Product Design & Value Engineering Material

Chapter:-7    Value Engineering Introduction

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 Value Engineering Definition : -

“An organized study of functions to satisfy the user’s needs with a quality product at the lowest life cycle cost through applied creativity”.            – USACE

“Value engineering is a proven management tool that can be used by agencies to streamline operations, improve quality and reduce contract costs.”

            - Franklin Rains, U.S. Office of Management and Budget

Value Engineering is the systematic application of recognized techniques by multidiscipline team(s) 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.

Value Methodology (also called Value Engineering, Value Analysis or Value Management) 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 Engineering (VE) is a methodology that is known and accepted in the industrial sector. It is an organized process with an impressive history of improving value and quality. The VE process identifies opportunities to remove unnecessary costs while assuring that quality, reliability, performance, and other critical factors will meet or exceed the customer's expectations. The improvements are the result of recommendations made by multidisciplinary teams representing all parties involved. VE is a rigorous, systematic effort to improve the value and optimize the life cycle cost of a facility.

VE generates these cost improvements without sacrificing needed performance levels. A wide range of companies and establishments have used VE effectively to achieve their continuous goal of improving decision making.

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 Value Engineering Terminology : -

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:

i.        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.

ii.     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.

iii.   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.

iv.   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.

v.      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 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.

vi.   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.

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 Benefits of Value Engineering : -

Value Engineering helps in improving efficiency and effectiveness of products, systems and procedures. In general, VE does the following:

·        It helps us to pinpoint areas that need attention and improvement.

·        It helps in generating ideas and alternatives for possible solution to a problem.

·        It provides a method to evaluate alternatives.

·        It provides a platform for dialogue.

·        It records the logic behind the decisions.

·        It improves the value of goods and services significantly.

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 Function Analysis : -

Function analysis, the study of design performance, is the heart of value methodology. It is one of the few things that make this technique different from all other cost reduction techniques.

The glossary accompanying this text provides definitions for 24 different types of functions that all value engineers need to study and understand. The key function of all those defined is the basic function.

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 Classifying Function : -

In an effort to make the classical methodology work better in the construction area (as opposed to the industrial area), the classifications of function were modified to include the following:

·        Basic function(s)

·        Required secondary functions (modification to industrial area)

·        Secondary functions

These classifications are defined in the following paragraphs.

     Basic Function : -

Basic function is:

1.      That which is essential to the performance of a user function, or

2.      The function describing the primary utilitarian characteristic of a product or design to fulfill a user requirement.

The determination of a basic function is made by asking, "Can the function be eliminated and still satisfy the user?" If the answer is no, the function is basic. All basic functions must be achieved as the result of VE. One cannot eliminate a basic function and satisfy the user. VE does not recommend changes that eliminate or compromise basic function. For example, the basic function & a match are to generate flame. The phosphorus tip is classified as a basic function. No flame can be generated without the tip. 

    Required Secondary Function : -

Since the construction field works according to many codes, standards, and safety requirements that must be met if a permit to construct is awarded, a new category-required secondary function-was developed by the author. A required secondary function is any function that must be achieved to meet codes, standards, or mandatory owner requirements.

Without this innovation, the worth of the project function developed under the classical approach-ether basic function with worth, or secondary function with no worth, resulted in a project worth so low Chapter Five Function Analysis that the value engineer appeared "foolish" to peers. In most cases, the impression it made on peers negated any value gained.

For example, under the classical approach, the basic function of a hospital is to treat patients. Using the classical approach, the fire protection system function is to control/extinguish fire-a secondary function worth zero.

Patients can still realize treatment without this system. But, who would build a hospital without a fire protection system? Classifying the function as a required secondary function having worth is a more realistic approach. One can still challenge the extent and manner of performance, but the function is required by code. 

    Secondary Function : -

If secondary functions are removed from the design, both the basic and required secondary functions can be realized. As such, their worth is zero. Consider these examples:

·        The label on a pencil that identities product is a secondary function. The basic function of the pencil, making marks, can be achieved without the label.

·        A secondary function would be a leveling slab under a slab on grade whose function is to prepare subgrade-a secondary function. The slab's basic function is to "support load." If the leveling slab were removed, you could still support load.

­  Defining Functions : -

Functions are defined by using a verb (active if possible) and a noun (measurable if possible). Everything that exists has a function(s) that can be defined in the two words, verb-noun form. Thus VE methodology can be applied to everything.

Functions can be defined at various levels of indenture. For example, the function of a store is to sell merchandise. The next higher-order function is to generate sales, and the next higher order function would be to generate profits. At the project level, a value engineer asks, "What is the function of the building?" For a prison, the project function might be to confine convicts; for a hospital, to treat patients; for a school, to teach students.

Unless the VE is done at the early program phase, the probability of success for the value engineer working on the higher-order project function(s) of the project is relatively slim. However, this does not mean that the VE team should not challenge the project function(s) if there are strong feelings about it. Working at the lower level of indenture, however, provides greater opportunity for savings, because implementation does not depend on major project changes.

For example, if a prison, hospital, or school project were to include a cafeteria, one might explore alternative ways to feed people and achieve implementation with a higher success rate than working on alternatives to teaching students.