A value engineering project can net 10 percent cost savings. While continuous improvement methods such as Lean or 6 Sigma help stem costs and boost quality, they often can’t account for costs caused by poor information flow or frequent engineering changes. Value engineering (VE) targets redundant or unnecessarily complex design and components, arbitrary specifications, and encourages early and enthusiastic supplier participation. VE leads to better profit margins through lower cost internal manufacturing processes and reduced purchase costs.
Value engineering is guided by a blueprint of eight phases:
• Phase I: Product and Team Selection. Product lines selected for a VE analysis usually are those with unacceptable margins, customer price reduction demands, and long-term product life contracts. As important as the right product is to VE’s success, so too is the quality of the project team. The team includes a trained VE facilitator and a multidisciplinary team with “can-do” attitudes involving shop workers, front office, process engineers, purchasing, estimating, and sales.
• Phase II: Investigation. To answer questions related to the functions, cost, and value of the selected product, the team gathers facts by analyzing drawings/specifications, determining current costs, observing the manufacturing process, compiling competitive data, defining requirements/constraints, charting the history of challenges, and performing cost models. With the appropriate information, the team can evaluate functions and costs, determine basic/secondary functions, assign cost per function to evaluate worth (based on customer perception), and eliminate unneeded functions (those with no value).
• Phase III: Creative/Speculation. The next step involves the brainstorming of alternatives to the current design of product/component. The team generates a large list of imaginative and innovative potential solutions.
• Phase IV: Evaluation. Using information gathered and the creative alternatives, the team then works to combine/refine ideas, develop alternative functions, list advantages/disadvantages, build cost models for refined ideas, estimate life cycle costs/investments required for implementation, and analyze and fine-tune potentials.
• Phase V: Development. This phase of value engineering involves defining and validating possibilities utilizing sketches, cost estimates, testing, and technical work. The team will develop action items to research the feasibility of each possibility.
• Phase VI: Presentation. The VE team presents its evaluations and justifications to the executive management with proposed recommendations, required investments/resources with return on investment analysis, advantages/disadvantages/risks, outstanding action items, and feasible implementation schedules.
• Phase VII: Implementation. Executive management must take ownership of the implementation phase to ensure benefits are realized through a new set of assignments with accountability.
• Phase VIII: Audits. To measure success, the team or VE champions must audit scheduling milestones and actual costs. Auditing determines the amount of savings generated by the value engineering project based on the recommendations implemented. IBI