What is Value Engineering?

Description
The Value Engineering method from Miles and Erlicher is a function-oriented, systematic team approach used to analyze and improve the value in a product, facility design, system or service. It is a powerful methodology for solving problems and/or reducing costs while improving performance/quality requirements. Value, as defined, is the ratio of Function to Cost, and can therefore be increased by either improving the function or by reducing the cost. The terms Value Engineering (VE), Value Analysis (VA) and Value Management (VM) are used synonymously and interchangeably by some people. The approach is sometimes also referred to as Value Control, Value Improvement or Value Assurance.

Origin of Value Engineering. History

VE was developed in 1947 just after World War II at the General Electric Company when a shortage of material and labors affected GE production. Lawrence Miles was asked to explore why this occurred, and how cost reduction and performance improvement could be achieved.

Costs in Value Engineering

Note that when value engineers talk about reducing costs, they could be referring to either total life cycle costs or the direct costs of production. Total life cycle costs are the total expenditures over the whole life span of the product. This measure of cost is most applicable to expensive capital equipment, and includes manufacturing costs, installation costs, maintenance costs, and decommissioning costs. Individual expenditures must be discounted to reflect the time value of money. When referring to consumer products, the direct cost of production is more typically used. This measure is limited to the costs directly associated with manufacturing the product.

Usage of Value Engineering. Applications

Areas in which VE can be efficiently and profitably utilized are: Engineering: Design, product improvement. Manufacturing: Material Handling, tool design and production. Purchasing: Manufacturer's vendor alternative proposals; new product information. Sales: Slow selling products. Systems and Procedures: Paperwork, forms processing, reproduction services. Maintenance: Procedures, material, work scheduling. Energy Conversion: Procedures, life cycle costing analysis. Construction: planning, scheduling, labor, consumables. Surplus usage.

Steps in Value Engineering. Process

The common terminology offers a standardized step by step Job Plan of the systematic problem solving process and consists of four major phases:

1. Information Phase. This phase involves defining of the problem to be solved, evaluating

the feasibility of implementing the VE study for the problem, gather information about the problem, and allocate the required resources and team to execute the study.
2. Speculative Phase. This phase aims to develop alternative approaches of providing the

required functions at lower cost. The functional analysis is developed by the Function Analysis Systems Technique (FAST), which is a diagramming procedure that demonstrates the logical relations among the functions of building, system, or component. Upon creating the FAST diagram, the VE team shall start generating a wide variety of ideas. This helps to optimize the solution of a value improvement problem by increasing the probability of selecting the best idea through brainstorming or other idea generation techniques.
3. Analytical Phase. The purpose of this phase is to apply cost comparisons and define the

optimum alternative of those ideas generated in the previous phase. The Life Cycle Costing (LLC) is applied to study the lowest cost of the final selected alternatives.
4. Proposal Phase. The purpose of this phase is to present results of the VE study to the

stakeholders, to obtain approval from the client and to define concurrence and a commitment from the designer, project sponsor, and other management to proceed with implementation of the recommendation.

Strengths of Value Engineering. Benefits

Optimizes Quality/Performance. Reduces Total Life Cycle Costs of Projects or Processes. Minimizes waste in Manufacturing and Design Process by eliminating wasteful practices. Simplifies and Improves Functional Reliability and Systems Performance. Identifies Potential Risks and Generates Solutions to Mitigate.

Limitations of Value Engineering. Disadvantages

VE should be performed as early as possible before commitment of funds. According to Pareto law 80% of the problem count represents 20% of the amounts to be paid. Therefore the optimum timing for VE study is during the design phase. The approach depends on team work, creativity concepts.

Assumptions of Value Engineering. Conditions

Cost cutting alone is not the main function or objective. Neither is improvement alone.
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