Value Engineering

1. Value Engineering: A Systematic Approach to Cost Reduction and Function Improvement

Value engineering is now defined as a systematic application of recognized techniques by multi-disciplined team(s) which identifies the functions of a product, process, service or system; establishes a worth for the functions; generates alternatives through the use of creative thinking and provides the needed functions, reliably, at the lowest overall cost.

Holistic approach. Value Engineering (VE) is not merely about cost-cutting; it's a comprehensive methodology that focuses on optimizing the relationship between function and cost. It involves a multidisciplinary team that analyzes products, processes, or systems to identify and eliminate unnecessary costs while maintaining or improving functionality.

Key components:

• Function analysis: Identifying and defining the primary and secondary functions
• Cost-worth analysis: Determining the minimum cost to achieve each function
• Creative problem-solving: Generating alternative solutions to perform functions at lower costs
• Evaluation and implementation: Assessing alternatives and implementing the best solutions

VE can be applied at any stage of a project or product lifecycle, from conceptual design to ongoing operations, making it a versatile tool for continuous improvement and innovation across industries.

2. The Origins and Evolution of Value Engineering

The World War II forced us to forfeit numerous values from the social fabric of our lives. But it also rendered one value to us in the form of value analysis (VA)!

Birth from necessity. Value Engineering emerged during World War II as a response to material shortages and the need for increased production efficiency. Lawrence D. Miles, a purchase engineer at General Electric, developed the initial concept of Value Analysis in 1947 to find alternative materials and methods that could perform the same functions at lower costs.

Evolution:

• 1954: U.S. Navy Bureau of Ships adopts and renames the technique "Value Engineering"
• 1959: Society of American Value Engineers (SAVE) is established
• 1960s-1970s: VE spreads to various industries and government agencies
• 1973: SAVE initiates certification program for Value Specialists

The technique has since evolved into a globally recognized methodology, with professional societies and certification programs established in numerous countries, including Japan, India, and the UK.

3. Function Analysis: The Heart of Value Engineering

Function is the ' ' of value engineering

Core concept. Function Analysis is the fundamental principle that distinguishes Value Engineering from other cost reduction techniques. It focuses on identifying and defining the essential purposes of a product, process, or system, rather than its physical characteristics.

Key aspects of Function Analysis:

• Two-word definition: Functions are defined using an active verb and a measurable noun
• Basic vs. Secondary functions: Differentiating between essential and supporting functions
• Function-Cost-Worth analysis: Allocating costs to functions and comparing them to their worth

By concentrating on functions, VE practitioners can think creatively about alternative ways to achieve the same results, often leading to innovative and cost-effective solutions that might not be apparent when focusing solely on the existing design or process.

4. Life Cycle Costing: A Comprehensive Approach to Cost Evaluation

The Life cycle cost, which is also known as 'cradle to grave cost', is the total cost from acquisition of an item to the final disposal of the same after the life of the item.

Long-term perspective. Life Cycle Costing (LCC) is an essential component of Value Engineering that considers all costs associated with a product or system throughout its entire lifespan. This approach provides a more accurate picture of the true cost and value of alternatives.

Elements of Life Cycle Cost:

1. Acquisition cost
2. Operational cost
3. Maintenance cost
4. Repair and replacement cost
5. Salvage cost

LCC analysis helps decision-makers choose between alternatives that may have different initial costs but varying long-term expenses. It's particularly useful in VE studies where proposed changes might affect ongoing costs or the lifespan of a product or system.

5. Creativity Techniques: Fostering Innovation in Value Engineering

Creativity is the art of imagination which brings something new to existence.

Generating alternatives. Creativity is crucial in Value Engineering for developing innovative solutions to perform functions at lower costs. VE employs various creativity techniques to overcome mental blocks and generate a wide range of ideas.

Popular creativity techniques in VE:

• Brainstorming: Group ideation technique focused on quantity over quality
• Gordon Technique: Similar to brainstorming but with the problem concealed initially
• Attribute Listing: Identifying and modifying attributes of existing products
• Morphological Analysis: Examining structural dimensions and relationships
• Laddering: Using "how" and "why" questions to explore different levels of abstraction

These techniques help VE teams break free from conventional thinking patterns and explore unconventional solutions that can lead to significant improvements in function and cost.

6. Team Dynamics and Human Relations in Value Engineering

Man is a social animal and this nature explains the preference to stay and work with other human beings. This is not different in the case of VE too.

Collaborative approach. Value Engineering relies heavily on multidisciplinary teams to bring diverse perspectives and expertise to problem-solving. Understanding and managing team dynamics is crucial for the success of VE studies.

Key aspects of team dynamics in VE:

• Multidisciplinary composition: Teams include members from various departments and backgrounds
• Ego states and transactions: Understanding different communication styles (Parent, Adult, Child)
• Team building: Transforming groups into cohesive teams through physical, mental, and spiritual processes
• Leadership: Developing and applying leadership skills within the VE context

Effective team management in VE involves fostering open communication, encouraging creativity, and ensuring that all team members contribute their unique expertise to the problem-solving process.

7. The Value Engineering Job Plan: A Structured Methodology

Value Methodology deals with Functions rather than product

Systematic approach. The Value Engineering Job Plan provides a structured framework for conducting VE studies. It ensures a thorough and consistent approach to identifying and improving value.

Typical phases of the VE Job Plan:

1. Information: Gathering data about the project or product
2. Function Analysis: Identifying and defining functions
3. Creative: Generating alternative solutions
4. Evaluation: Assessing and selecting the best alternatives
5. Development: Developing selected alternatives in detail
6. Presentation: Presenting recommendations to decision-makers
7. Implementation: Putting approved changes into action

This structured approach helps VE teams stay focused and methodical in their analysis and problem-solving efforts, leading to more effective and actionable results.

8. Certification and Professional Development in Value Engineering

The certification programme is composed of two major elements: individual professional certification and educational programme approval.

Professional recognition. Certification programs in Value Engineering provide a standardized way to recognize and validate the expertise of VE practitioners. These programs contribute to the professionalization of the field and ensure consistent application of VE principles.

SAVE International certification levels:

1. Value Methodology Practitioner (VMP)
2. Associate Value Specialist (AVS)
3. Certified Value Specialist (CVS)

Certification requirements typically include a combination of training, practical experience, and examinations. Professional development and recertification requirements ensure that certified practitioners stay current with evolving VE techniques and best practices.

9. Financial Analysis Techniques in Value Engineering

The Marginal cost format is as below.

Quantifying value. Financial analysis techniques are essential in Value Engineering for evaluating alternatives and justifying proposed changes. These techniques help translate VE recommendations into tangible financial benefits.

Key financial analysis techniques in VE:

• Break-even analysis: Determining the point at which revenue equals total cost
• Payback period: Calculating the time required to recover the cost of an investment
• Return on Investment (ROI): Measuring the efficiency of an investment
• Discounted Cash Flow (DCF): Evaluating the present value of future cash flows

Understanding and applying these financial techniques enables VE practitioners to present compelling business cases for their recommendations and helps decision-makers assess the financial impact of proposed changes.

10. Function Analysis System Technique (FAST): A Powerful Analytical Tool

The FAST is a Systematic Diagramming Technique that logically identifies and visually displays the necessary function to accommodate a design purpose.

Visual function analysis. The Function Analysis System Technique (FAST) is a diagramming method that visually represents the logical relationships between functions in a system or product. It provides a powerful tool for understanding and analyzing complex systems.

Types of FAST diagrams:

1. Classic FAST
2. Technically Oriented FAST
3. Customer Oriented FAST

FAST diagrams help VE teams:

• Organize and simplify function lists
• Identify missing or unnecessary functions
• Deepen understanding of the problem
• Set the scope of the study
• Demonstrate thorough team analysis

By visually mapping functions and their relationships, FAST diagrams facilitate creative thinking about alternative ways to achieve required functions, often leading to innovative value improvements.

Last updated: March 11, 2025