Value Engineering

1. Value Engineering
A Systematic Approach
VGEC - Mechanical

2. Founder

3. WHAT VALUE ENGINEERING ISN'T
• is not just "good engineering
• It is not a suggestion program
• it is not routine project or plan review
• It is not typical cost reduction in that it doesn't "cheapen" the
product or service, nor does it "cut corners."
• Value Engineering simply answers the question
"what else will accomplish the purpose of the
product, service, or process we are studying?"

4. VE Introduction
• It is a plan which provides a positive course of
action to remove unwanted and unnecessary.
• Change & Modification
• Management of Change

5. VE History (1947)
• 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 “value analysis”.

6. VE to VA
• 1947 , General Electric Company
• Systematic approaches were conceived & brought together
and called Value analysis (VA)
• Applied in purchasing area.
• Slowly understand the broader scope of it in engineering &
manufacturing.
• It can be applied to area that generated and influenced the
cost of physical product.
• Finally application to all business areas – hardware &
software, systems & procedures, processes & services etc.
• To anything that effects the product’s total costs.

7. Management
• Act , art or manner of managing things
• Skillful managing , executive ability
• Manage : To Control, guide or work
To Have charge of, direct , conduct, administer

8. • Product : Any thing which is a result of
someone's labor

9. VE
• It is a magic or say magic acts.
• It is a team work , it is a change
• Application of systematic, planned approach to
obtain desired effect.
• Application to both productive & non-productive
THINGS
• The desired effect is
• Positive
• Result is same or better performance at lower total costs

10. Approaches for Cost reduction
• Competitive cost comparison
• Manufacturing system analysis
• Motion analysis
• Make or Buy
• Standardization
• VE SA application, coupled with these above
approaches , increase the effectiveness of
latter(cost reduction).
• VE is supplement not a replacement.

11. Objective
• A means/way of total cost control anywhere within a
product’s life cycle.
• It stresses only the reduction or elimination of cost.
• Maintaining the required quality & reliability of product using
systematic approach.
• Not to cheapen or degrade the product
• As per SAVE:
Value Engineering is the systematic application of recognized
techniques which identify the function of a product or service,
establish a monetary value for that function, and provide the
necessary function reliably at the lowest overall cost.

12. Purpose of VE
• Provide a means of skillfully, deliberately, and
systematically analyzing and controlling the total
cost of a product.
• Cost control – by alternative means to achieve
the function
• Isolating /define & segregate the necessary from
the unnecessary (both for function and cost)
• Develop alternate means of accomplishing the
necessary at lower cost.

13. Cost
• Determined from purpose and objectives of
this approach. (Total cost)
• Total cost : Sum of all efforts and expenditures
made in the development , production, and
application of product.
• Three Costs:
• Development Cost
• Production Cost
• Application Cost

14. Priority of Cost
• Application Cost :
• Producer of item must constantly evaluate effects on quality,
reliability, and maintainability.
• Effect on above will be on the User Total cost.
• Development Cost
• Production Cost:
• It contains the large amount of unnecessary cost.
– Material cost-60% approx
– Labor cost – 10% approx.
– Overhead cost – 30% approx.

15. • VESA directs its primary efforts at the material
content of the product cost.
• It does not mean a physical material , but it
considers:
• Functions to be performed by material
• Effects of the above functions on the
other cost factors.

16. Un-necessary Cost
• Which do not meaningfully contribute to the
product to which they accrue.
• Grouped in three categories:
• Mental Conditioning
• Mental Roadblocks
• Faulty Communications

17. Mental Conditioning (Cost)
•Lack of information
•Lack of Ideas
•Honest Wrong belief
•Temporary Circumstances
•Habits and Attitudes

18. Mental Road Blocks (Cost)
• Result of human nature
• Another name : Single Solution Fixation

19. Faulty Communication (Cost)
• Due Lack in communication
• It is having a additive property with multiplier
of the effect of previous two.
• Communication ability depends on:
– Background
– Education
– Training
• “ As the twig is bent , so a the tree inclined”

20. • A average manager spends 90% of time in the
act of communication.
• Acts of communication survey:
• Writing – 9%
• Reading – 16%
• Talking – 30%
• Listening – 35%
• Other Activities – 10%
• Actual problem of communication is divided in
two parts:
• Lack of Communication
• Multiple meanings