VALUE ENGINEERING HISTORY

The name value engineering is a common name used for the VM. It was
established by the Society of American Value Engineers (now SAVEI). The value
methodology originally began with Lawrence D. Miles when he practiced the
methodology with General Electric (GE). Mr. Miles was forced to continue to find
ways to produce products for GE using fewer available materials that was being
consumed for World War 11 purposes. United States Bureau of Ships decided to use
the value analysis process practiced by Mr. Miles, but the only way they could add
new employees to do the value improvement work was to call them engineers not
analysts as Miles suggested. Thereafter, the trade was earmarked with a name of value
engineering. VE was known to improve value without sacrificing intended functions
on purpose. Through the use of the VM trained value improvement team leaders
conduct thousands of studies per year to produce an annual savings of over $1 to $3
billion for the United States. The methodology does more than reduce costs but has
other benefits to improve time, performance, quality, as well as determine the type of
work that should be performed. At this time there are currently not enough
practitioners in the field’ and the United States is joining an effort to expand the
knowledge and practice to others interested in improving value for their programs,
projects, processes, systems and techniques. The SAVE1 has current information on
the number of Certified Value Specialists. Some nations may have more professionals
certified in this field according to their standards that may vary slightly from the
certification standards set by the SAVE1 in the United States. So there is no question
that more professionals are going to be needed to meet the demand of value
improvement in the future.
The SAVEI society is working with all agencies nationally and
internationally to fiher the understanding, knowledge, training, and facilitation of
value irnprovements techniques worldwide. SAVEI is formulating plans to offer
corporate sponsorships to interested corporate partners worldwide to assist both
SAVEI and the individual companies expand the Knowledge and help shape the
future of this

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INTRODUCTION

Value Engineering Concept:

The concept evolved from the work of Lawrence Miles who, in the 1940's was a
purchase engineer with the General Electric Company (G. E. C). At that time,
manufacturing industry in the United States was running at a maximum capacity to
supply the allies with arms. There were shortages in steel, copper, bronze, nickel,
bearings electrical resistors, and many other materials and components. G. E. C
wished to expand its production of turbo supercharger for B24 bombers from 50 to
1000 per week.
Miles was assigned the task of purchasing the materials to permit this. Often he
was unable to obtain the specific material or component specified by the designer, so
Miles reasoned, "If I can not obtain the product, I must obtain an alternative which
performs the same function". Where alternatives were found they were tested and
approved by the designer. Miles observed that many of the substitutes were providing
equal or better performance at a lower cost and from this evolved the first definition
of value engineering.
It is an organized approach to providing the necessary functions at the lowest
cost from the beginning the concept of value engineering was seen to be cost
validation exercise, which did not affect the quality of the product. The straight
omission of an enhancement or finish would not be considered value engineering.
This led to the second definition: It is an organized approach to the identification and
elimination of unnecessary cost Unnecessary cost is Cost which provides neither use,
nor life, nor quality, nor appearance, nor customer features.

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VALUE ENGINEERING

Definitions
Value engineering (VE) is an organized effort directed at analyzing the function of
Goods and services for the purposes of achieving basic functions at the lowest Overall
cost, consistent with achieving essential characteristics.VE is a process using multi
disciplined teams to review projects and standards to identify high cost functions with
improvement potential. The teams follow the systematic, creative VE job plan to
establish an optimum value for selected functions. Alternatives, which will provide
the necessary functions at the most economical initial capital costs and/or life cycle
cost, are developed consistent with requirements for safety, quality, operation,
maintenance, and aesthetic.

Meaning:
Value Engineering is the systematic application of recognized techniques by
multidiscipline team that identifies the function of a product or service; establishes a
worth for that function; generates alternatives through the use of creative thinking;
and provides the needed functions, reliably, at the lowest overall cost.

Value Engineering may be defined in other ways, as long as the definition contains
the Following three basic precepts:

• An organized review to improve value by using multi-disciplined teams of

specialists knowing various aspects of the problem being studied.

• A function oriented approach to identify the essential functions of the system,

product, or service being studied, and the cost associated with those functions.

• Creative thinking using recognized techniques to explore alternative ways of

performing the functions at a lower cost, or to otherwise improve the design.

VE Terminology
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The term Value Engineering is synonymous with value management, value analysis,
and value control. Some of these terms were coined to minimize confusion about the
word engineering. You do not have to be an engineer to apply VE. The following
terms are used throughout this document:

• Value Engineering Project: A preplanned effort to study a specific area or task, the
primary objective being to improve value using VE methodology while maintaining
required functions.

• Function: The purpose or use of an item or process. The VE approach first

concerns itself with what the item or process is supposed to do. The consideration of
function is the fundamental basis of the VE method.

• Value: The relationship between the worth or utility of an item (expressed in

monetary terms) and the actual monetary cost of the item. The highest value is
represented by an item with the essential quality available at the lowest possible
overall cost that will reliably perform the required function at the desired time and
place.

• Worth: The lowest cost to reliably achieve the required function. Worth is
established by comparing various alternatives to accomplish that function and
selecting the lowest cost alternative.

• Value Engineering Proposal: A specific proposal developed internally by DoD

personnel for total value improvement from the use of VE techniques. Since Value
Engineering Proposals are developed and implemented by Government personnel, all
resulting savings accrue to the Government. A Value Engineering Proposal can also
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be the result of a technical support contractor effort if it is funded by the Government
specifically to conduct a VE study on a contract to which it is not a party.

• Value Engineering Change Proposal (VECP): A proposal submitted to the

Government by the contractor in accordance with the VE clause in the contract. A
VECP proposes a change that, if accepted and implemented, provides an eventual,
overall cost savings to the Government and a substantial share in the savings accrued
as a result of implementation of the change for the contractor. It provides a vehicle
through which acquisition and operating costs can be reduced while the contractor’s
rate of return is increased.

Why Use VE?

By using VE we have a powerful proven methodology to:

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 o Solve problems
o Reduce costs
o Improve quality
o Improve performance
o Maintain intended functions

Value Objectives Methodology:

Return on investment has ranged from 10 to 1 to 1,000 to 1. VE (synonymous With
VA or VM) is a function-oriented systematic team approach to provide more value for
a program, process, product, service, system, or technique.

VE Philosophy
Often, this improvement philosophy is focused on cost reduction; however, other
Improvements such as customer-perceived quality and performance are also
paramount in the value equation. VE techniques can be applied to any product,
system, or service in any kind of business or economic sector, including industry,
Government, construction, and service. VE focuses on those value characteristics
Deemed most important by the customer.

Need for VE

Cost analysis for our projects is a part-time job. Since this is so, we have many
products, services, and systems that have built-in unnecessary costs. Even though the
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design has nearly reached completion the use of VE can provide benefits not
previously achieved. VE has side benefits to reducing overall life-cycle costs and it
can find ways to utilize our resource (people, time, money, and materials) better. VE
happens on purpose, so we can create the change that is necessary before it is too late.
VE also provides many professionals with a new avenue of improving projects by
managing value objectives MVO). On each case the team has value objectives they
would like to meet. So the team will strive to manage the future course of action in
order to meet those value objectives by using VE.

VE Helps Your Organization:

o Increase bottom-line profits
o Solve problems
o Use resources more effectively
o Improve costs
o Save time
o Increase market share
o Compete more successfully in nationaVintemationa1 markets
o Improve resource efficiency
o Improve quality
o Reduce risk
o Manage value objectives
o Resolve issues
o Increase potential for improved return on investments
o Recover schedule delays

How Can VE Be Applied?

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The VE technique is governed by a structured job plan to assess the value of products,
projects, programs, processes, systems, services, and techniques. A VE job plan can
be implemented when unsatisfactory value is suspected.
The plan involves the following phases:

o General: Before actual work begins, a foundation should exist consisting of

Good human relations, teamwork, and management support so that an effective
interaction can take place and work can focus on specifics.

o Information: Secure facts, determine costs, and fix costs on specifications

and requirements.

o Function: Define the function, evaluate function relationships (FAST

diagramming), and identify costs for these functions. When possible, customer
attitudes concerning functions are included.

o Creativity: Establish positive thinking and develop creative ideas in a team

Setting.

o Evaluation: define and combine ideas, establish costs on all ideas, develop
Function alternatives, and evaluate by comparison.

o Development/Recommendation: Develop and present proposals that resolve

the study issues and motivate to action.

o Implementation: This is the phase of the job plan in which the proposal is
implemented and the product is improved by acceptance of VE recommendations.

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There are two keys to the VE discipline:

(1) The phases must be taken in the proper sequence as outlined above and

(2) The unique method of function analysis must be used, and when appropriate,
customers' perceptions of worth to the functions must be related. When cost reduction
is the objective, this discipline can achieve impressive savings far above the norms of
traditional cost reduction techniques.

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What are the benefits of Value Engineering ?
Value Engineering helps your organization in :

• Lowering O & M costs

• Improving quality management
• Improving resource efficiency
• Simplifying procedures
• Minimizing paperwork
• Lowering staff costs
• Increasing procedural efficiency
• Optimizing construction expenditures
• Developing value attitudes in staff
• Competing more successfully in marketplace

VE OVER A SYSTEM’S LIFE CYCLE

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VE can be applied throughout the life cycle of a DoD system. Section A describes the
overall DoD Systems Acquisition Framework and indicates areas with the greatest
potential for achieving VE benefits. The remainder of the chapter provides specific
VE opportunities during each phase of a system’s life cycle in a systems-engineering
context. Section B discusses VE early in the life cycle. VE during production and
deployment is covered in Section C. Finally, Section D illustrates VE in the
Operations and Support (O&S) phase.

A. INTRODUCTION
The Defense Acquisition Management Framework is characterized by five phases
separated by three major milestone decision points.
The five phases are:

• Concept Refinement,
• Technology Development,
• System Development and Demonstration,
• Production and Deployment, and
• O&S.

The three major milestone decision points are:

• Milestone A authorizes the Technology Development phase;

• Milestone B is typically formal program initiation; and
• Milestone C approves Low-Rate Initial Production.

The Design Readiness Review marks the transition from system integration (design)
to system demonstration (build and test). The Full-Rate Production decision is made
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after initial operational test and evaluation have been completed. Initial Operational
Capability. (IOC) and Full Operational Capability (FOC) are achieved as the
production units are fielded. While value engineering is applicable at any point in the
life cycle, Figure 4 shows that the savings potential commonly decreases as the
program ages. VE should be applied as early as possible in the life cycle. Early VE
tends to produce greater savings (or cost avoidance) because at the Design Readiness
Review, approximately 80 percent of the costs are committed.
Therefore, greater opportunities exist for change and the changes cost less to
implement before then. Even if early opportunities are missed, VE can still be
applied. Late in a program VE is precluded only in those rare instances where the cost
of the VE effort and subsequent implementation would be greater than the savings
potential. While later VE normally adds implementation costs and affects smaller
quantities, such deterrents are typically offset by improved performance and
reliability through advances in technology and savings generated from increased
product life. Usually some opportunities offer net savings at any stage of a program.

“Acquisition programs shall be managed though the application of a systems

engineering approach that optimizes total system performance and minimizes total
ownership costs.”

The use of VE and the value methodology can make valuable contributions to the
systems engineering process throughout the life cycle, although the most appropriate
time to apply VE varies. When to apply VE depends on whether:

• Current system performance or cost does not satisfy the customer;

• Advances in technology have system application, resulting in enhanced performance
or reduced cost;
• The likely savings are high; or
• VE may be applied easily.
An important precursor for applying the VE methodology is properly establishing
separate cost and income baselines and accumulation practices. This enables more
accurate tracking of savings during execution. The following sections describe VE
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opportunities early in the life cycle, during production and deployment, and during
Operations and support.

VE EARLY IN THE LIFE CYCLE

The most opportune time to apply the VE methodology is early in the life cycle,
before production begins, before field or technical manuals are drafted, and before
logistic support plans are finalized. Some of the more important benefits are as
follows:

• Savings can be applied to all production units.

• Reductions to the high cost of development, the subsequent cost of production,
and the consequent costs related to operation and support may be realized.
• Fewer modifications to production lines, tooling, processes, and procedures will
be required.
• Fewer drawing changes will be necessary.
• Fewer post-production changes to logistic and support elements such as
manuals, maintenance facilities, and spare parts requirements will be needed.
The Concept Refinement, Technology Development, and System Development and
Demonstration Phases encompass the early part of the life cycle.

VALUE ANALYSIS

INTRODUCTION:
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VA for New Products – Value Engineering

For new products, the team will need to modify the VA approach and will operate in
an environment that is less certain and has poor levels of available information upon
which to make decisions. In this case, the analysis and systematic process of review
for new products is known as Value Engineering (VE). The VE approach is similar to
that of Value Analysis but requires a much greater level of investment by the
organization in terms of the skilled, experienced and proficient human resources
seconded to the group. For more detailed information on Value Engineering as
opposed to Value Analysis please refer to the references listed at the end of this
report.

VA for Product Families- Horizontal Deployment

The final form of VA is results when there is scope for the ‘horizontal deployment’ of
the results of a VA exercise with a single product or family of products. Under
conditions where the value analysis project team finds commonalties with many
products manufactured by the company, then it is possible to extend the benefits to all
these other products concurrently. In this manner, all affected products can be
changed quickly to bring major commercial benefits and to introduce the
improvement on a ‘factory-wide basis’. This is particularly the case when supplying
companies offer improvements that affect all the products to which their materials or
parts are used. The horizontal deployment activity has many advantages both in terms
of financial savings and also the relatively short amount of time required to introduce
the required changes to the product design.

Competitive VA

VA techniques are not simply the prerogative of the business that designed the
product. Instead VA is often used as a competitive weapon and applied to the analysis
of competitor products in order to calculate the costs of other company’s products.
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This is often termed ‘strip down’ but is effectively the reverse value analysis. Here the
VA teams are applied to understanding the design and conversion costs of a
competitor product. The results of the analysis is to understand how competitor
products are made, what weaknesses exist, and at what costs of production together
with an understanding of what innovations have been incorporated by the competitor
company. It is recommended that the best initial approach, for companies with no real
experience of VA, is to select a single product that is currently in production and has a
long life ahead. This approach offers the ability to gain experience, to learn as a team,
and to test the tools and techniques with a product that has known characteristics and
failings. In the short term it is most important to develop the skills of VA, including
understanding the right questions to ask, and finally to develop a skeleton but formal
process for all VA groups to follow and refine.

Types Of Value Analysis Exercises

VA for Existing Products

One of the best approaches to VA is simply to select an existing product that is sold in

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Relatively large volumes. This product, or product family, will tend to have a great
deal of the basic information, and documented history, which can be used quickly as
opposed to a newly introduced product where such a history is not available. An
existing product unites all the different managers in a business, each with an opinion
and list of complaints concerning the ability to convert the design into a ‘saleable’
product. Therefore any team that is created for the purpose of VA will understand
their own problems but not necessarily the cause of these problems across the entire
business. These opinions regarding poor performance (and documented evidence of
failures) are vital to the discussions and understanding of how the product attracts
costs as it is converted from a drawing to a finished product. These discussions
therefore allow learning to take place and allow all managers to understand the
limitations to the scope of product redesign and re-engineering activities.
These issues include:
• The inability to change existing product designs due to the need to redesign tooling
and the expense of such an initiative.

• The project team may have a finite duration before the project is concluded and
therefore time will dictate what can be achieved.

• The high levels of purchased costs may imply a need to engage with suppliers in the
VA process. This initiative will be constrained by a number of issues such as the
timing of the project, the availability of resources from the supplier, the location of
the suppliers, and other constraints.

HOW TO USE VALUE ANALYSIS

Keys to Success
There are many keys to the success of a VA programme and it is wise to consider
these issues before commencing the project, as errors in the project plan are difficult
to correct, without causing frustration, once the VA project has started. One of the

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most important initial steps in developing the VA process is to create a formal team of
individuals to conduct the exercise. These individuals must be drawn from different
parts of the business that affect the costs associated with design, manufacturing,
supply and other relevant functions. In addition, the team must be focused on a
product or product family in order to begin the exercise.
Further key success factors include:
• Gain approval of senior management to conduct a Value Analysis exercise.
Senior management support, endorsement and mandate for the VA project
provides legitimacy and importance to the project within the business. This
approval process also removes many of the obstacles that can prevent progress
from being made by the team.

• Enlist a senior manager as a champion of the project to report back directly to

the board of directors and also to act as the programme leader.

• Once a programme team has been developed it is important to select an

operational leader to co-ordinate the efforts, monitor progress and to support
the project champion. This leader will remain with the VA team throughout
the life of the project and will be the central linking pin between the team and
the senior management champion.

• Establish the reporting procedure for the team and the timing of the project.
This project plan needs to be formal and displayed as a means of controlling
and evaluating achievements against time.

• Present the VA concept and objectives of the team to all the middle and senior
managers in the business. Widespread communication of the VA project is
important so that other employees, particularly managers (who may not be
involved directly with the process) understand the need to support the project
either directly by assigning staff or indirectly through the provision of data.

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• Maintain a list of those business functions that should receive a regular
communication of progress even though they may not be directly involved
with the project. This process allows other individuals in the business to be
informed about the progress and findings of the group. This form of promotion
is important as it maintains a momentum and communicates the findings of
the team as widely as possible.

• Provide an office space and co-locate the team members where practical and
possible to do so. The ability to locate a VA improvement group in one area of
the business is important and assists the communication within the group. A
convenient area can also be used to dismantle the product and also the walls of
the area can be used to record, on paper charts, the issues that have been
discovered by the team (and the associated actions that must be undertaken).

• Select the product for the first study. Ideally the existing product, or family of
products, will be one that is established, sells in volume and has a relatively
long life expectancy. As such any improvement in the cost performance of the
product will provide a large financial saving to the business.

• Write down the objectives of the project and the key project review points.
Estimate the targets to be achieved by the project. These objectives provide a
reference point and framework for the exercise. The objectives also focus
attention on the outputs and achievements required by the company.

• Select and inform any personnel who will act in a part time or temporary role
during the project. This process is used to schedule the availability of key
specialist human resources to support the team throughout the duration of the
project.

• Train the team in both the process of VA and also in basic team building
activities. It is important that all members understand the nature of the project
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 and its importance. The initial team building exercises are also a good way of
understanding the attitude of all members to the project – especially those with
reservations or a negative attitude to what can be achieved. As with most team
exercises there is a requirement to allow the team to build and bond as a unit.
It is often difficult for individuals, drawn from throughout the factory, to
understand the language that is used throughout the business and also to
understand the ‘design to market’ process when their own role impacts on a
small section of this large and complex process.

Stage 1 - Orientation Phase

The next section will concentrate on the selection and development of the VA team
and on the selection of the product. It will also provide an overview of the
implementation stages as summarized in the diagram below

Techniques: Market Survey, Focus Groups,

Orientation
e.g. Reports, Warranty Claims.

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 Functional Techniques: Brainstorming, C
Identification
Charting, Affinity diagrams

Functional Techniques: FAST Analysis

Analysis
Creative Alternatives

Analysis &
Evaluation

Implementation

1. Forming the Value Analysis Team

If it is accepted that costs accumulate from the design office all the way to the
customer and that this is not the fault of any individual then the VA process can be
used to build a proper and effective system of control. Adopting the ‘company-wide’
perspective for VA activities is therefore critical if real financial and efficiency
savings are to be made across the business. Seen in this way, VA will address losses
in the factory (such as slower than expected processing times, poor quality and excess
material loss during conversion) as well as more tangible costs that lie outside the
factory (warranty returns and customer complaints etc.). In order to respond to this

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total approach, any business that uses VA will need to create a team of employees that
represent areas in which these costs arise (it should be noted that these costs may arise
in one department but be caused by another). The development of the cross functional
team will be important to generate an understanding of the ‘cause and effect’
relationship between sub-optimal designs, value generation and product margin.
A formal and systematic Value analysis approach involves many employees
within a single business each contributing to the solution (value at lowest cost). The
exact make-up of the Value Analysis team will depend upon the company, the
resources that it has available and the objectives of the programme. Ideally, the team
would include any stakeholder in the product design and manufacturing process from
within the company as well as external representation (customers and suppliers) that
has an impact or is affected by the costs of poor design. It is therefore important that
this stage, in the implementation process, is planned carefully such that the best
human resources in the business can be directed to the VA project. It may seem
illogical that the best resources are used by the project but a VA programme is an
investment made by the company to minimize the costs of a product and therefore the
project requires the best skills that a company can afford. It is therefore important that
the collective members of the VA team must possess the right skills, have access to
the relevant information and be capable of working as a team in a thorough and
professional manner.

The typical representatives involved in a VA team would include:

• Designers due to the responsibility they hold for the product itself and their
knowledge of design activities and the decisions taken at the early stages of
the product lifecycle (specifications, materials selected and the constraints this
imposes on other departments and in the business).

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 • Manufacturing engineers and production engineers. These employees have a
‘natural’ requirement to be involved with the VA process as they have a direct
impact on the ability to make a product efficiently and cost effectively. These
people determine how the product is to be made. Other engineering related
personnel could include industrial engineers and production managers who
have a responsibility to manage the process and therefore are concerned with
the reduction of conversion costs.

• Purchasing specialists. These employees have a detailed knowledge of the

purchasing requirements that result from a product design and convert these
design requirements into material specifications. As such, these employees
have an interest in where materials are sourced including what alternatives
have been suggested by existing suppliers to the business.

2. An Extended Team Approach

A purely internal VA process is limited in that improvements can only be aimed at the
processes within the factory. As companies engage in greater levels of purchasing
from suppliers, then the relative percentage of supplied costs to the overall cost of the
product rises. This implies the need to enlist the support and participation of suppliers
but also to complete the process and involve customers, too. The integration of
suppliers has proven to be a major advantage for companies such as Japanese
manufacturers who actively seek the involvement of suppliers during the total design
process of products such as electronics and automobiles. Indeed, for many Japanese
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companies, the suppliers are deliberately organized into groups to allow an efficient
and effective process of supplier engagement. This group approach allows a much
greater level of participation and dynamism to develop with and between suppliers as
they work together to solve common problems.
The integration of suppliers and customers offers many additional benefits to the VA
process teams:

• Customers tend to be poor at articulating and summarizing the value they get
from products and services but when integrated into a project tend to be able
to offer a greater insight into their real intentions. As such the solicitation of
customer information is key to a successful VA process although it should be
recognized that the customer need not be involved in the full process but
contribute to the early stages of product value definition. Working with
customers is a comparatively difficult process, in relation to working with
suppliers, and therefore the integration of customers into the VA process
requires a good working relationship between the company and its customer

• Suppliers and subcontractors tend to know more about their products (and
substitutes) than the purchasing business from a technical, applications and
commercial. Also, tasked with greater responsibility for the design of
products, these suppliers will tend to make better designs both in terms of cost
and functionality. Indeed many suppliers perform services that were
considered to be ‘non core’ activities and therefore many of the skills that
were previously retained to design and make these products are no longer
within the business. In addition, the specialist suppliers of materials or parts
tend to be capable of working autonomously without the need for close
supervision and team support.

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3. Selecting the Product

Once the size and make up of the VA team is determined and roles have been
established then the next stage is to determine which product, or product family, will
be the subject of the study. Essentially, VA can be applied to any product however
certain commercial attributes will make the VA process more commercially important
and potentially profitable to the business.
The criteria and attributes that can be applied in the product selection stage include
products with:

• Known problems or those that have generated complaints or costly warranty

returns. These products have attracted criticism and frustration from the
customer to the point that the customer has formally complained. As such
these problems need to be corrected as they compromise the perceived value
of the customer. Products with known problems within the factory are also
important, as these products require high levels of internal rectification before
they reach an standard suitable for dispatch to the customer

• Forecast sales volumes that are due to rise, grow or maintain a high level of
sales. These products are attractive for VA activities as they represent key
products to the business. In terms of classification these products are often
termed ‘runners’ as they feature regularly each week in the production
programmes. Conversely, infrequent product manufacturing cycles of products
with low annual sales tend to be called ‘strangers’ and these products do not
tend to offer the same ability to make substantial savings from minor
improvements due to the lack of volume and economies of such volumes.

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 • Below average margins. Products that have poor or negative profit margins
would attract the attention of VA teams, as they do not contribute to the long-
term survival of the business. In reality, the selection of the product will be
based on criteria that is specific to the business but it is preferable to start with
a product that is sold in volume at a profit rather than attempting to correct a
product that does not make a profit.

4. Preparation

To understand properly the function of a product the team must experience the
product and this stage is important for both teams building and creating a common
understanding (including a common language) regarding the different components of
the product under study. This is the first stage in functional analysis and provides a
product overview for the team. It is essential that the team spends time getting to
understand the product and how it travels through the factory as this information will
provide the skeleton upon which later analyses will build and refine the details of the
product functionality and costs. This stage is therefore a ‘gathering’ stage where the
team will be expected to collect basic information about the product under study.
In this preparation it is beneficial to get the team to collect and display items such as:

• A fully assembled product. The finished product is placed on a table and

allows the team to study the product that is presented to the customer. It is
common to find that, in the process of understanding, the team uses
identification labels to highlight (and provide the correct name for) elements
of the product.

• Product sub-assemblies. The finished product allows the team a limited

amount of product knowledge therefore it is desirable to collect sub-
assemblies for analysis. In the case of the computer printer, this may include
the inkjet cartridge carrier system, the drive mechanism, the power

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 transformer system, and such like. Once again these items will be displayed
and identified with their correct names.

• Product Parts mounted on a board. For each sub assembly the team may build
an ‘exploded’ bill of materials list and in the same way as before, the product
will be dismantled, separated and identified. In the case of the inkjet printer
cartridge carrier this may include such items as the printer cartridge holder,
retaining clips to hold the cartridges in place, the communications cable, and
the printed circuit board control unit.

• Examples of raw materials such as polymer plastic, steel sheet, aluminium

profile and such like.
• Examples of scrap produced at the various stages of the manufacturing
process. These items provide valuable insights into the causes of waste and the
hidden costs of poor design or poor operation.

• Competitor products. These products are ideal and should be displayed for the
team to review and compare rival systems with the systems that are used in the
focal product. As such, the cartridge system can be compared with the system
in the rival product. Ideally, the competitor product would be displayed in the
same manner (the final product, subassembly and parts), as the focal product
has been prepared. Obviously, the collection of these support materials is
greatly enhanced when the team is collocated in an area where these items can
be displayed and examined

Useful Techniques for the preparation stage:

• Team brainstorm of project requirements, critical path, losses at each stage of

the design to customer process.

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 • Refinement of the detailed product-process map (the recording of the stages of
the process with comments related to costs, quality and known problems at
each stage.
• Development of the cause and effect, bar chart of problems and pareto
analysis of failures in the conversion process. Development of Failure Modes
Effect Analysis chart (FMEA).
• Development of a chart that displays the process and costs of each process
stage to demonstrate the points in the conversion process that generate the
most costs.
• Review of customer complaints (or survey) with associated cause-and-effect
and pareto analyses.
• Benchmarking information where available or practical to collect.

Stage 2 - Functional Analysis

The next stage of the VA exercise is to commence the analysis of the product by
identifying systematically the most important functions of a product or service. This is

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known as functional analysis. ‘Function’ can be defined, as the use demanded of a
part pr a product and the esteem value that it provides. These functions therefore
make the product work effectively or contribute to the ‘sale ability’ of the product.
Functional analysis outlines the basic function of a product using a verb and a noun
such as ‘boil water’ as in the case of our kettle.
These are several steps within this stage:

A. Describe the Functions

The first step is to systematically analyze and describe the functions that the product
undertakes. The basic functions of the product or service are listed, or brainstormed
out. A function is best described by a verb or noun, such as ‘make sound’ or ‘transfer
pressure’, or ‘record personal details’. The question to be answered is ‘what functions
does this product/service undertake?’ Typically here will be half a dozen or more
activities. There is a temptation to take the basic function for granted, but do not do
this, as working through them often gives very valuable insights into the value and
functionality of the product and nothing should be taken for granted by the team. For
instance, for as domestic heat time controller, some possible functions are ‘activate at
required times’, ‘encourage economy’, and ‘supply heat when required’. This is often
a slow but enjoyable stage of the VA process and it is not an activity that many of the
team will have experienced before. Once again, it is important to document all
discussions and team exercises for later reference.

A customer requires two types of function in any product or service: ‘work’

functions and ‘sell’ functions. For instance a postage stamp has the work functions of
‘authorize carriage’ and ‘evidence of payment’, and sell functions are ‘attract
identification’ and ‘allow collection opportunity’. The team should brainstorm these
‘work’ and ‘sell’ functions of the product. It is useful to brainstorm these issues using
Post-It notes and to record the results of this exercise on a standard form for this
activity.

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 B. Rank the Functions by pair-wise Comparison

The next step uses pair-wise comparison to rank the functions. This is often done as a
group activity, reaching a consensus about each pair. It works like this: each function
is compared for importance with each other function, using e.g. a table (see figure).
The most important of the two functions is identified and written on the table. Always
decide which function is more important, do not allow the ‘cop out’ of saying that
both are equally important. Then the group decides if the difference in importance is
minor (1 point), medium (2 points), or major (3 points). The group discussion on
importance usually makes this easy, and points made are written on the table. After all
pairs have been compared, the scores for each function are added up – the higher the
score, the more important the function. Experiences here show that in most studies
one or two functions emerge as being by far the most important ones. These functions
are those to concentrate subsequent efforts on. This stage of identifying the most
important or ‘basic’ functions is very important from the point of view of gaining
group consensus.

Stage 3 - Creative Brainstorming

This step requires a certain amount of creative thinking by the team. A technique that
is useful for this type of analysis is brainstorming which allows all the members of the
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team to participate and for some strange yet ultimately commercial ideas to be
promoted amongst the team. This stage is concerned with developing alternative,
more cost effective ways of achieving the basic function. All rules of brainstorming
are allowed, and criticism needs to be avoided as it could cease the flow of ideas.
Simply list down all ideas, not regarding whether they sound apparently ridiculous.
Various ‘tricks’ can be used, such as

• Deliberate short periods of silence. These deliberate periods of reflection

allow the team members to refocus their thoughts and to avoid the trap of
following one line of thought to far.
• Writing ideas on cards anonymously. This approach is particularly good for
team members who are shy or feel inferior to the specialists in the group.
Using this approach each team member is issued with a number of paper cards
and uses these to write down their ideas. At a point in time, all the cards are
collected, discussed and grouped. This is a good way of gaining high levels of
participation from the entire team.
• Sequencing suggestions in a ‘round-robin’ fashion. This process involves the
team situated at a table. Each person nominates an idea for the team and then
the responsibility passes to the person on his or her right. As the process
unfolds, several cycles of the entire table will produce a large number of ideas
which will eventually become exhausted. Therefore the team will amass a
great quantity of ideas for discussion in a relatively short time period.
• Making sketches. Many of the specialists in the group will be more
comfortable drawing their ideas rather than verbalizing them. This is true of
engineers who find verbalizing complex solutions difficult but drawing them
somewhat easier. In this process, the teams are allowed to draw potential
improvement ideas for discussion.
• Explaining the product to an ‘extra-terrestrial’ customer3. This process is
interesting and somewhat challenging, as the team must describe the
functionality to a person that has no concept of the product or its application.
This process sounds very easy but in reality is quite difficult as the team will
constantly review their efforts to describe the product and therefore add
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 greater and greater levels of detail that often go unexpressed. This process
usually involves a high degree of humor and is a fun activity that ensures
everyone in the team understands the functionality of the product. In effect,
this process creates a common understanding and a baseline that can be shared
with all team members regardless of their level of specialist knowledge.

Stage 4 - Analysis and Evaluation

The third stage is to evaluate the ‘cost’ and ‘worth’ of each function. This is not an
exact process but allows the existing cost of the product to be apportioned between
the functions based on the assumptions that have been made by the team. The worth is
determined by estimating the lowest cost of producing each basic function if cut down
to its minimum. The value potential is therefore the difference between the cost and
the worth figures. In some cases it might be necessary to for the team to take a break
while specialist team members, or seconded resources, evaluate the costs and
feasibility of some of their suggestions that have been generated.

At this stage, the options available to the team are therefore to modify the design of
the product to:

Completely eliminate the part from the design as it serves no useful purpose and has
no customer value but only a cost. Replace, substitute or modify the part and therefore
lower the cost of the product by making an improvement to it. The results of these
team deliberations and evaluations of the different alternatives and Potential changes
can be recorded using a cost-benefit chart. This chart displays the costs of the
improvement on one axis, and the associated benefits along the other. At this point the
team has developed and justified improvements to the product and this stage usually
concludes with a project report with recommendations.

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In addition, the team will develop a brief presentation to senior management as a
summary of their findings and recommendations.
• The presentation and report will usually contain the following sections:
• The subject, product and VA project team brief mandated by senior
management
• The business conditions and justification to improve the cost performance or
value enhancement of the product.
• The current costs of the product and the failures in the conversion process that
represent the hidden costs of poor design.
• An analysis of the product and its functionality for customers.
• The proposed changes and the commercial reasons for it.
• The comparison of actual costs now and post-implementation costs.
• The savings year on year based on future expected volumes.
• The expenditure items required.
• The process of implementing the change and the proposal (including timing of
the different phases)
• A list of issues that could not be resolved by the team but are worthy of future
analysis.
• A complete list of appendices containing all the materials collected used and
recorded during the lifecycle\ of the team.
• The next stage is to gain a formal agreement by the senior management team
to proceed and schedule the timed implementation of the recommended
changes.

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Stage 5 – Implementation

The final stage of the VA team is to report the findings to the senior management
team and to gain permission to implement the findings of the report. This is the most
rewarding stage as the many hours of brainstorming; classification and calculation
begin to become ‘the new product’ and ‘the new way of manufacturing’. At this point,
each product or service that is conducted is done so with the knowledge that it
generates profit for the business and generates value for the customer in the most
effective and efficient way. It should be noted that changes need to be scheduled in
order to prevent ‘change overload’ within the factory whereby many elements of a
product are replaced or modified and also to allow specialist departments such as the
Purchasing Department to make the necessary changes to material and part
specifications. These activities need to be phased to avoid the chaos of multiple
changes happening at once and to allow the anticipated cost savings to be tracked and
monitored. Indeed, it may be necessary to track the improvement in the quality
performance of the product (in the factory) over many months before the
improvements can be proven to work. This is especially true where the company has
to run down the existing stocks of the problem part before introducing the modified
part.

Cases of VA Success

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• A manufacturer of domestic water heaters conducted a VA analysis. It found
that the customer derived value from the cost efficiency and reliability of the
product. In addition, the company found that the largest source of failures
resulted from internal moving parts that failed frequently. The VA exercise
resulted in a decrease in these moving parts (valves etc.) and a replacement of
other problem items with more cost-effective alternatives. The reliability of
the product has resulted in no complaints from customers and a reduction of
moving parts to only three parts.
• A lighting company has achieved savings of 6 times the costs of its value
analysis exercises. One product has achieved a 250% increase in sales over its
predecessor. Now the company has trained over 15% of its workforce in VA
techniques.
• A small company producing cooling radiators for machinery involved its
suppliers in the redesign of the existing product range with the result of a
much better product and half the conversion costs of the previous product sold
to the market.
• An office stationary company conducted a VA exercise on a range of paper
stapling devices and hole punching devices. The team found that the
traditional designs had always incorporated metal as the main material. After
several exercises that looked at the way in which the products were used and
also the function required of the product, the company converted the product
from metal to a plastic design at a major cost saving.
• Toy Company redesigned a model product, as a result of a VA exercise, and
reduced the many different metal fasteners with just one type creating a saving
for the company and the supplier.

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 THE JOB PLAN

Information gathering occurs in the beginning of the job plan followed by many
MVO study teams. During information gathering the teams will confront many cost
modeling pitfalls and the team will need to verify the cost estimate given for them to
study. Usually 80% of the costs are in 20% of the items Costs are to be modeled for
all major function areas of the project By taking the cost for a typical project the
group may model the costs Determine what costs are missing What costs appear low
or high Include the cost for unknowns Quantities may need to be checked and
reviewed Prepare parametric costs for comparison to the current estimate. Parametric
cost example: Normally, the cost/sq of yard of pavement may be compared to the
actual estimated cost (for example, the parametric cost/sq yd of pavement may be
$IO/sq yd, but when compared to the actual estimated cost/sq yd, it is determined that
the actual cost'sq yd is $24/sy, which may be high and an area for the team to
focus). Use the information h m the instructor's handout and sketch for the project and
develop a cost model for the project broken down by major function area, (i.e.,
earthwork, lighting etc.) After each cost model has been prepared determine the
parametric costs.

The following value engineering terms are commonly used,

FIVE-STEP JOB PLAN

The structured job plan technique is very helpful in providing for assessment and
evaluation of product and procedure values. When unsatisfactory value is discovered,
the value engineering job plan can be used.

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The job plan involves these phases:

PRE-WORKSHOP

Before the workshop begins, a foundation is established to instill good human

relations, teamwork, and management support so that an effective interaction can take
place and work focuses on the specific study at hand.
The steps include:
• Select project and distribute to all team members
• Determine what type of project is being studied
• Determine required team to study project
• Determine major components of project needed for study
• Make sure owner, MVO team and consultant designer understand the MVO
• process being undertaken and the expected time frame for results

WORKSHOP

Information Gathering Phase

Care should be taken to gather all the pertinent data before the MVO study begins.
For a construction project, for example, you would:
• Secure all the facts
• Obtain latest drawings
• Obtain latest specifications
• Obtain current cost estimate
• Make site visit if appropriate
• Obtain data from designer's, geotechnical, bridge, traffic, and previous studies,
• and alternative analyses
• Determine project requirements
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 • Determine constraints
• Understand previous problems and attempts to resolve
• Develop a cost model and prioritize costs
• Determine completeness of original cost estimate

FAST Diagramming/Function Determination Phase

• Evaluate functions and costs

• Determine basic/secondary functions
• Assign costs per function
• Develop FAST diagrams
• Determine worth of function
• Consider customer attitudes when determining functions
• Set goal for basic function costs
• Eliminate unneeded functions
• Combine functions where necessary

Creative/Speculative Phase

• Brainstorming techniques used

• All ideas should be submitted without pre-judgment
• Use positive thinking
• List all ideas
• Use checklists to help
• Use imagination
• Think of similar applications that may be unrelated
• Locate where function is performed
• Can item perform dual function?
• Creative techniques are used

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 • Three dimensioning
• Criticizing ideas not allowed
• Accept all ideas
• Encourage freewheeling
• Atmosphere free of negative attitudes

Development/Evaluation Phase

• Combine ideas
• Refine ideas
• Develop alternative functions
• List advantages disadvantages
• Price-out the recommended function
• Compare original to proposed methods
• Include sketches and complete description of proposed methods determine
• how ideas would work
• Determine approximate cost of each idea
• Will ideas provide basic secondary functions?
• Filter out better alternatives
• List advantaged disadvantages
• Select evaluation criteria for matrix

Presentation/Report Phase
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• Determine how idea works
• Can disadvantages be minimized?
• What is total cost?
• Is new proposed idea better?
• Determine life cycle costs
• Document convincing facts
• Be concise
• Overcome road blocks
• Identify additional advantaged disadvantages
• Compare proposed method to original concept
• Fine-tune proposed method to orally explain to management the new method
• Resolve issues
• Play devil's advocate to improve proposal
• Cause the responsible party to be motivated to take action to implement
proposed
• alternatives
• Issue report to management

QUESTIONNAIRE

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 1. What do you know about the value engineering?

2. How you follow value engineering?

3. Is value engineering technique helps to cost reduction?

4. What strategies are used in your organization for value engineering?

5. As per your experience what are the benefits of value engineering?

6. At what extend value engineering helps for quality improvement of product?

7. Which ideas are to be developed?

a) First Choice
b) Second Choice
c) Third Choice.

CASE STUDY

Water Wells Replacement: Case Study for Applying Value Engineering

Methodology and Techniques
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There are always several ways to manufacture or produce a product but there is
generally one best way can produce it. This paper discuses value engineering that is
the process to find the best way to produce the product with optimum cost.
Specifically, the primary objective of this study is to assess the validity and
applicability of the Value Engineering (VE) principles and guidelines. A secondary
objective is to show the value improvement or good amount of saving could be
achieved when applying VE on a case study for construction project implemented in
Kingdom of Saudi Arabia to replace six water wells.

This paper is divided into two main parts. The first one, gives a historical background
about Value Engineering, when did it exist and why, what do we mains by VE, when
is the must effective time to perform it and illustrate the VE Methodology and
Techniques. The second part of this paper is a real Value Engineering report made on
a project in Kingdom of Saudi Arabia at Abqaiq Area. The project is about “Abqaiq
Water Well Replacement” which will show the saving that made by Value
Engineering Study.

Finally, by analyzing the Value Engineering Techniques and the data obtained for the
project of water wells replacement, conclusion and recommendations for
implementing principles of Value Engineering on future construction projects are
presented.

CONCLUSION

Value analysis is a technique with immense possibilities, and systematically

employed, it can achieve great economies and increased efficiency. Although good
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results have been obtained in several individual cases in some industries, only a large
scale and systematic application of this technique in all industries, and in defence
production, can result in substantial economies on a national scale.

This valuable technique, if systematically employed, promises rich

dividends, and, among other things, enables greater use of indigenous raw materials
and equipment by import substitution. It is, therefore, of special significance to a
developing country like India which has adopted a programme of rapid
industrialization in the face of paucity of foreign exchange and other handicaps.

BIBLIOGRAPHY

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The following are the various sources through which the project information is

collected to make this project.

WEBLIOGRAPHY:

www.wikipedia.com

BOOKS:

Material management
-Prof.Gopal Krishnan.

Inventory management and control

-Prof. A.K.Datta.

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