Value Engineering and Value Analysis

Overview

• What is Value Engineering?

• How is VE Applied?

• When is it used?

• What is Function Analysis and FAST?

Definitions

Value Engineering is a technique applied to identifying optimum value solutions during new product development.

Value analysis is a technique applied to improving existing products, processes or services. The objective is usually to reduce cost, but may equally or simultaneously be to improve performance or quality.-LD Miles

The Key Points of VA / VE

• Applying formal work plans.

• A team approach.

• Specific definition of functions.

• The simultaneous look at functions and costs.

• Control of the analysis process.

• Quantifiable results

What is VALUE ?

Value is the relationship between the defined function the customer requires and the costs incurred to provide that function.

– Cost Value– Use Value– Esteem Value– Exchange Value

Value Engineering

Value Engineering is• Reliability• Maintainability• Producibility• Human Factors• Parts Availability• Cycle Time• Quality• Weight Reduction

Why use Value Engineering?

Save TimeSave Money

Build TeamworkImprove Quality

Satisfy Customer

When is VE used

• Existing part/product cost is high• Existing technology is complex/old though

simpler means are available• There is a need to release a cheaper product

by cutting down some of the existing feature• The existing customer demands a minimal

increment in product features that are in use• There is a need to cut down the manufacturing

cycle time/cost

• 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.

When is VE used

Benefits of VE

• Decreasing costs

• Increasing profits

• Improving quality

• Expanding market share

• Saving time

• Solving problems

• Using resources more effectively

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.”

Value Engineering ResearchQuestions and Check Sheet

1. Can it be eliminated without impairing function or reliability?

2. Does it cost more than its worth?

3. Does it do more than is required? Are there unnecessary features?

4. Is there something better with which to do the job?

Value Engineering ResearchQuestions and Check Sheet

5.Can it be made by a less costly method?

6. Can a standard item or specialty product be used?

7. Could a less costly manufacturing technique be used?

8. Should different tooling be used?

9.Can someone else provide it at less cost without affecting dependability?

Potential Savings from VE

Net Savings from VE

Total Cost of VE Implementation

Concept Design

Engineering &Production

Release Production

Drawings Released Tooling Changes

Re-Test/Re-qualification

No engineeringChange Revision

Document Revision

VE Implementation beyond this point results in a net loss.

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.

To Increase Value

F

C

F

C

F

C

F

C

REDUCE INCREASE MAINTAIN

• Value = Function

Cost

Competitive Advantage

Quality is defined as “conformance to specification.”

Value is defined as:Function

Cost

You can’t have one without the other!

Competitive Advantage = Quality + Value

Unnecessary Cost• Any cost that can be removed without

impairing the essential– Quality– Performance– Customer requirements– Reliability– Maintainability– Marketability– Schedule

Criteria for Evaluating Value

• COST• Initial cost• Operations• Maintenance• Return on

Investment• Life cycle• Replacement• Cost of capital

• PERFORMANCE• Quality• Stakeholder

requirements• Safety• Level of service• Environmental

Impacts• Schedule Impacts• Operability• Reliability• Maintainability

Generalized Procedure for VA/VE

Information Phase

Analysis Phase

Decision Phase

Speculation Phase

Evaluation Phase

What is it?What does it do?What does it cost? How else can the job

be done?At what cost?Is the change better?

How much better?Why?

Review with depts and suppliersSelect best alternativeGet approvalPrepare specifications

Audit effectivenessUse experienceProvide feedback

Six Step Value Engineering Job PlanInformation

PhaseInformation

Phase

Creativity Phase

Creativity Phase

Evaluation Phase

Evaluation Phase

Planning PhasePlanning Phase

Reporting Phase

Reporting Phase

Implementation Phase

Implementation Phase

Clearly identify the problem(s) to be solved, and gather information on the background, functions and requirements of the product, process, or system.

Clearly identify the problem(s) to be solved, and gather information on the background, functions and requirements of the product, process, or system.

Brainstorm ideas on how to improve the high cost, broken, or inadequately performed key functions.

Brainstorm ideas on how to improve the high cost, broken, or inadequately performed key functions.

Screen ideas for acceptance, score remaining ideas on a scale and group ideas into categories. Develop design scenarios, and selection criteria. Rate and rank ideas.

Screen ideas for acceptance, score remaining ideas on a scale and group ideas into categories. Develop design scenarios, and selection criteria. Rate and rank ideas.

Plan how to sell ideas to management, identify key recommendations, plan management presentation.

Plan how to sell ideas to management, identify key recommendations, plan management presentation.

Give oral presentation to management, or develop written report.

Give oral presentation to management, or develop written report.

Get management approval for go-ahead, make management plan, make assignments, implement, follow-up.

Get management approval for go-ahead, make management plan, make assignments, implement, follow-up.

INFORMATION PHASE FUNCTION

ANALYSIS PHASE CREATIVE PHASE EVALUATION

PHASE Complete data package

Modify scope Identify functions

Classify functions

Develop function models

Cost functions

Establish value index

Select functions for study

Create quantity of ideas by function

DEVELOPMENT PHASE PRESENTATION

PHASE

How must each idea work?

What is the feasibility of implementation?

What will be the cost?

When will we breakeven?

What is the best overall alternative?

- Conduct benefit analysis

Complete technical data

Create implementation Plan

Prepare final proposals

Present oral report

Prepare written report

The Value Methodology Job Plan

- Complete/ implement changes

- Monitor status

- Collect user/ customer attitudes

Complete data files

Determine evaluation factors

Scope the study

Build data models

Determine team composition

PRE-STUDY

POST-STUDY

Property of OSC VE Office

What is to be included in the study?

Who is best able to study the problem?

What are the current and future requirements of the subject under study?

What type of impediments will the team

come against?

- What is the problem or opportunity?

Why do you consider it a problem or opportunity?

Why is a solution necessary?

What is the cost?

Develop a plan to gather project data

Investigate the project

Verify data

What is the task function?

What are the basic functions?

What are the supporting functions?

What else can perform the function?

Where else can the function be performed?

How else can the function be performed?

Rank and rate alternative ideas

Select ideas for development

How can disadvantages be overcome?

Why is the new way better?

Will it meet all the requirements without compromise of form, fit, or function?

What are the annual savings?

Who should be sold?

How should the ideas be presented?

What was the problem?

What is the new way, savings, and benefits?

How will it satisfy our customers?

What is needed to implement the proposals?

Who is responsible for implementing the change?

Did the new way work?

How much did it cost/save?

Did the change meet customer’s expectations?

Verify accomplishments

Present results

Advertise outcomes

Information Phase-Fact Finding

What do you need to know about the problem that you don’t know now?

What facts are known?

What are the requirements of the system?

Are these facts, opinions, assumptions, or prejudices?

Where or how can information be obtained?

Function Analysis

• Shifts the problem-solving focus away from the items toward the functions

• Function need be defined by two words: an Active Verb and a Measurable Noun

• The verb defines the required action; the noun tells what is being acted on

• The more abstract the function definition, the greater the opportunities for finding creative alternatives

Function Analysis FAST (Function Analysis System Technique) - A

logic diagram to describe how a system works. Examples of Verbs and Nouns:

Active VerbsTransmitIrradiateProject

DissipateGenerateConvertReceiveReflectProvide

(passive!)

NounsSignal

InformationDataHeat

RadiationCurrent

LightImage

Functions of a No. 2 PencilDescription

Pencil

Eraser

Band

Body

Paint

Lead

Function

Makes Marks

Removes Marks

Secure Eraser

Improve

Appearance

Support Lead

Transmit Force

Accommodate

Grip

Display

Information

Protect Wood

Improve

Appearance

Makes Marks

FAST Example

Functional Analysis System Technique (FAST) Diagram

1. List Desired Outcome and Requirements of Customer in Verb Singular Noun Form

Mouse Free Living Area = Eliminate Mice

FAST Diagram2. List Products and Services that satisfy

Desired Outcome (Q4). These Products or services answer WHAT is desired of the system.

• Use Cat• Create Virus• Kill Mice• Eliminate Food

FAST Diagram• 3. List all functions in Verb Noun format and processes that

would satisfy or produce each product or service in the previous step.

• Generate all functions, basic, secondary, support without regard to relationship.

Kill Mice• Trap Mice• Electrocute Mice• Shoot Mice• Gas Mice• Drown Mice• Use Snake• Poison Mice

FAST Diagram4. Select each function from the previous step starting

with what you believe to be the basic function.

Ask HOW this basic function might be accomplished.

KILL MICE POISON MICE

•Spray Poison•Inject Poison•Step on Poison•Eat Poison•Shoot Poison

HOW

Use CatCreate VirusKill MiceEliminate Food

Trap MiceElectrocute MiceShoot MiceGas MiceDrown MiceUse SnakePoison Mice

Eliminate Mice

FAST Diagram5. Continue to answer the HOW and place the answer• directly to the right.• Related functions that are at the same level, stack

above or below the CRITICAL PATH

KILL MICE POISON MICE

•Spray Poison•Inject Poison•Step on Poison•Eat Poison•Shoot Poison

HOW

EAT POISON

Use CatCreate VirusKill MiceEliminate Food

Trap MiceElectrocute MiceShoot MiceGas MiceDrown MiceUse SnakePoison Mice

Eliminate Mice

•Eat Bait•Drink Bait•Smell Bait

FAST Diagram6. Continue to answer the HOW and place the answer• directly to the right.• Related functions that are at the same level, stack

above or below the CRITICAL PATH

KILL MICEPOISON

MICE

•Spray Poison•Inject Poison•Step on Poison•Eat Poison•Shoot Poison

HOW

EAT POISON

EAT BAIT

ATTRACT MOUSE

WHY

•Attract Mouse•Trap Mouse

•Eat Bait•Drink Bait•Smell Bait

Trap MiceElectrocute MiceShoot MiceGas MiceDrown MiceUse SnakePoison Mice

FAST Questions

• How do we perform the function?

• Why do we perform the function?

• When do we perform the function?

• What is the Desired Outcome?

• Where do we perform the function?

• Who performs the function?

The Technical FAST Model

ACTIVITY 1

INDEPENDENT FUNCTION

(SUPPORTING)

DEPENDENT FUNCTION

INDEPENDENT FUNCTION

HOW?

(concept)

(concept)

OUTPUT

INPUT

WHEN

OBJECTIVES OR

SPECIFICATIONS

MINOR CRITICAL PATH

(AND)

HIGHER ORDER FUNCTIONS

LOWER ORDER FUNCTIONS

ACTIVITY2

MISSION, OBJECTIVE, OR HIGHER

ORDER FUNCTION

BASIC FUNCTION

DEPENDENT FUNCTION

D EA

LOWEST ORDER

FUNCTION

B

C

WHY?

SCOPE OF THE PROBLEM UNDER STUDY

MAJOR CRITICAL PATH

Critical Path

CONVEY Information

PROJECT IMAGE

GENERATE LIGHT

RECEIVE CURRENT

TRANSMIT CURRENT

CONVERT ENERGY

HOW WHY

F.A.S.T MODELOVERHEAD

PROJECTOR

(concept)

(concept)

Supporting Functions

CONVEY Information

PROJECT IMAGE

GENERATE LIGHT

RECEIVE CURRENT

TRANSMIT CURRENT

CONVERT ENERGY

SUPPORT IMAGE

GENERATE NOISE

AMPLIFY IMAGE

DISSIPATE HEAT

GENERATE HEATFOCUS

IMAGE

HOW WHY

F.A.S.T MODELOVERHEAD PROJECTOR

(concept)

(concept)

WHEN

Objectives or Specifications

CONVEY Information

PROJECT IMAGE

GENERATE LIGHT

ALLOW SAFETY

RECEIVE CURRENT

TRANSMIT CURRENT

CONVERT ENERGY

FACILITATE PORTABILITY

SUPPORT IMAGE

GENERATE NOISE

AMPLIFY IMAGE

DISSIPATE HEAT

FOCUS IMAGE

HOW WHY

F.A.S.T MODELOVERHEAD PROJECTOR

(concept)

(concept)

WHEN

OBJECTIVES OR SPECIFICATIONS

GENERATE HEAT

Add Scope Lines

CONVEY Information

PROJECT IMAGE

GENERATE LIGHT

ALLOW SAFETY

RECEIVE CURRENT

TRANSMIT CURRENT

CONVERT ENERGY

FACILITATE PORTABILITY

SUPPORT IMAGE

GENERATE NOISE

AMPLIFY IMAGE

DISSIPATE HEAT

GENERATE HEATFOCUS

IMAGE

HOW WHY

F.A.S.T MODELOVERHEAD PROJECTOR

(concept)

(concept)

OUTPUT INPUT

WHEN

OBJECTIVES OR SPECIFICATIONS

ALLOW SAFETY

FACILITATE PORTABILITY

OBJECTIVES OR SPECIFICATIONS

FAST Example - Overhead Projector

GENERATE NOISE

DISSIPATE HEAT

GENERATE HEAT

SUPPORT IMAGE

AMPLIFY IMAGE

FOCUS IMAGE

HOW?F.A.S.T MODEL

OVERHEAD PROJECTOR

CONVEY Information

PROJECT IMAGE

GENERATE LIGHT

RECEIVE CURRENT

TRANSMIT CURRENT

CONVERT ENERGY

(concept)

(concept)

OUTPUT INPUT

WHEN

WHY?

Creativity Techniques- Brainstorming

Generate a large number of ideas - quantity, not quality.

Free-wheeling is encouraged - Listen and improve on the ideas of others.

Don’t criticize - No evaluation of ideas Encourage everyone to participate Record all ideas presented Time to let ideas “incubate” should be allowed. Select an appropriate meeting place

Function Analysis Function Analysis is the key to key to

understandingunderstanding the problem.

BrainstormBrainstorm all possible functions

Next, build a FAST Modelbuild a FAST Model to help identify any missing functions.

Other tools that can work with VE Activity Based Costing (ABC) Cost Function Matrix Failure Modes and Effects Analysis (FMEA) Risk Analysis Tools Other traditional quality tools such as pareto

analysis, ishakawa diagrams, scatter diagrams, etc.Function analysis is the key to understanding the system and what it does. Function analysis enables you to analyze the problem from a system perspective.

• PlanningWhat is recommended?Who has to approve it?What is the implementation plan?Are mockups or prototypes required to verify

final decisions?What are the cost, schedule, and deliverables?ROI?

The Planning & Reporting Phases

ACTION PLAN GUIDELINES

“What needs to be done?” Identify the actions needed to “solidify” the

proposals.

“Who should be assigned the action?”Assign a team member.Assign a completion date for the action.

“When should the task be completed?”Plan regular team status meetings.Anticipate 4-6 weeks to complete the actions.

Implementation Planning

Ideas must be planned and managed to ensure implementation.

Proposed actions should be managed like a project with specific end products, defined start and end dates, and funding limits.

The Planning & Reporting Phase

• ReportingGive oral presentation.Support it with written executive brief.Be clear, concise, and positive.Anticipate roadblocks

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 Checklist1. Can the item be eliminated? 2. If the item is not standard, can a standard item

be used? 3. If it is a standard item, does it completely fit the

application, or is it a misfit? 4. Does the item have greater capacity than

required? 5. Can the weight be reduced? 6. Is there a similar item in inventory that could be

substituted? 7. Are closer tolerances specified than are

necessary?

The Value Engineering Checklist

8. Can you make the item less expensively in your plant? If you are making it now, can you buy it for less?

9. Can cost of packaging be reduced?

10.Are suppliers contributing suggestions to reduce cost?

Concluding Remarks

• The design stage provides the greatest opportunity to reduce costs

REMEMBER !Value Analysis is a continuous process