Value Engineering

No industry can take seriously Total Quality Management without operating a formalized system of Value Analysis/Engineering. No business that desires to become lean will succeed if product designs remain unchanged because of no amount of continuous improvement in the process can identify the costs of a poor design or a design that has not changed for many years. However, poor product reviews or an informal process that is restricted only to a review of the design by a particular group may yield only limited achievement in eliminating costs that could be avoided or the costs of poor quality.

These efforts will miss the many opportunities to make the process in manufacturing, assembly and service much easier, optimal, less complex and less costly. Thus margins will not be improved significantly because only a small part of the total process has been managed correctly. As such, this type of superficial activity will not generate increased profit and the revenue stream that will be needed to finance new products and new investments in technology.

A properly managed and effective value engineering process will easily repay the time invested over the life of the product and a truly effective process will yield significant competitive advantage for companies that exploit it. For businesses that supply other organizations, the ability to design and redesign product and processes opens the possibility of true, meaningful, profitable and long-term partnership with a customer.

Each progressive step that secures a greater design responsibility for the supplier will, in parallel, make the supplier increasingly more important to the competitive advantage of the customer organization and will increase the benefits to both companies. In an environment where budgets are often reduced, the market determines the selling price of a product and consumers demand a greater variety of products, value engineering is one technique that companies cannot afford to ignore because for everyday that the technique is not employed, the cost due to generated waste and non-value adding processes and resources are accumulated.

As a process, value engineering is very robust and offers tangible, financial and people-based benefits. The process eliminates wastes, it removes unnecessary costs and importantly it allows people to understand products, processes and continuous improvement. Very few modern management techniques allow this form of participation and involvement and even fewer have such a profound impact on the bottom line of the business’ trading accounts.

For companies that do not employ this technique, there is one very alarming thought that for every product that the company makes one or two may be bought by competitors and subjected to value analysis. Therefore, these competitors can easily recover the ground lost to any breakthrough new product with half the effort and half the expense of starting from the beginning. These competitors can also take the new product and streamline it to offer maximum value at minimum cost thereby creating a new product without any real expense.

Emissions generated in every step of the process or any activity shall always be significantly observed and considered in designing and improving the process without sacrificing the value of the overall output through keen understanding of the positive and negative emissions in value engineering. These emissions translate to costs affecting or requiring additional operations, activity and might possibly result to environmental hazards.

Such emissions results to wastage in human resources, energy, monetary value not enhancing the overall worth of the desired output. Waste reduction shall become a major consideration of most industries for sustainable living. In manufacturing, service or any process, the negative emissions become a focus of reduction or elimination as part of the analysis of the value adding elements of the process. This attempts to improve the value of a product with a must consideration in two emission outputs which results to a more simple, defined and optimal process with significant enhanced value of the desired output.

The first concerns the use of the product or the use value wherein along the process is the result of positive emissions and the second is the negative or the undesirable result of the process elements. However, current practices focus only with the input transformation into the useful or desired function. Employing the same focus used to determine value to non-value, this results to a reduction of procedure, processes, unnecessary elements and a total removal of waste output. It is important for all business to understand the nature of costs in the business and for any given product.

These costs include the materials used, the technology employed, the time required to manufacture the product and such like. The design process creates many constraints for the business and fixes a high degree of the total product cost. It is therefore a process that demands periodic review in order to recover any avoidable costs that can be removed throughout the life of the product by correcting weaknesses or exploiting new processes, materials or methods and lowering the costs of production while maintaining its use value to the customer.

A detailed understanding on how costs are rapidly accumulated throughout the process is the key to exploiting the process of value engineering. All value engineering activities are aimed at the reduction of avoidable, unnecessary costs and emissions without compromising customer value, and therefore the value engineering process should target the largest sources of potential cost reduction rather being and indiscriminate or unsystematic process such as focusing on labor alone.

It is therefore preferable to take the holistic approach to understanding costs, losses and wastes in the entire system of design and conversion of value in order to determine how to achieve customer service functionality. In value engineering, all alternatives can be compared using life-cycle costing because the alternatives for each project component are defined to satisfy the same basic function or set of functions. When the alternatives all satisfy the required function, then the best value alternative can be identified by comparing the first costs and life-cycle costs of each alternative.

For many projects, there is a viable sustainable development alternative or enhancement. Sustainable development may include more recycled material contents, require less energy or water usage, reduce construction waste, increase natural lighting, or include other opportunities that contribute to an optimal facility. The value engineering methodology can provide for the identification of alternatives, sustainable or eco-efficient design features, and traditional design features, on an equal playing field for comparison.

Comparison of alternatives or the process for identifying the best value alternative is accomplished using life-cycle costing along with first-cost estimates. Life-cycle costing will in most cases be able to accurately estimate the first-cost and the full life-cycle cost differentials of each alternative. At this point, tradeoffs and decisions can be made to balance environmental performance with total cost reliability, safety, and functionality. When all alternatives are compared equally sustainable development technology and integration can then be fully evaluated for performance in the acquisition process.