What is Value Engineering?
Value engineering is a systematic, organized approach to providing necessary functions in a project at the lowest cost, promoting the substitution of materials and methods with less expensive alternatives without sacrificing function. It focuses on the functions of various components and materials, rather than their physical attributes. This approach is also called value analysis.
Key Takeaways
- Systematic Approach: Value engineering applies a structured methodology to ensure project goals are achieved economically.
- Cost-Effective Substitutions: It encourages the use of less expensive alternatives without compromising on the functional aspects.
- Comprehensive Lifecycle Analysis: Value engineering covers the entire lifecycle of a product from design through maintenance to disposal.
- Focused on Values: It concentrates on four major values: use, cost, esteem, and exchange.
- Fundamental Formula: Typically formulated as function divided by cost to maximize functionality while minimizing expenses.
Understanding Value Engineering
Value engineering involves reviewing new or existing products during the design phase to cut costs while enhancing functionality. The aim is to identify the most cost-effective solutions without leaving out critical aspects of the product. Cost cutting at the expense of quality isn’t the goal here—maximizing value is.
The concept originated at General Electric during World War II, driven by the need to find material substitutes due to shortages. This process successfully lowered costs while maintaining or even improving performance.
Ratio of Function to Cost
Value is typically represented as a ratio of function to cost. It’s about achieving the best possible functionality for the least expense throughout the product’s lifecycle, encompassing design, production, maintenance, and replacement costs.
Steps in Value Engineering
Step 1: Gather Information
Start by analyzing the product lifecycle—foreseeing all associated costs and processes, from manufacturing to distribution.
Step 2: Think Creatively
Encourage out-of-the-box thinking to identify new methods of product development and improved processes. Experimentation is key here.
Step 3: Evaluate Ideas
Assess the previous step’s ideas for feasibility, balancing the pros and cons without ignoring overarching costs and benefits.
Step 4: Develop and Analyze
Develop detailed proposal plans and revised financial projections. Test their viability while staying alert to timeline constraints.
Step 5: Present Discoveries
Present the best ideas with supporting documentation to upper management, emphasizing how the proposed changes enhance value.
Step 6: Implement Changes
Execute approved changes and appoint teams to oversee implementation. Continued monitoring ensures alignment with projected outcomes.
Types of Value in Value Engineering
Use Value
Defines what a product is capable of and its primary purpose. Without use value, products fail to secure initial consumer interest.
Cost Value
Represents everything it takes to produce a product. Keeping an eye on cost vs. consumer price point is essential.
Esteem Value
This intrinsic value is drawn from non-physical aspects, like brand recognition, which consumers may see as added value.
Exchange Value
Relates to a product’s ability to be bought, traded, and shipped, considering market accessibility and physical characteristics.
Value Engineering vs. Value Analysis
While value engineering targets pre-product fabrication to prevent value loss, value analysis focuses on already existing products to enhance their value by reviewing current costs and benefits.
Conclusion
Value engineering is pivotal in ensuring a product fulfils its potential without becoming a financial drain. By focusing on maximizing functional value while minimizing costs, companies ensure they offer products that serve consumer needs efficiently and economically.
Related Terms: value analysis, cost reduction, product design, life cycle analysis.
References
- Washington State Department of Transportation. “The Methodology for Maximizing Project Value”, Page 3.
