decision makers a complete awareness
of Big Picture
Development Phase
Purposes

To select the best

alternative(s)
To develop complete written
and oral proposals
Development Phase
Techniques
Recommend specifics, not generalities
Make sure your report describes the disadvantages as well as
the advantages
Gather convincing facts
Assure technical adequacy
Spend your clients money as you would your own
Complete order-of-magnitude cost estimate w/LCC
Prepare Proposal
Finalize FAST diagram for proposal
Sell the idea through the justification
You are selling something
uncomfortable to most people CHANGE!
Misteaks will cast doubt on your validity

USE GOOD HUMAN RELATIONS

Presentation Phase
Purposes

To present value engineering study

proposal(s) to the decision makers/stake
holders
To obtain approval/support
To enhance potential implementation
Presentation Phase
Techniques

Again, you are selling CHANGE!

Your enthusiasm will sell your proposal
Use FAST diagram as a communication tool
Are the most important functions
satisfied?
Be brief, pertinent and convincing
Keep it simple

USE GOOD HUMAN RELATIONS

Presentation Phase
Techniques

Anticipate/remove road blocks understand

their point of view
Network with people and gain support
BUT you cant please everybody
AND dont overload the cart with too much
information
USE GOOD HUMAN RELATIONS
Questions

Dont be shy!
Example

Before VE: The staple remover is

placed in an awkward position and
obstructs the users fingers when
the stapler is held in the palm of the
hand. It is attached to the stapler
with a plastic catch and becomes
loose when the catch wears down.
Moreover, it makes the stapler look
bulky.
After VE: The staple remover is
incorporated into the lower body of
the stapler.
Result: About an 8% reduction in
manufacturing cost is achieved.