SM

Value Engineering
KPIT Cummins

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This whitepaper provides an insight into how world class companies have
achieved a competitive edge through Value Engineering. Also get to know the
factors that have challenged most of them, from our perspective, after
working with various customers on their value engineering requirements.
Although there could be a lot more to Value Engineering than what we have
documented here, this paper however, should provide a good reference in
understanding the methodologies and a holistic approach required to
internalize Value Engineering into the organizational DNA and reap
continuous benefits across all product lines.
Value Engineering is a process rather than a program. It is an ongoing use of a
methodology by cross functional teams to achieve organizational objectives.
Broadly it consists of four activities:
Ÿ Identify the function of a product or service
Ÿ Provide the required functions to accomplish the original purpose of the
project at the lowest life-cycle cost without sacrificing safety, necessary
quality, and/or environmental attributes of the project
Value engineering (VE) concepts can be applied to business as well as
technical situations and consequently lead management to informed,
results-oriented decisions. “Value Engineering has to be treated as a future
investment for gaining technology leadership in the industry. VE is a fantastic
process that triggers a complete overhaul of the system, alternate design,
alternate material, design verification for strength, durability & safety;
manufacturing process & testing. From our experience, VE has many a times
led to disruptive innovations and environment friendly systems &
technologies.” says Suneel Pandita, AVP and Head- Mechanical Engineering
Design, KPIT Cummins, commenting on benefits of value engineering.

Ÿ Establish a worth for that function Most often than not, VE initiatives are reactive to market pressures. Post
product launch, VE is initiated as a reaction to field failures, market
Ÿ Generate alternatives through the use of creative thinking feedback and competitive pressures. e.g. after you have launched your

Market Survey
& Analysis

Product
Development
Customer
R&D Manufacturing Support
Vendor
Design Product
Specs Design
Development • Field Failures
Quality • Market Feedback
• Target deadlines • Material availability • Competitive Pressures
• High FoS • Manufacturability - Quality improvement
• Overdesigned • Variant reduction - Feature Enhancement
• Process streamlining
& optimization
Executive
Management
Competitive tear down
& Benchmarking results Value
Engineering Extend Active
Life-of-Vehicle

• Alternate materials • Quality improvement

• Cost reduction
• Breakthrough Technology & Designs • Feature Enhancement
• Mfg. process improvement
• Innovations & IPs • Weight reduction
• Variants Standardization
• Products for new markets • Problem Solving

Fig 1: Value Engineering Role in Product Lifecycle

product, a competitor brings in a product a lower cost or at same cost with Cost and weight reduction, quality improvement and feature enhancement
better features, then it becomes almost essential to re-look at your product are obvious and expected results of VE initiatives. While the average cost
so as to stay competitive in the market. improvement from VE is 6%, cost reduction is not always the most significant

Projects that have already experienced cost, schedule, or scope problems benefit. There are many other outcomes which accompany VE activities.

benefit from VE analysis. But the greatest potential for improvement is in Many times, VE results in breakthrough technology, new designs and IPs for

the R&D Phase at 20-35% completion. VE at this point produces maximum the organizations which give them a competitive edge. Innovations for

benefit because recommendations can be implemented without delaying alternate materials have also come out of VE initiatives. VE done for

progress or causing significant rework of completed designs. R&D is hard manufacturing process can help in process streamlining and optimization as

pressed on deadlines for product design. Mostly this results in overdesigned well as variant reduction.

parts or products with a higher factor of safety than actually required. This
gives an independent team a lot of room for value engineering since R&D
may have a bias towards the designs they've developed.
In spite of all the benefits that VE can bring to an organization, the fate of VE
initiatives is not as rosy as it seems. Our experience with various automotive
OEMs reveals that as many as 70 to 80% of VE programs die out when instant
results do not occur because of budget constraints or lack of dedicated VE
team. Out of the rest 60- 70% fail to reach the implemented stage on a
vehicle program because they do not meet expected gains. Internal teams
face roadblocks selling VE initiatives to the top management. All the
incoming ones do not go for value engineering and only those are selected
which either promise long run savings or extend the active engineering life
of the vehicle model. Management here plays a major role as they have to
take a call for implementation of VE results based on Total cost of change
analysis, so they need to be convinced of the overall gains.

Following factors emerge as a differentiatosr when we dive deeper and try

to analyze organizations who have achieved a competitive edge through VE
from those who are struggling with their VE initiatives;

Ÿ Executive management commitment

Ÿ Dedicated VE cross-functional team(CFT) accountable to meet business
objectives

Ÿ Program management of VE initiatives with clear milestones and targets

All organizations are at different maturity levels of VE initiatives. VE begins Ÿ Proactive VE and standard VE framework across all groups of the
as a response to market feedback which we call reactive VE. Once the organization
benefits become visible, VE is adopted as a tool for cost reduction and
Ÿ VE integrated with continuous improvement process, product
quality improvement. Finally organizations reach a proactive VE phase
development process and problem solving for process characteristics
where VE results are fed into continuous improvement and product
development. These, many a times, result into product or technology
innovation and give companies a leap forward in the market. Proactive VE
can also feed in information from competitive tear down and benchmarking
activities to R&D, which can help R&D develop more efficient designs for
future product lines.
KPIT VE KPIT
PHASE 0 PHASE I PHASE II PHASE III PHASE IV PHASE V
Scope Definition Functional Analysis Evaluation & Development Implementation Validation
& Information Creative Innovation
G1 G2 G3 G4 G5

Cross Functional Team

Significant improvements can occur if value engineering is done in the R&D Methodology • Statement of
Work

• Project
Information
O
• Establish
Process &
Methodology

P • Identify
- Value of Fns.
M
P
• Idea Generation

• Rank alternative
P solutions- ROI
• Selection for
ro
• Concept
l Selection
va • Product
p Requirement
p
A • Develop
• Design

u
Implementation
te• BOM & Mfg
c drawing release
e
x
E
A
P
• Product
Implementation

• Prototyping &
E testing
PentaPhase
• Objective & - Potential areas Implementation details of • Design • Cost saving

phase of the product lifecycle. Close to 75% of the product cost is frozen by Gated
in design/ selected Verification & calculations
Requirement
process/value • Design, Assembly alternatives Validation
stream and V&V • Life Cycle
Management
• Documentation
Customer/KPIT KPIT Customer/KPIT KPIT Customer Customer/KPIT

the end of this phase. However there is no comparative cost, quality and Process
performance data. So this becomes challenging as one needs to anticipate
the issues that might occur during production or in field after product
launch. Fig 4: KPIT Value Engineering Approach

KPIT has helped its customers strategize VE as a process. Teams from OEMs
Design Feature Alternate
and Tier I suppliers have domain specialists; while an independent
Optimization Enhancement Material
engineering provider like KPIT brings in framework and process specialists.

Material Performance Alternate Based on experience with the customers, KPIT has developed an approach for
Optimization Improvement Mfg. process value engineering which comprises of a detailed methodology and a Penta-
phase gated process. This is time proven with assured results for different
Assembly Problem Alternate customers across different product lines. The gated process here is a critical
Weight Reduction
Solving Assembly factor in getting desired results. Each phase has defined owners and a cross
functional team ensures that inputs and considerations from all stakeholders
Field Failure Alternate
Variant Reduction are taken care of. The “gated process” ensures that there are no attributes
Problem Solving Design
that get neglected.
Fig 3: Areas around Value Engineering
The process also gives VE a systematic approach for problem solving, a result Value Engineering gives a breather time to the design group for developing
driven program management and schedule adherence. This means that VE new product lines and platforms. Leveraging value engineering for
projects reach implementation stage and there is a buy-in from top extending the Active Engineering Life (AEL) of a vehicle program is an art.
management for the solution. World class OEMs have gained technology leadership through this.

To realize sustained benefits from value engineering sustained and focus
efforts, dedicated team and a fundamental strong process are very
essential. Successful organizations look at VE as an instrument to grow
business.
“Realizing the full potential from value engineering needs a paradigm shift.
VE has to be looked as an instrument for business growth. Organizations can
reap continuous benefits across all product lines only when VE is internalized
as a holistic approach into the organizational DNA”, says Suneel Pandita,
commenting on the scope of value engineering.

• Realizing longer Market

life of a vehicle program
Product • Higher amortization of
Launch R&D investments
Life 1
Without VE

Life 2
With VE

Initiate • Model upgrade launched/

VE Implement feature enhancement
VE results • Breather time to R&D for
designing new product
Active Engg. Life of a
lines/platforms
Vehicle Program
Market Life of a
Vehicle Program

Fig 5: VE for increasing Active Engineering Life (AEL) of a vehi cle program

SM

For more information

Email: meds@kpitcummins.com
Website: www.kpitcummins.com
KPIT Cummins