Value Engineering was developed by Larry Miles in 1942 for General Electric (GE) during the Second World War. Miles developed the tool to find alternative materials and ways to manufacture products made by GE during the Second World War when materials were scarce.
To correctly apply the value method, it is necessary to analyze the functions of the product or system being studied. The result solves problems and reduces life cycle costs while improving performance and quality. If a process does not include functional analyses, recommendations, and solutions from the study or improvements in quality and performance, it is not a real study of value engineering.
Value engineering uses normal logic and functional analysis to identify the relationships that increase value. It is referred to as a quantitative process similar to the scientific process, which centers on hypothesis-conclusion methodology to test connections and on operational research, which uses the model-building to discover analytical correlations.
What is Value Engineering?
Value Engineering is a systematic process for the improvement of the value of goods and services using a functional test. The value is the ratio of function to cost i.e function/cost. We can either improve the function or reduce the cost to influence the value. One of the fundamental principles of value engineering is that essential functions are preserved and not reduced due to value improvements.
The logic behind value engineering is that, if producers anticipate a product to become obsolete in practical terms over some time, they can design it to last for that period alone. Products could be built with better quality components, but with a value design, they are not, because they would involve unnecessary costs for the manufacturer and, to a lesser extent, increased costs for the buyer. Value engineering will significantly reduce these costs. A business typically uses the least expensive components that meet the product’s life expectancy.
The main objective of value engineering is to make the target cost of a product by:
- Identification of improved product designs to reduce production costs without sacrificing functionality
- Elimination of unnecessary features that increase the cost of the product.
Value Engineering Analysis
Value engineering requires the use of functional analysis. This process involves the segregation of a product into its many elements. For example, in the case of automobiles, the function could consist of comfort, performance, aesthetics, consistency, superiority, pleasant appearance, and other aspects. A value is determined for each item that reflects the amount the customer is willing to pay for the product. To obtain this information, companies usually conduct surveys with customers. The total values for each function provide the estimated sales price from which the target profit is deducted to deduct the target cost. The cost of each feature of a product is compared with the benefits perceived by customers. If the cost of the function exceeds the advantages for the customer, the feature must be removed, modified to reduce the cost, or improved in the perceived value so that its value is greater than the cost.
Therefore, value engineering is the technique used to analyze all aspects of an existing product to determine the minimum cost required for specific functional requirements.
Value measurement in value engineering
Value engineering measures the price/cost ratio for each product function. Value is the level of satisfaction to be obtained from a product.
Value = Price of the function/Cost of the function
The price of the function is the price expected for the function that customers are willing to pay. The cost of the function corresponds to the expenses planned by the company to perform this function. The price must exceed the cost; therefore, the value must be higher than one. The greater the value, the more the function contributes to the profitability of the product.
Understanding Value Engineering
Value engineering is the systemic process of evaluating existing or new products during the design phase to enhance product value by reducing costs and increasing functionality. The value of an article is defined as the most economical way to produce an article without harming its purpose. Therefore, reducing costs over quality will be a cost reduction strategy. Value engineering does not mean that the quality of products developed should be of low standard in a bid to reduce cost.
Miles defines the value of the product as the ratio between function and cost. The function of an element is the specific work for which it was designed, the cost related to the cost of the component during its life cycle. The function/cost ratio implies that the value of a product can be increased by improving its function or reducing its cost. In value engineering, costs related to production, design, maintenance, and replacement are included in the analysis.
For example, assuming we want to design a new product that will last for only two years. The product will, therefore, be created with the cheapest materials and features that will be used until the end of its life cycle, which will save money for both the manufacturer and the end consumer. This is an example of value improvement through cost savings.
Another manufacturing company may decide to create added value by optimizing the function of a product at a minimal cost. In this case, the function of each article component will be evaluated to develop a detailed analysis of the product’s destination. Part of value analysis will require an assessment of the multiple ways in which the project or product can perform its function.
The different forms listed are reduced to a few primary and secondary options that can be implemented in the project. For example, a detergent bottle that becomes slippery after a portion of the liquid soap has been leaked sideways can be improved by redesigning the bottle shape and opening nozzle to enhance grip and minimize losses. This could result in increased sales without incurring additional advertising costs.
Value Engineering in Commercial General Contracting Services
When applied to the commercial general contracting services, value engineering has huge advantages for contractors. The multi-step process is an essential part of the planning process for new development and seeks to add value. In value engineering, our primary aim is to maximize the function of the product and at the same time minimize cost. This, in turn, creates maximum value for our customers
Value Engineering at Constructive Solutions Inc.
At ABC General ContractorServices, we aim to create maximum value for our customers at every point in time. We have realized that when we integrate value engineering into our design process, it always adds value and significantly reduced costs for our customers. All aspects of the contracts are carefully considered by our team of project managers to make engineering proposals of benefit to all customers. We recognize and explain each of the options in the following areas carefully:
- Cost savings: Proposals for cheaper alternatives to specified materials or contacts.
- Added value: High-quality products that will increase customer value and overall contract satisfaction.
- Sustainability: Systems and contract proposals that will reduce maintenance costs for our customers
Examples of Value Engineering
- Many Automobile manufacturers have employed active systems to limit the type of fasteners in their products to reduce the cost of equipment and the overall cost of assembling their products.
- Many times, a premium forming practice can eliminate hundreds of low-accuracy processing. Precision transfer molding allows you to quickly create hundreds of high-quality parts from steel and aluminum rollers. The fusion is used to produce metal parts in sturdy aluminum or tin alloys (they are almost as resistant as mild steels).
- Russian rocket engines with liquid fuel are intentionally designed to allow poor quality welding (even without leakage). This reduces costs by eliminating the operations of grinding and finishing that do not allow the engine to work better.
- Some Japanese disc brakes tolerated 3 mm parts, easy to find precision. Combined with raw statistical process controls, it guarantees that it will contain no less than one in a million pieces.
- Japan (the country where production engineers are most valued), designing cheap phenolic resin and paper plates and reducing the number of copper layers to one or two to reduce costs without any damage to specifications.