Value Engineering – A Tool for Improvement Sep04

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Value Engineering – A Tool for Improvement


Value Engineering – A Tool for Improvement

Value engineering (VE) is a management technique that seeks the best functional balance between cost, reliability and performance of a product, project, process, system or service. It is a function oriented, systematic team approach and method to improve the ‘value’ of product, project, process, system or service by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements. Often, the value improvement is focused on cost reduction; however other important areas such as customer perceived quality and performance are also of paramount importance in the value equation.

History of value engineering

Value engineering was conceived at General Electric Company in early 1940s. At that time due to the World War II, there were shortages of skilled labour, raw materials, and component parts. To overcome theses shortages, Lawrence Miles, Jerry Leftow, and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved the product, or both. What started out as an accident of necessity was turned into a systematic process. This technique was named as ‘Value Analysis’.  Besides value analysis, value engineering is also sometimes known as value management and value methodology.

The job plan

A value engineering study generally encompasses three stages. Stage 1 consists of preparation. During stage 2, multi phase job plan is carried out. Stage 3 consists of documentation, implementation and audits.

Value engineering is usually done by systematically following a multi stage job plan which is known as ‘value analysis job plan’.  The job plan is carried out by a multidisciplinary team to improve the value through the analysis of functions. The job plan usually consists of the following six phases. However some teams vary the job plans in four to eight phases to fit their constraints.

  • Information phase – In this phase further familiarization of the project by the team takes place. All team members participate to determine the true needs of the project and to identify the areas of high cost and low worth.  The team reviews and defines the current conditions of the project and identifies the goal of the studies.
  • Function analysis phase – The team defines the project functions using a two word active verb/measurable noun context.  The team reviews and analyzes these functions to determine which need improvement, elimination or creation to meet the goal of the project.
  • Creative phase – The team lists creative ideas generated from its review of the project with the aim of obtaining a large number of ideas through brainstorming and association of creative proposals. The team employs creative techniques to identify other ways to perform the project’s functions.
  • Evaluation phase – During this phase, creative ideas are analyzed and the team selects the best ideas for further development. The team follows a structured evaluation process to select those ideas that offer the potential for value improvement while delivering the project functions and considering performance requirements and resource limits.
  • Development phase – The team prepares alternative designs with capital and/or life cycle cost comparisons of original designs and proposed alternatives. All recommendations are supplemented with written descriptions, sketches, basic design concepts; technical information and cost summaries. The team develops the selected ideas into alternatives (or proposals) with a sufficient level of documentation to allow decision makers to determine if the alternative should be implemented.
  • Presentation phase – The objective in this phase to present the VE study report to the decision makers. The team leader develops a report and/or presentation that documents and conveys the adequacy of the alternatives developed by the team. The report includes a statement of the follow up necessary to ensure implementation.

Value engineering process flow is given in Fig 1

VE flow sheet

Fig 1 Process flow for value engineering

Applicability

Value engineering can be applied during any stage of a project’s development cycle, although the greatest benefits are typically achieved early in development during the conceptual stages. The following are the typical applications of the value engineering. Value engineering can be applied as a quick response study to address a problem or as an integral part of an overall organizational effort to stimulate innovation and improve performance characteristics. Value engineering can also be used to enhance an organization’s quality programs, new product development activities, manufacturing processes and architectural and engineering designs. Some of the examples of applicability of value engineering to various type of project are given

  • Construction projects – construction projects can benefit by identifying improvements for various project phases namely concept development, preliminary design, final design, procurement and construction.
  • Manufactured products – All kind of products can be studied with a focus on either the design of the product or the manufacturing process. A product can be the subject of a value engineering study at any time during the product’s life. A value engineering study can be applied at the onset of the product development to better understand the customer’s needs, identify the functions necessary to satisfy those needs, and develop the initial concept. Throughout the development, value engineering can be used to refine and enhance the concept, based on the latest facts. Even after a product has been introduced and is in production, value engineering study can be used to further enhance the product and respond to changing customer and economic conditions. Value engineering study can be used to either develop new ways to manufacture a product or change an existing process.
  • Business systems and processes – Business systems and processes can also be the subject of value engineering studies. Many elements of a business or an organization can be improved through the application of value engineering. This can be from the development of the business plans or organizational studies for improving existing business processes.
  • Service organizations – Value engineering can be gainfully employed to improve system, processes and procedures in the service organizations.

Benefits of value engineering

Value engineering helps to learn the following

  • Improve career skills
  • Separation of the symptoms from the problems
  • Solving root cause of problems and capture opportunities
  • Becoming more competitive by improving benchmarking process
  • Taking command of a powerful problem solving methodology to use in any situation

Value engineering benefits an organization in many ways. Some of these benefits are given below.

  • Lowering of operation and maintenance cost
  • Improvements in quality management
  • Improving resource efficiency
  • Simplification of procedures
  • Minimization of paperwork
  • Lowering staff costs
  • Increasing procedural efficiency
  • Optimizing construction expenditures
  • Developing value attitudes in staff
  • Competing more successfully in marketplace