Value Engineering/Analysis: Value for Money

You may like to refer the related topics at: (Customer Orientation) http://customer-orientation.blogspot.com/, (Cost Management) http://cost-management-control.blogspot.com/

Definition and Explanation of the Terms

"Value" is what people are willing to pay for something.
Then, value analysis (VA)/value engineering (VE) are techniques for assessing the “value” content of the elements of a product or process. They also encompass carrying out improvements in the value.
The terms value analysis (VA) and value engineering (VE) are sometimes used interchangeably. However, more specifically, value analysis generally refers to ongoing improvements, especially of processes, while value engineering generally refers to first-time design and engineering of a product or process.
Both VA and VE emphasize value added by focusing on the ability of product elements (product components) or process elements (steps and procedures) to add to a product’s worth in terms of customer expectations.
All production and support activities add to a product’s cost but not all add to its value. Similarly, all components add to the cost of a product but they do not all effectively contribute to its functional value. VA and VE look at how much value something adds compared to the cost it adds.
Since the price customers are willing to pay for something cannot significantly exceed the value they perceive in it, the cost of the elements involved in the product’s components and its manufacture can not exceed the value contributed by those elements.

Types of Value

Functional value
Quality or reliability value
Service value
Comfort value
Aesthetics value
Esteem or status value
Fashion value

Ongoing VA/VE Approach

0 (zero) look VE: Functional analysis and cost targets of product components are performed in the early stages of product development.

First look VE: Functional analyses are performed during the product design, planning and trial production stages and the design is improved to narrow the differences between cost targets and present conditions.

Second look VE: Ongoing cost-reduction analyses are performed during manufacturing for the remainder of the product life cycle.

Value Engineering Methodology

The VE approach typically involves a sequence of five phases:

Information gathering
Analysis
Creation
Evaluation
Implementation

Information Gathering

Data is collected about the components or elements of the system being studied (product, process or some aspect of them).
Information about the cost of elements, their requirements and features (functions and other attributes as to why they are included etc) is collected.
The worth of each component is estimated based on the least expensive known alternative to it.
Given the worth and cost of each component, the components having the highest cost-to-worth ratio are identified. As an alternative, components can be rank-ordered in descending cost and the highest cost components become the focus of analysis. These are the components wherein the most could be gained through elimination or substitution with other lower cost components.
However, it should be remembered that the main emphasis of value analysis is not simply to cut cost but to find alternatives that add the same value for lower cost or that increase the value added for about the same cost.

Analysis

The chosen element (component in a product, step in a process or the product itself) is studied for the function it serves. Whether a step, component or product, the question is “What does it do?" If the element is a step in a process, the answer should explain why the step is there. If it is a component in a product, the answer should explain what function the component serves in the product. If it is a product, the answer should explain why the product works and why the customer buys it.
Next question that needs to be asked is "What should it do?" ·
Answers to these questions lead to ideas about ways to improve processes/components/products or suggest the need for entirely new processes/components/products.
Other questions include “Do we need it? Can something else do it better? What are alternatives to doing the same function? Can we make it better (or faster or cheaper)? Can someone else make it better (or faster etc)?”

Creation

Ideas are generated for alternative, possibly better ways of serving the same function as the element under study. They include simplifying the design, replacing nonstandard with standard parts and using less expensive materials etc.

Evaluation

Costs and the ability of alternatives to fulfill the required functions are analyzed.
The alternative which seems to have the best chance of fulfilling the function but at lower cost is chosen as the replacement.
In some cases, it is discovered that the element can be eliminated because the function it serves can be served as well by other existing elements or that the function it serves is not necessary for fulfilling the purpose of the process or product.

Implementation

The selected alternative is adopted.
The results are monitored for costs and to ensure that the function is being well served by the new element.
Data is retained for later analysis and repetition of the process.

For More Guidance, Assistance, Training and Consultation

Contact: prodcons@prodcons.com

Training in "Value Engineering/Analysis" is provided by Prodcons Group's Mr Shyam Bhatawdekar, eminent management consultant, management educationist and trainer- par excellence, with distinction of having trained over 150,000 people from around 250 organizations.

Also refer: (Prodcons Group) http://prodcons-group.blogspot.com/, (Training Programs by Prodcons Group) http://training-development-function.blogspot.com/, (Productivity Consultants) http://productivity-consultants.blogspot.com/

Other Topics of Interest

All Management Topics (General Management, Marketing and Sales, Service, Operations/Manufacturing, Quality, Maintenance, Human Resources, Finance and Accounts, Information Technology, Life Management)

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