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Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements.
The reasoning behind value engineering is as follows: if marketers expect a product to become practically or stylistically obsolete within a specific length of time, they can design it to only last for that specific lifetime. The products could be built with higher-grade components, but with value engineering they are not because this would impose an unnecessary cost on the manufacturer, and to a limited extent also an increased cost on the purchaser. Value engineering will reduce these costs. A company will typically use the least expensive components that satisfy the product's lifetime projections.
Due to the very short life spans, however, which is often a result of this "value engineering technique", planned obsolescence has become associated with product deterioration and inferior quality. Vance Packard once claimed this practice gave engineering as a whole a bad name, as it directed creative engineering energies toward short-term market ends. Philosophers such as Herbert Marcuse and Jacque Fresco have also criticized the economic and societal implications of this model.
Value engineering began at General Electric Co. during World War II. Because of the war, there were shortages of skilled labour, raw materials, and component parts. Lawrence Miles, Jerry Leftow, 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 "value analysis".
Value engineering is sometimes taught within the project management or industrial engineering body of knowledge as a technique in which the value of a system’s outputs is optimized by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers.
VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of paint has a "function" of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment consisting of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun) and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint). This is the basis of what value engineering refers to as "function analysis".
Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships.
Value engineering is also referred to as "value management" or "value methodology" (VM), and "value analysis" (VA). VE is above all a structured problem-solving process based on function analysis—understanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgment. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate.
The Job Plan
Value engineering is often done by systematically following a multi-stage job plan. Larry Miles' original system was a six-step procedure which he called the "value analysis job plan." Others have varied the job plan to fit their constraints. Depending on the application, there may be four, five, six, or more stages. One modern version has the following eight steps:
Four basic steps in the job plan are:
- Information gathering - This asks what the requirements are for the object. Function analysis, an important technique in value engineering, is usually done in this initial stage. It tries to determine what functions or performance characteristics are important. It asks questions like; What does the object do? What must it do? What should it do? What could it do? What must it not do?
- Alternative generation (creation) - In this stage value engineers ask; What are the various alternative ways of meeting requirements? What else will perform the desired function?
- Evaluation - In this stage all the alternatives are assessed by evaluating how well they meet the required functions and how great the cost savings will be.
- Presentation - In the final stage, the best alternative will be chosen and presented to the client for final decision.
How it works
VE follows a structured thought process to evaluate options as follows.
1.What is being done now?
- Who is doing it?
- What could it do?
- What must it not do?
2.How will the alternatives be measured?
- What are the alternate ways of meeting requirements?
- What else can perform the desired function?
3.What must be done?
- What does it cost?
4.What else will do the job?
5.Which Ideas are the best?
Develop and expand ideas
6.What are the impacts?
7.What is the cost?
8.What is the performance?
9.Alternative options are presented to the client, a recommendation is made for the best alternative and presented to the client for a decision.
In the United States, value engineering is specifically mandated for federal agencies by section 4306 of the National Defense Authorization Act for Fiscal Year 1996, which amended the Office of Federal Procurement Policy Act (41 U.S.C. 401 et seq.):
- “Each executive agency shall establish and maintain cost-effective value engineering procedures and processes".
- "As used in this section, the term ‘value engineering’ means an analysis of the functions of a program, project, system, product, item of equipment, building, facility, service, or supply of an executive agency, performed by qualified agency or contractor personnel, directed at improving performance, reliability, quality, safety, and life cycle costs".
- Value Methodology Standard
- The Value Methodology Standard. SAVE International. August 2007.
- SAVE International - Value Engineering, Value Analysis, Value Management and Value Methodology
- National Defense Authorization Act for Fiscal Year 1996, Publc Law 104-106, accessed 4 March 2016
- Cooper, R. and Slagmulder, R. (1997): Target Costing and Value Engineering.
- "Value Engineering - Concepts, Techniques and Applications by Anil Kumar Mukhopadhyaya"
- "Value Engineering Mastermind - From Concept to Value Engineering Certification by Anil Kumar Mukhopadhyaya"
- "Value Optimization for Project and Performance Management by Robert B. Stewart, CVS-Life, FSAVE, PMP"
- Lawrence D. Miles Value Foundation
- SAVE International - American Value engineering society
- wertanalyse.com - Many links regarding VE organizations and publications
- The Canadian Society of Value Analysis - Value Engineering in Canada
- Value Engineering’s History in Construction- American Institute of Architects - AIA
- The Institute of Value Management, UK
- the APTE method