What is Value Engineering?
Value Engineering (VE) nowadays receives many names, all targeted to the same purpose: a phased methodology used to analyze a product, project, or process with the goal of improvement or enhancement without jeopardizing quality or violating any intended functions. Alternative descriptions used by companies to fulfill this purpose are Value Analysis (VA), Design-to-Value (DtV), Design-to-Cost (DtC), and other.
An important success factor for VE is that it achieves that goal by assembling a cross-disciplinary team of professionals to come up with design change proposals.
The value methodology that we apply follows disciplined steps and a 360º analysis of all “idea sources” that come into play when designing a product. It builds on a process where the project participants work together as a team, communicate effectively, and make decisions on a concurrent basis. The project management requires experience to manage all the aspects of the redesign and to apply the soft skills when dealing with highly sensitive topics.
Thinking out of the box, the project team will be able to arrive at unique ways to improve product / project performance, reduce product / project costs, and deliver a more exciting solution for its customers.
Where does the Value Methodology come from?
During World War II, General Electric inaugurated a process they called Value Analysis. Due to the shortage of materials in that period, the company needed to find substitutes. As they found options that were available, cost less, and performed equally well or better, Value Analysis became a process inherent in their operational approach.
The US Navy then realized they could benefit by using Value Analysis and approached General Electric for collaboration with their engineering resources. Following the war, the Navy began to use Value Analysis, taught it to their naval officers, and changed the terminology to Value Engineering.
The original Value Engineering (VaVe) approach focuses on function-driven re-design of products. We enhanced that approach over the past 20 years to a holistic product-related improvement strategy. We just call it Value Engineering (VaVe), and it covers many levers for EBITDA improvement: market analysis, competitive landscape, value proposition heat map (variants, base vs options, packages, services, etc.), spare parts business, voice of customer (VoC), product benchmarking (internal, external, similar industries), product teardown, design for manufacturability, assembly and service, level of vertical integration, direct supplier participation, voice of the shopfloor (VoS), cost of poor quality (COPQ) before and after sales, demand for retro-fitting, functional product analysis and challenges, lab tests and other available data vs simulation software data and use, supplier input, parametric and reverse costing.
In addition to directly bolstering a product’s profit margin, the rewards of Value Engineering (VaVe) can extend to supply-chain improvements, increased manufacturing efficiency, and the ability to effectively tap new markets and enhance revenue.
What are the benefits of value engineering?
Re-designing a product is a unique opportunity to “get it right”. Our holistic approach addressed 6 main idea sources to grasp all possible benefits through a disciplined method.
Applying these idea sources to the product portfolios of our clients have resulted in important product cost reductions:
Food processing machines
Large wastewater purification systems
Automotive, motorcycle and truck suppliers
How is value engineering applied?
In our experience, the best approach to Value Engineering (VaVe) is a formal, holistic one, with the process guided by experts with extensive experience in engineering, process design, product design, purchasing and manufacturing. Without this experience, individuals often struggle to grasp the gamut of design choices that were made for a single product; for example, optimized material choice is key, as different materials can be used to produce the same component at different costs. The appropriate technical background allows a Value Engineering (VaVe) expert to ask the right questions and help an organization achieve not just incremental cost savings but also more extensive benefits that might not be readily apparent, even to the most experienced manufacturer.
Our Value Engineering (VaVe) approach follows a sequence of specific steps that generate all the possible ideas and opportunities for enhancing the products’ performance and/or reduce its costs. It obviously involves a series of multi-functional, multi-regional, and multi-hierarchical VE workshops (we tend to say that the more complex the team configuration, the better results they achieve). Learn more.
Where do the ideas for value engineering come from?
The original SAVE method focused on the function analysis, meaning that a given product or process is divided into functions and a cost is attached to each function. Functions can then be divided into necessary / unnecessary functions, essential functions, and the project team then brainstorms on how to achieve similar functions at a lower material cost, supply chain cost, labor cost, or total landed costs.
We expanded the function analysis to include further idea sources, since value engineering (VaVe) is a unique opportunity to work in multifunctional teams on improving the product / project performance:
Voice of the customer
- Understand brand differences
- Learn the technical interpretations of customer specifications and regulation changes
DfXX: Design for manufacturing, assembly, service
- Learn how design changes can improve manufacturing and/or assembly operations: COPQ, productivity, poka yoke, etc.
- Define changes that can improve the manufacturing / assembly processes
Supply chain, supplier ideas, sourcing
- Invite suppliers to learn their constraints
- Challenge the vertical integration
- Challenge origin of sourcing HCC to BCC or the other way around
- Cluster functions in various ways, f.e. essential functions vs. non-essential ones, wanted vs. unwanted functions, etc.
- Define how the same function can be achieved in a different way (from function pareto analysis)
- Think outside the box
- Identify the weakest link in terms of performance and decide
- Upgrade the weakest link or downgrade the performance of the rest
- How do competitors achieve the same functions?
- Learn if competitors interpret the specifications and regulations differently
- Perform “red tagging” on own and competitor product
- Establish how components are treated today in relation to engineering and production: design & build, built-to-print, joint development, built-to-specifications, off-the-shelf
- Identify “differentiating” functions or components
- Redraw the vertical integration map
Voice of the shop floor
- Go on-site where the product s/ components are manufactured or assembled
- Involve the people that touch the product every day, in order to gather their improvement ideas
All these idea sources are addressed to VE studies that apply to both project cost reduction and product cost reduction. But they don’t specifically address engineering hour efficiencies. That kind of improvements are addressed through focused lean engineering optimization programs and portfolio management.
When should value engineering take place?
Most companies nowadays follow the stage-gate system as governing process steps for product development (see Lean Product Development). Sunk costs are increased, and design choices made as the development jumps from one stage gate to the next. This means that design freedom is reduced as the project develops, meaning that the freedom to evaluate multiple ideas (often mutually exclusive) for accomplishing a function is greatest at the beginning of the development.
But there are big differences on how fast and rigid re-design cycles are for products / projects. Having said this, the maximum value for performing value engineering projects is as early as possible within a product development project or design process (right after finalizing the concept paper), or after a project is launched, and the next generation is still far away. Tooling costs also play a role in deciding when to perform a value engineering (VaVe) project, because the cost of change is lower the closer the re-design is done to the natural change of tools.
Finally, we also did value engineering projects not for the next, but the following product launch. This may happen when each project is very tight in time and budget, and engineers and project / product managers are only concerned about the next launch. An industry in case is automotive or agriculture. Project stakeholders just don’t have the patience to wait until a value engineering project is done.
How do you become a certified value specialist?
During our first value engineering (VaVe) projects with our customers, we jointly identify those persons that fulfill the requirements to become value specialists. Those persons are then trained on the theory behind value engineering, and they perform several case studies under the supervision of our consultants. This grants them with the “level 1” certification.
We then perform various projects with the value specialists, and help them perform the activities properly, make decisions at the right moment, manage the soft topics correctly, etc. At the end of the process, we only act as coaches, and let the value specialists run their projects. This expertise grants them with the Level 2” certification as “value practitioners”.
What are the different types of values in Value Engineering?
The original definitions of this type of process are:
- Value Analysis (VA) for the process that happens if function-driven cost savings or performance improvements happen at the start of a product development project
- Value Engineering (VE) if the function-driven cost savings or performance improvements happen after the launch of a new product
- Design-to-Value (DtV) / Design-to-Cost (DtC): these are synonymous terms for either one of the above types