Value = Desired performance (P)

Overall Costs (C)

Value can be increased by either improving the Performance or reducing the cost.

VALUE

VALUE METHODOLOGYValue Methodology (also called Value

Engineering, Value Analysis or Value Management) is a powerful problem-solving tool that can reduce costs while maintaining or improving performance and quality requirements.

It is a function-oriented, systematic team approach to providing value in a product or service.

Continued….The value methodology helps organizations

compete more effectively in local, national and international markets by:

- Decreasing costs - Increasing profits - Improving quality - Expanding market share - Saving time - Solving problems Using resources more effectively

Value AnalysisVA is an step by step approach to identify the functions of a product, process, system or service; to establish a monetary value for that function and then provide the desired function at an overall minimum cost without affecting any of the existing parameters like Quality, Maintainability, Productivity, Safety and other Performance characteristics.

Value EngineeringValue Engineering is where the value of all

the components used in the construction of a product from design to final delivery stage are completely analyzed and pursued.

Origin Value Engineering began at General Electric Co. during World War II. Because

of the war, there were shortages of skilled labor, raw materials, and component parts. Lawrence Miles and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved the product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique as “Value Analysis”.

In the year 1954, US Navy Bureau of ships adopted same technique in their effort at ‘cost avoidance’ during the design stage and saved millions of dollars. They named it as “Value Engineering”. VE follows thought process that is based exclusively on “function”, i.e. what something ‘does’ not what it is.

DIFFERNCE BETWEEN VALUE ANALYSIS AND VALUE ENGINEERING

VALUE ANALYSISIndicates application

on the product that is into manufacturing.

All factors come together including workers, subcontractors, engineers to make a team with total experience and knowledge

VALUE ENGINEERING Indicates application

on the product at its design stage.

It is always done by a specific product design (engineers) team.

DIFFERNCE BETWEEN VALUE ANALYSIS AND VALUE ENGINEERING

VALUE ANALYSISIt may change the

present stage of the product or operation

It is worked out mostly with help of knowledge and experience

VALUE ENGINEERING

the changes are executed at the initial stages only.

It requires specific technical knowledge.

WHAT IS THE MEANING OF OVERALL COSTS?

Overall costs means different to different people.

For a producer overall cost is the summation of all the elements of the cost required to produce a product or service such as labour, material, overhead, etc.

For a consumer overall cost is the monetary sum (price) for which the products or services are purchased in the market.

The value of a function can be increased by four

methods

1. Decrease the cost while ensuring the same level of performance.

2. Enhance the performance at the same cost.3. Decrease the cost and increase the

performance4. Increase both performance and cost

ensuring that performance increases more than the increment in the cost.

VALUE ANALYSIS TESTS

Does its use contribute value? Is its cost proportional to its usefulness? Does it need all its features? Is there anything better for the intended

use? Can a usable part be made by a lower cost

method?

VALUE ANALYSIS TESTS

Can a standard product be found which will be usable?

Is it made on proper tooling, considering quantities used?

Do materials, reasonable labour, overhead, and profit total its cost?

Will another dependable supplier provide it for less?

Is anyone buying it for less?

FUNCTION OF VA/VE

FUNCTION HERE MEANS NEED

THE VARIOUS TYPES OF FUNCTION ARE AS FOLLOWS: Use function and Aesthetic function

Primary function and secondary function

Higher order and secondary function

USE FUNCTION AND AESTHETIC FUNCTION

Use function-Performs some action, expresses in active tone

Aesthetic function-Pleases customer, expressed in passive or non-measurable tone

Primary function and secondary function

Primary function - Basic purpose for which a product exists

Secondary function - Arises out of specific design chosen to fulfill the primary function

Higher order and secondary function

Higher order function - Reason of satisfying the basic function

Lower order function - Means of achieving the basic function

EXAMPLEFUNCTION OF A TORCH

GIVE LIGHT FACILITATE VIEWING LIGHT THE BULB

SUPPLY CURRENT INSERT BATTERY

WHY?

HOW ? HOW ?

HOW ?

Job Plan with Specific Phases

Orientation

Information

Function

Creation

Evaluation

Recommendation

Implementation

Audit/Follow up

Orientation

To creat awareness and learn the methodology of tools

Training sessions for all supervisory and managerial staff on VA & VE

Exposure to techniques like ABC, Pareto etc. for selection of project

Formation of team of experts from various functions

Information

To collect all the information pertaining to the project (product)

Work can be divided among team members

Function

To develop FAST diagram

Start from basic function and probe further with WHY? And HOW?

List down all the functions for all the parts

Creation

To develop alternate means to achieve these functions

Brainstorming sessions to generate ideas

5. Evaluation phase:

The objective of this is to select for further analysis of the most promising of the ideas

generated during the creative phase and to subject the ideas to a preliminary screening to identify

those which satisfy the following criteria.

Will it work?Is it less costlier than the present design?

Is it feasible to implement?

There are four techniques associated with this phase:

Refine and combine ideas: The ideas must be practicable an to make them so we may have to refine an idea or combine two or more than two ideas

Estabilish cost on all ideas: calculating potential costs of implementing the ideas.

Develop function alternatives: Mould the individual functional solutions into total solutions.

Evaluate by comparison: Once the rough total solutions and their related estimates of costs have been established, they are compared to determine which one will provide the greatest value advantage.

6. Recommendation Phase:

To submit the details about the proposed changes with financial implications. Report includes proposed changes, reasons of changing, new investments and annual savings.

7. Implementation:

To execute the proposed/ accepted changes list down all the activities and fix up the time frame for each. Make the entire team responsible for all the activities.

8. Audit / Follow up:

To compare the actual results with that of expected. It can be done only after complete execution of the project. This is the responsibility of top management alone.

THE RED POINTER AND RED INK

On an appliance knob, a strip of bright metal containing a red pointer was mounted.

Function: knob conceals the screw and provides the appearance which the customer wished.

The value audit of the product showed that $20000 was spent each year on the production of 1 million pieces.

Developing alternatives to reduce costs.

A polished stainless steel part was one alternative which would accomplish the function and be liked by the customer as well.

The industrial stylist asked, “Why does the red pointer increase the cost so much?”

The answer was that it caused the small part to become a “name plate”, which imposed certain costs and restrictions on its manufacture and procurement.

Some of the other alternatives, such as the polished stainless steel, were merely small stampings not using name plate technology and not limited to the sources of supply who provide name plates.

Instructions by stylist: to take out the red pointer and use polished stainless steel. the red arrow was not good, that it caused the product to look

more like a toy and less the mature and he never had liked the red color

The change was made, both improving the customer appearance value of the product and eliminating 815,000 of unnecessary cost .

Although the answer , once developed, and the thinking process seen simple, $15,000 cash each year ($1250 each month) for the design life of three to four years shows the benefits of an optimum problem solving system for simple as well as involved matters.

Value analysis is a problem-solving system implemented by the use of a specific set of techniques, a body of knowledge, and a group of learned skills.

An organized creative approach to efficiently identify unnecessary costs

Leads to orderly utilization of better approaches, alternative materials, newer processes, and abilities of specialized suppliers.

It focuses engineering, manufacturing and purchasing attention on one objective-equivalent performance for lower cost.

Step by step procedures for accomplishing its objectives efficiently with assurance.