Explain the concept of value engineering. Also, explain the various phases involved in the value engineering process

What Is Value Engineering?

Value engineering is a systematic, organized approach to providing necessary functions in a project at the lowest cost. Value engineering promotes the substitution of materials and methods with less expensive alternatives, without sacrificing functionality. It is focused solely on the functions of various components and materials, rather than their physical attributes. Value engineering is also called value analysis.

Understanding Value Engineering

Value engineering is the review of new or existing products during the design phase to reduce costs and increase functionality to increase the value of the product. The value of an item is defined as the most cost-effective way of producing an item without taking away from its purpose. Therefore, reducing costs at the expense of quality is simply a cost-cutting strategy.

The concept of value engineering evolved in the 1940s at General Electric, in the midst of World War II.1 Due to the war, purchase engineer Lawrence Miles and others sought substitutes for materials and components since there was a chronic shortage of them. These substitutes were often found to reduce costs and provided equal or better performance.

Ratio of Function to Cost

Miles defined product value as the ratio of two elements: function to cost. The function of an item is the specific work it was designed to perform, and the cost refers to the cost of the item during its life cycle. The ratio of function to cost implies that the value of a product can be increased by either improving its function or decreasing its cost. In value engineering, the cost related to production, design, maintenance, and replacement are included in the analysis.

For example, consider a new tech product is being designed and is slated to have a life cycle of only two years. The product will thus be designed with the least expensive materials and resources that will serve up to the end of the product’s life cycle, saving the manufacturer and the end-consumer money. This is an example of improving value by reducing costs.

Another manufacturing company might decide to create added value by maximizing the function of a product with minimal cost. In this case, the function of every component of the item will be assessed to develop a detailed analysis of the purpose of the product. Part of the value analysis will require evaluating the multiple alternate ways that the project or product can accomplish its function.

Steps in Value Engineering

Value engineering often entails the following six steps, starting from the information-gathering stage and ending with change implementation.

Step 1: Gather Information

Value engineering begins by analyzing what a product lifecycle will look like. This includes a forecast of all the spending and processes related to manufacturing, selling, and distributing a product.

Value engineers will often break these considerations down into more manageable data sets. In addition to assigned financial values, value engineers may prioritize processes or elements along a product's manufacturing plan. Value engineering may also call for expectations regarding time, labor, or other resources for different manufacturing stages.

Step 2: Think Creatively

With the core baseline expectations for the product having been documented, it's now time for the value engineering team to consider new, different ways for the product to be developed. This includes trying new approaches, taking risks on things never been done before, or creatively applying existing processes in a new way.

Levering these creative ideas, value engineers will re-imagine how the product will be created and distributed from state to finish. This phase is the "idea-generation" stage where members of the team should be encouraged to brainstorm freely without fear of criticism.

Examples of thinking creatively may include changing the materials used, changing the product's design, removing redundant features, trading off reliability for flexibility, or changing the steps/order of the manufacturing process.

Step 3: Evaluate Ideas

With a bunch of ideas now on the table, it's time to decide which are reasonable and which aren't Each idea is often assessed for its advantages and disadvantages. Instead of focusing on the quantity of each tally, the value engineering team must consider which pros and cons outweigh their counterpart.

For example, a single change may result in five new benefits. However, doing so would outlaw distribution to a country that the company exports the most goods to. In this case, the five benefits may not outweigh the one disadvantage.

Step 4: Develop and Analyze

Once the ideas are ranked, the best ideas are taken and further analyzed. This includes drafting model plans, detailing changes and their impacts, producing revised financial projections, redesigning physical renderings, and assessing the overall viability of the change.

Be mindful of timeline constraints and considerations when analyzing changes, especially if other departments will be negatively impacted by pushed out schedules or deadline changes. Also, consider how the break-even point of a product may change as a result of the adjustment to ensure the strategy aligns with the philosophy and financial capability of the organization.

Step 5: Present Discoveries

With plans devised and presentations pulled together, it's time to deliver the best ideas to upper management or the board for their consideration. Often, more than one idea will be presented at a time so the deciding group can consider and compare alternatives. Each alternative should be consistently presented with fair representation across each choice.

Value engineering calls for enhancing the value of each product; therefore, presentations should begin and end with how the change will benefit the company. Presentations should also include revised timelines, financial projections, drawings, and risks. Often, management may seek specific answers on changes or desire to see different analysis performed than what is presented.

Step 6: Implement Changes

As management gives confirmation to move forward with changes, value management shifts from a theoretical practice to an change management implementation process. When proposed changes are accepted, new teams are formed and assigned areas of oversight. Value engineer team leads often remain engaged with the changes to monitor what is being adjusted and how expectations are being aligned .with new realities.

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