VALUE

Value = Desired performance

(P)

Overall Costs (C)

Value can be increased by either improving the

Performance or reducing the cost.
VALUE METHODOLOGY
Value 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 Analysis
VA 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 Engineering
Value 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 ANALYSIS VALUE ENGINEERING

 Indicates application on  Indicates application on
the product that is into the product at its design
manufacturing. stage.
 All factors come together  It is always done by a
including workers, specific product design
subcontractors, engineers (engineers) team.
to make a team with total
experience and knowledge
 DIFFERNCE BETWEEN VALUE ANALYSIS AND
VALUE ENGINEERING

VALUE ANALYSIS VALUE ENGINEERING

It may change the the changes are executed
present stage of the at the initial stages only.
product or operation It requires specific
It is worked out mostly technical knowledge.
with help of knowledge
and experience
 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 performance
4. 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
 EXAMPLE
FUNCTION OF A TORCH

WHY? HOW ?
GIVE LIGHT FACILITATE VIEWING LIGHT THE BULB

HOW ? HOW ?

SUPPLY CURRENT INSERT BATTERY

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
 Onan 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.

 Thevalue 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.