Value Engineering Value Engineering is the conscious, systematic application of a set of techniques that identify the needed functions, establish values for them and develop alternatives to perform these functions at minimum cost.

What is value? VALUE = What we get out of something What we put into it VALUE = Quality, reliability, appeal, etc = Benefits Cost, time, mass, energy, etc. Resources VALUE = Worth = Performance Cost Cost Delivery of necessary project functions while achieving best balance between project performance and project costs. This is a separate subject that I wanted to mention to this group. One of my tasks is to identify trends in Change Orders so that lessons learned can be incorporated back into our design policy and standards. If any of you have noticed specific trends, please contact me. I am focusing on two reason codes- DE and CD. I am looking for trends – not individual war stories.

Value = Function Cost To Increase Value F C REDUCE INCREASE MAINTAIN

Functional Analysis Basic Function Secondary function Unnecessary function Item Function Basic Secondary Flashlight Provide Light X Lens Focus Light, Protect Bulb Front Glass Protect Bulb Front cap Hold Glass Rear Cap Retain Spring Bulb Cell Provide Energy Thread on Cap Permit Access

Standardization Simplification Specification Can Design be changed to eliminate a part ? Can design be purchased at lower cost ? Can standard Part be used ? Would an altered standard part be economical ?

Key Areas Material Process Standard Parts Number of parts Weight Tooling Reliability Maintainability Process Lead time

Generalized Procedure for VA/VE Information Phase What is it? What does it do? What does it cost? How else can the job be done? At what cost? Speculation Phase Is the change better? How much better? Why? Analysis Phase Review with depts and suppliers Select best alternative Get approval Prepare specifications Decision Phase Audit effectiveness Use experience Provide feedback Evaluation Phase

Analysis of Each Component Can any part be eliminated without impairing the operation of the complete unit? Can the design of the part be simplified to reduce its basic cost? Can the design of the part be changed to permit the use of simplified or less costly production methods? Can less expensive but equally satisfactory materials be used in the part? Design simplifications frequently are more apparent than is possible under the original design

The Value Engineering Checklist Can the item be eliminated? If the item is not standard, can a standard item be used? If it is a standard item, does it completely fit the application, or is it a misfit? Does the item have greater capacity than required? Can the weight be reduced? Is there a similar item in inventory that could be substituted? Are closer tolerances specified than are necessary?

The Value Engineering Checklist Can you make the item less expensively in your plant? If you are making it now, can you buy it for less? Can cost of packaging be reduced? Are suppliers contributing suggestions to reduce cost?

When is VE used Value Engineering is used to determine the best design alternatives for Projects, Processes, Products, or Services Value Engineering is used to reduce cost on existing Projects, Processes, Products, or Services. Value Engineering is used to improve quality, increase reliability and availability, and customer satisfaction . Value Engineering is also used to improve organizational performance. Value Engineering is a powerful tool used to identify problems and develop recommended solutions.

Benefits of VE Decreasing costs Increasing profits Improving quality Expanding market share Saving time Solving problems Using resources more effectively Value = Function + Quality / Cost Where, Function = The specific work that a design/item must perform Quality = The owner’s or user’s needs Cost = The Life Cycle Cost, LCC, of the product So, Value = The most cost effective way to reliably accomplish a function meeting the users needs, desires and expectations Value methodology easily produces savings of 30 percent of the estimated cost for manufacturing a product, constructing a project or providing a service. The return on investment that public and private organizations derive from implementing VM programs averages 10 to 1. That is, for every dollar invested in a VM study - including participants' time and implementation costs - $10 in net savings results.

VE’s Weaknesses Successful VE results are dependent on the quality of information brought to the VE workshop for evaluation. VE is not time oriented, but, product oriented. Thus, improvements in production activities are not readily recognized. There are many misunderstandings and biases against VE that have been built up over time due to misuse of the methodology. “It cheapens the product without improving it.” “VE is only used for cost reduction.”

Potential Savings from VE Net Savings from VE Total Cost of VE Implementation Concept Design Engineering &Production Release Production VE Implementation beyond this point results in a net loss.

Competitive Advantage Quality is defined as “conformance to specification.” Function Cost Value is defined as: You can’t have one without the other! Competitive Advantage = Quality + Value