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Unit 14

Value Engineering

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Value Engineering/ Value Analysis

Value Engineering (VE) or value analysis is a methodology by which we try tominimize the cost and improve the revenue of a product or an operation.

It was developed by General Electric Corporations (GEC). Value engineering has gained popularity due to its potential for gaining high

Returns on Investment (ROI).

The different aspects of value engineering can be encapsulated into a sequenceof steps known as a Job Plan.

Value engineering in any organizations helps to identify:

The problem or situation that needs to be changed/improved All that is good about the existing situation The improvements required in the situation The functions to be performed The ways of performing each function

The best ways among the selected functions

The steps to be followed to implement the function

The person who executes the function, It should be remembered that we are not seeking

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Relevance of VE in Modern Manufacturing

Modern Manufacturing is seen with the management approach which consists ofadopting techniques like TQM, JIT, Kanban, concurrent engineering, lean

manufacturing, TPM, group technology, cellular manufacturing, and others. Four basic types of value

Use valueThe properties or characteristics of an item or service that enablesperformance to satisfy the customer.

Esteem valueThe properties or characteristics of an item or service that makes itdesirable to possess.

Exchange value - The properties or characteristics of an item or service that enablesits exchange with another item.

Cost valueThe total of materials, labour, and other costs that make up a product orservice.

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Process of Value Analysis

1. Data gathering

2. Analysis and valuation of functions

3. Idea generation and evaluation of substitutes

4. Implementation and regulation

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VE Approaches and Aim

Now-a-days, the principles of value engineering starts at the product concept anddesign and is carried down the value chain.

The aim of value engineering is to effect economies by investigating everyopportunity and discovering new materials and methods to achieve high qualityperformance.

The aims of value engineering can be listed as:

Product simplification Better and less costly materials Improved product design High efficiency in the processes Economy in all activities Pre-sourcing: The process of involving suppliers from the design stage is

called presourcing.

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Supplier evaluation and certification

Material procurement procedures

Inspection and issue procedures Production planning and control systems Quality control methods Process of design and evaluation Management Information Systems Labour relations and compensation systems Culture of productivity and quality

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Providing Value to the Customers

Promote employee involvement in value wo rk Act on customers voice Enhance prod uct rel iabi l i ty

Ensure eff ic ient pro curement pract ices for better value Streaml ine bus iness processes

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Benefits

Cost reduction

Overall cost consciousness A culture of effecting savings across organization Streamlining of administration and creation of transparency in all dealings

even with outsiders

Development of reliable suppliers