What is Value Engineering?
Value Engineering is "the systematic application of recognized techniques by a multi-disciplined
team which 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." VE is an
effective technique for reducing costs, increasing productivity, and improving quality.
It can be applied to hardware and software; development, production, and manufacturing;
specifications, standards and contract requirements. It can also be applied to other
acquisition program documentation; facilities design and construction. It may be
successfully introduced at any point in the life cycle of products, systems, or
procedures. The VE technique is directed towards analyzing the functions of an item
or process to determine "best value" or the best relationship between worth and
cost. In other words, "best value" is represented by an item or process that consistently
performs the required basic function and has the lowest total cost. It helps people
creatively generate alternatives to secure essential functions more cost effectively.
VE uses a job plan, is function based, and requires that a product be generated
as a result of the study. The term Value Engineering is also synonymous with Value
Analysis, Value Management, and Value Planning. To summarize, Value Engineering:
- helps customer retain value
- addresses hidden costs and obvious ones
- is function-oriented and focuses on performance
- is procedural
Origins of Value Engineering
Value Engineering originated with the efforts of Larry Miles, an engineer who was
working with General Electric in the early 1950's. He is now considered the father
of Value Engineering. Miles was working toward continuous improvement and GE formed
a core group to address this area. By the 1950's, a lot of companies and governments
were applying Value Engineering techniques, which really set the ball rolling. Several
organizations have been formed to help people learn the process, monitor it, and
set standards. The process generated by Mr. Miles and the General Electric department
he headed created the basic structure for the process that has survived to this
day. However, it is worth noting that continuous improvement is an integral part
of Value Engineering.
A key component of the Value Engineering process (value process) is its use of a
carefully crafted and thoroughly tested job plan. Adherence to the job plan focuses
on a specific decision process, that which contains the right emphasis, timing,
and elements to secure a high quality product. The job plan and its sub-elements
highlight the issues involved, essential needs, criteria, problems, objectives,
and concerns. The eight-step job plan phase is displayed below.
- Selection Phase
- Information Phase
- Creativity Phase
- Analysis Phase
- Development Phase
- Presentation Phase
- Implementation Phase
- Verification Phase
One of the most unique features of Value Engineering is its use of functions and
a function-logic process to describe needs, purposes, and ramifications. The use
of function-logic removes many of people's preconceived biases. The use of two word
functions (active verb, measurable-noun descriptors) and their positioning in a
decision-logic diagram move people from the "I want" position to a basic needs focus.
It also helps them see how their decisions rely on critical features, and whether
their decisions require support to implement. (potential value-mismatches, also
known as potential value opportunities).
Every step of the process is geared toward obtaining a result that increases the
ROI (return on investment) or value for the client (individual, employer, etc.).
As a result, they generate one or more products (recommendations) in some form or
other. These are presented in both verbal and written form for use and future reference.
That way, the company has a record of the results and a series of "fall back" positions
to use as the project progresses.
How Does the Value Methodology Work?
The value methodology works through a VM study that brings together a multidisciplinary
team of people who own the problem and have the expertise to identify and solve
it. A VM study team works under the direction of a facilitator who follows an established
set of procedures -the VM job plan -to review the project, making sure the team
understands the customer requirements and develops a cost-effective solution.
Value is the worth of a product or service from the customers' point of view as
compared to its cost.
You can increase value by reducing cost while maintaining performance.
You can increase value by increasing performance if the customer needs, wants and
is willing to pay for more performance.
Value is a representation of Quality
Value Engineering Approaches
VE uses Functional Analysis Systems Technique (FAST) as a tool. This is centered
on two approaches.
- Technical FAST
- Customer FAST
- This technique does not ask for customer expectations.
- It accepts the Designer's blueprint as an accurate representation of the customer's
- It is best used on a part or portion of a larger assembly or a process defined in
context of a larger product or system
- It begins with asking the customers what they like or dislike about the product.
- It uses the customer's viewpoint to identify the value mismatches between "Cost"
- It is best used for an entire product about which the customer will have an opinion.
Benefits of Using Value Methodology
The value methodology is a powerful problem-solving tool that can reduce costs while
maintaining or improving performance and quality requirements. It is a function-oriented,
systematic team approach to providing value in a product or service.
The value methodology helps organizations compete more effectively in local, national
and international markets by:
- Decreasing costs
- Increasing profits
- Improving quality
- Expanding market share
- Saving time
- Solving problems
- Using resources more effectively
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 to1. Value methodology can increase customer satisfaction and
add value to an organization's investment in any business or economic setting. Value
practitioners can apply the value methodology to products and services in manufacturing,
construction, transportation, government, health care, environmental and engineering
Relationship to Other Management Improvement Processes.
Since the value methodology's creation, several other management approaches have
caught the eye of business leaders: total quality management, quality function deployment,
project management, concurrent engineering, re-engineering, and benchmarking. The
value methodology lends itself to use with other approaches, and this combined strength
(customer needs, teamwork, creativity and a rigorous system approach) rise above
the strengths of other processes. VE is a management tool that can be used alone
or with other management techniques and methodologies to improve operations and
reduce costs. For example, the total quality management process can include VE and
other cost cutting-techniques, such as life-cycle costing, concurrent engineering,
and design-to-cost approaches by using these techniques as analytical tools in process
and product improvement.
VE contributes to the overall management objectives of streamlining operations,
improving quality and reducing costs; and it results in the increased use of environmentally
sound and energy-efficient practices and materials. The complementary relationship
between VE and other management techniques increases the likelihood that the overall
management objectives are met.