Value Engineering

ASHUTOSH SHARMA 1RV04IM054

Overview Brief history Introduction Definitions Objectives Value Job Plan Examples Framework of Value Analysis in Management

Practices FAST Case Study Benefits Weakness

BRIEF HISTORY OF VALUE ENGINEERING  It was during the World War II that the concept of value

engineering emerged by chance. Due to the scarcity of critical materials to be obtained, many manufacturers were forced to find out substitute materials and designs for the applications desired. The General Electric Company found that many of the materials that were substituted worked out cheaper and gave much better performance than the original ones.  In 1947, Lawrence D. Miles an engineer in General Electric

developed a number of ideas and techniques to substitute and enable the change intentionally rather than by chance. Mr. Miles worked with an odd attitude to develop new ideas and search for value in the products and developed a successful methodology. The concept quickly spread up due to the large savings with relatively modest investments.  In 1954, the U. S. Navy Bureau of Ships applied the Value Analysis

process to cost improvement during design. They called it Value Engineering. Value Engineering, Value analysis, Value Management is the same concept, and these terms are used depending upon

INTRODUCTION

In today’s market, Value Engineering has

proven to be sound enough in saving or reducing 10 to 15% of the investment costs The concept of Value in Value Engineering

is to describe the best value or the optimum value. Mr. Miles had different kinds of values that use esteem, exchange and cost. Today’s Value Management has two concepts – function and value for money.

Contd… 90% of the engineers think of value

engineering as a cost cutting tool. It is true that reducing initial project cost is the prime objective of value engineering, but value can take other forms too. The Society of American Value Engineers (SAVE) recognizes many other objectives of value engineering. Such objectives include broadening a project's function or usefulness, creating a higher quality end project, reducing schedule requirements,

Value Engineering and Value Analysis Value Engineering:

Value Engineering is a technique applied to identify optimum value solutions during new product development.

Value Analysis:

Value analysis is a technique applied to improve existing products, processes or services. The objective is usually to reduce cost, but may equally or simultaneously be to improve performance or quality. Value Methodology (also called Value Engineering, Value Analysis or Value Management)

How Does the Value Methodology Work? The value methodology works through a

VE/ VA/ VM study that brings together a multidisciplinary team of people who own the problem and have the expertise to identify and solve it. A VM study team works under the direction of a facilitator who follows an established set of procedures - the VM job plan - to review the project, making sure the team understands customer requirements and develops a cost-effective solution.

When Do You Need Value Engineering ? 1. When price competition has reduced profits. 2. At the beginning of each new product, project or

service life cycle. 3. When it appears that a new project or program may exceed budget expectations. 4. When there is a need to reduce process cycle times. 5. When there is a need to maintain the same programs at reduced costs. 6. When there is a need to produce new ideas for marketing and procuring goods and services. 7. When there is a need for productivity improvement 8.Value Engineering is used to improve quality,

What is Value? VALUE = What we get out of something What we put into it VALUE = Quality, reliability, appeal, etc = Benefits Cost, time, mass, energy, etc. Resources VALUE = Worth = Cost

Performance = FUNCTION Cost COST

Value = The most cost-effective way to reliably

accomplish

a function that will meet the

CONTD..

VALUE = FUNCTION COST

To Increase Value:-

F C

REDUCE

F C

F C

INCREASE

F C

MAINTAIN

Analysis in Management Practice

Value Analysis Job Plan (for all Management Practices) I -- INFORMATION PHASE - Project Familiarization II-- SPECULATION PHASE - Creative Brainstorming

(Continues)

III -- ANALYSIS PHASE - Critical Judgment IV -- DEVELOPMENT PHASE - Develop Alternatives V -- PRESENTATION PHASE - Present Alternatives VI– IMPLEMENTATION PHASE – Follow Up

Information Phase

Creativity/ Speculation Phase Analysis/ Evaluation Phase Planning/

☛ Clearly identify the problem(s) to be solved, and gather information on the background, functions and requirements of the product, process, or system. ☛ Brainstorm ideas on how to improve the high cost, broken, or inadequately performed key functions. ☛ Screen ideas for acceptance, score remaining ideas on a scale and group ideas into categories. Develop design scenarios, and selection criteria. Rate and rank ideas.

Development Phase

☛ Plan how to sell ideas to management, identify key recommendations, plan management presentation.

Presentation Phase

☛ Give oral presentation to management, or develop written report.

Implementatio n Phase

☛ Get management approval for go-ahead, make management plan, make assignments, implement, follow-up.

FEW EXAMPLES.. Value methodologies can be applied during

any stage of a project’s development cycle, although the greatest benefit and resource savings are typically achieved early in development during the conceptual stages.  Construction projects: Could benefit by

identifying improvements for various project phases: concept development, preliminary design, final design, procurement and construction.

CONTD..

Manufactured products: Whether consumer,

industrial, or defense, may be studied with a focus on either the design or manufacturing process of that product. A product may be the subject of a value study at any time during the product’s life. A value study can be applied at the onset of the product development to better understand the customer’s needs, identify the functions necessary to satisfy those needs, and develop the initial concept. Throughout the design development, value methodology can be used to refine and enhance the concept, based on the latest facts. Even after a product has been introduced and is in production, a Value Study can

Value Analysis, Hollis

CONTD.. Business systems and processes: May

also be the subject of Value Studies. Many elements of a business or an organization. It may be improved through the application of a value methodology. This may be from the development of business plans and organizational studies to improving existing business processes. Service organizations : Can benefit from

the use of value methodologies. In the past value methodologies have been used to improve processes and procedures in the

Analysis of Management Practice

Pre-Workshop Activities  Plan and organize the Value Study  What has to be done to prepare for a Value

Study?  The desired outcome is a clear

understanding of what senior management have addressed, what the strategic priorities are, and how improvement will increase organizational value.

Workshop (Job Plan) Activities Information Phase : Understand the current state of the project and constraints that influenced project decisions. Function Analysis Phase : Understand the project

from a functional perspective; what must the project do, rather than how the project is currently conceived(imagined). Creative Phase : Generate a quantity of ideas related

to other ways to perform functions . Evaluation Phase : Reduce the quantity of ideas that

have been identified to a short list of ideas with the

Contd… Development Phase : Further analyze and

develop the short list of ideas and develop those with merit into value alternatives. Presentation Phase : Present value alternatives

to management team and other project stakeholders or decision makers.

Post-Workshop Activities Implementation Activities : Ensure accepted

value alternatives are implemented and that the benefits projected by the Value Study have been realized.

Value Study Follow-Up Activities : Follow up

on implementation of the Value Study results and improve the application of a value methodology for future studies.

FAST Function Analysis System Technique(FAST).  It comes under Functional Analysis Phase. It is a powerful Analysis process that helps people with various technical background to effectively communicate interact & resolve issues that requires multi-disciplinary considerations. The system links two words a noun object and a verb to describe the functions of each component of a complex project. Participants with various level of training & experience can understand complex subjects when the functions are described in two simple words.

Generating a Function Picture Function Analysis System Technique: A logic diagram to describe how a system works.

Verb-Noun

Verb-Noun

Verb-Noun

Verb-Noun

Function

Function

Function

Function

“F.A.S.T. Diagram”

Examples of Verbs and Nouns ACTIVE VERBS

NOUNS

Transmit

Signal

Irradiate

Information

Project

Data

Dissipate

Heat

Generate

Radiation

Convert

Current

Receive Reflect

Light Image

etc…

etc..

Example Of FAST In a FAST diagram , HOW might something be done? And WHY should something be done? Are used to develop relations between various functions. The word HOW is always written on the LEFT and answered by reading to RIGHT. The word WHY is always written on the RIGHT and answered by reading to LEFT. To the LEFT is always HOW and it is known as High Order Function or an OBJECTIVE whereas to the RIGHT is always WHY and is known as Lowest Order Function or the Beginning of the study.

CASE STUDY Value Engineering for Municipal

Projects. Greater Vancouver Regional District(GVRD)

The GVRD is undertaking a $650 million program to

upgrade the ANNACIS & LULU island wastewater treatment plants from primary to secondary treatment. The main reason to do this project was to show that the new biosolids and effluents quality objectives can be met by controlling the projected costs. According to Mr.Don Little Ford,

M.B.A,P.Eng,Administrator of the GVRD’s wastewater treatment plants, Value Engineering (VE) helps to meet the objective. In this program 80% of the cost is in Construction

hence it was imperative that decisions & assumptions are based on Construction which needed to be Optimized. VE provides a method (FAST) which helps

Contd…

Function Analysis System Technique (FAST) was

used in this program to get better results. Mr. Don stated that VE has been worthwhile. By

1994 they conducted 3 formal VE sessions for secondary treatment . The total present value savings came out to be $17000000 of which 90% was of capital costs(construction costs). GVRD’s payback ratio came to be 24:1

payback ratio= SAVINGS VALUE

Contd… After the VE was done Mr. Don stated that:

“To work properly, the process must be a collaborative effort among the designer, owner and the VE consultant . Through this effort the interpersonal contacts has generated the exchange of ideas and synergy necessary to ensure that all good ideas were put on table for evaluation.”

Benefits Of USING Value Analysis IN MANAGEMENT PRACTICE Decreasing costs Increasing profits Improving quality Expanding market share Saving time Solving problems Using resources more effectively Increasing Customer’s Satisfaction Making Your Job Easier

Weaknesses

Lack of information Lack of ideas(Brainstorming done to get

proper ideas) Misbelieves VE is not time oriented, but, product oriented. Thus, improvements in production activities are not readily recognized. There are many misunderstandings and biases against VE that have been built up over time due to misuse of the methodology. VE is only used for cost reduction. Lack of communication and coordination.

Some key Points Value Analysis is a Continuous Process .

Value Analysis Begins & Ends With the

Customer. Keep A Positive Attitude to Change!!! THE BOTTOM LINE :

Work!!!

Make it

Conclusion Value Analysis is a better method of

management because it integrates cost, schedule and scope and can be used to forecast future performance and project completion dates. It is an “early warning” management tool that enables managers to identify and control problems before they become insurmountable(difficult to overcome). It allows projects to be managed better – on time, on budget