Lecture 3 Value Engineering

Value Engineering and Value Analysis Overview • What is Value Engineering? • How is VE Applied? • When is it used? • W

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Value Engineering and Value Analysis

Overview • What is Value Engineering? • How is VE Applied? • When is it used? • What is Function Analysis and FAST?

Definitions Value Engineering is a technique applied to identifying optimum value solutions during new product development. Value analysis is a technique applied to improving existing products, processes or services. The objective is usually to reduce cost, but may equally or simultaneously be to improve performance or quality. -LD Miles

The Key Points of VA / VE • Applying formal work plans. • A team approach. • Specific definition of functions. • The simultaneous look at functions and costs. • Control of the analysis process. • Quantifiable results

What is VALUE ? Value is the relationship between the defined function the customer requires and the costs incurred to provide that function. – Cost Value – Use Value – Esteem Value – Exchange Value

Value Engineering Value Engineering is • Reliability • Maintainability • Producibility • Human Factors • Parts Availability • Cycle Time • Quality • Weight Reduction

Why use Value Engineering? Save Save Build Improve Satisfy

Time Money Teamwork Quality Customer

When is VE used • Existing part/product cost is high • Existing technology is complex/old though simpler means are available • There is a need to release a cheaper product by cutting down some of the existing feature • The existing customer demands a minimal increment in product features that are in use • There is a need to cut down the manufacturing cycle time/cost

When is VE used



Value Engineering is used to determine the best design alternatives for Projects, Processes, Products, or Services



Value Engineering is used to reduce cost on existing Projects, Processes, Products, or Services.



Value Engineering is used to improve quality, increase reliability and availability, and customer satisfaction .



Value Engineering is also used to improve organizational performance. Value Engineering is a powerful tool used to identify problems and develop recommended solutions.



Benefits of VE • • • • • • •

Decreasing costs Increasing profits Improving quality Expanding market share Saving time Solving problems Using resources more effectively

VE’s Weaknesses Successful VE results are dependent on the quality of information brought to the VE workshop for evaluation. 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. “It cheapens the product without improving it.”  “VE is only used for cost reduction.”

Value Engineering Research Questions and Check Sheet 1. Can it be eliminated without impairing function or reliability? 2. Does it cost more than its worth? 3. Does it do more than is required? Are there unnecessary features? 4. Is there something better with which to do the job?

Value Engineering Research Questions and Check Sheet 5.Can it be made by a less costly method? 6. Can a standard item or specialty product be used? 7. Could a less costly manufacturing technique be used? 8. Should different tooling be used?

9.Can someone else provide it at less cost without affecting dependability?

Potential Savings from VE No engineering Change Revision

Document Revision Re-Test/Re-qualification

Drawings Released

Tooling Changes

Net Savings from VE

Total Cost of VE Implementation

VE Implementation beyond this point results in a net loss.

Concept

Design

Engineering &Production Release

Production

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 Cost

Delivery of necessary project functions while achieving best balance between project performance and project costs.

• Value =

Function Cost

To Increase Value

F

F

F

F

C

C

C

C

REDUCE

INCREASE

MAINTAIN

Competitive Advantage Quality is defined as “conformance to specification.” Value is defined as:

Function Cost

You can’t have one without the other! Competitive Advantage = Quality + Value

Unnecessary Cost • Any cost that can be removed without impairing the essential – Quality – Performance – Customer requirements – Reliability – Maintainability – Marketability – Schedule

Criteria for Evaluating Value • • • • •

COST Initial cost Operations Maintenance Return on Investment • Life cycle • Replacement • Cost of capital

• PERFORMANCE • Quality • Stakeholder requirements • Safety • Level of service • Environmental Impacts • Schedule Impacts • Operability • Reliability • Maintainability

Generalized Procedure for VA/VE Information Phase What is it? What does it do? What does it cost? Speculation Phase Is the change better? Analysis Phase How much better? Why? Decision Phase Audit effectiveness Use experience Evaluation Phase Provide feedback

How else can the job be done? At what cost?

Review with depts and suppliers Select best alternative Get approval Prepare specifications

Six Step Value Engineering Job Plan Information Phase

☛ Clearly identify the problem(s) to be solved, and gather information on the background, functions and requirements of the product, process, or system.

Creativity Phase

☛ Brainstorm ideas on how to improve the high cost, broken, or inadequately performed key functions.

Evaluation Phase

☛ 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.

Planning Phase

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

Reporting Phase

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

Implementation Phase

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

The Value Methodology Job Plan INFORMATION PHASE

 Complete data package  Modify scope

- What is the problem or opportunity?  Why do you consider it a problem or opportunity?  Why is a solution necessary?  What is the cost?

 Develop a plan to gather project data  Investigate the project

FUNCTION ANALYSIS PHASE

 Identify functions  Classify functions

CREATIVE PHASE

 Create quantity of ideas by function

 Develop function models  Cost functions  Establish value index  Select functions for study

 What is the task function?

 What else can perform the function?

EVALUATION PHASE

DEVELOPMENT PHASE

 Rank and rate alternative ideas  Select ideas for development

 Where else can the function be performed?

 How must each idea work?

 How else can the function be performed?

 What is the feasibility of implementation?

 What are the basic functions?

 What will be the cost?

 What are the supporting functions?

 When will we breakeven?  What is the best overall alternative?

 Verify data

PRESENTATION PHASE

- Conduct benefit analysis  Complete technical data  Create implementation Plan  Prepare final proposals

- Collect user/ customer attitudes

What is to be included in the study?

Complete data files

Who is best able to study the problem?

Determine evaluation factors Scope the study

What are the current and future requirements of the subject under study?

How can disadvantages be overcome?  Why is the new way better?  Will it meet all the requirements without compromise of form, fit, or function?

Build data models

What type of impediments will the team

Determine team composition

come against?

POSTSTUDY Verify accomplishments Present results Advertise outcomes

 Prepare written report  Who should be sold?  How should the ideas be presented?

 What are the annual savings?

PRESTUDY

 Present oral report

 What was the problem?  What is the new way, savings, and benefits?  How will it satisfy our customers?  What is needed to implement the proposals?  Who is responsible for implementing the change?

Did the new way work? How much did it cost/save? Did the change meet customer’s expectations?

- Complete/ implement changes - Monitor status

Property of OSC VE Office

Information Phase-Fact Finding

What do you need to know about the problem that you don’t know now?

What facts are known? What are the requirements of the system?

Are these facts, opinions,

assumptions, or prejudices?

Where or how can information be obtained?

Function Analysis • Shifts the problem-solving focus away from the items toward the functions • Function need be defined by two words: an Active Verb and a Measurable Noun • The verb defines the required action; the noun tells what is being acted on • The more abstract the function definition, the greater the opportunities for finding creative alternatives

Function Analysis  FAST (Function Analysis System Technique) - A logic diagram to describe how a system works.  Examples of Verbs and Nouns: Active Verbs Transmit Irradiate Project Dissipate Generate Convert Receive Reflect Provide (passive!)

Nouns Signal Information Data Heat Radiation Current Light Image

Functions of a No. 2 Pencil Description Pencil Eraser Band

Body

Paint

Lead

Function Makes Marks Removes Marks Secure Eraser Improve Appearance Support Lead Transmit Force Accommodate Grip Display Information Protect Wood Improve Appearance Makes Marks

FAST Example Functional Analysis System Technique (FAST) Diagram 1. List Desired Outcome and Requirements of Customer in Verb Singular Noun Form Mouse Free Living Area = Eliminate Mice

FAST Diagram 2. List Products and Services that satisfy Desired Outcome (Q4). These Products or services answer WHAT is desired of the system. • Use Cat • Create Virus • Kill Mice • Eliminate Food

FAST Diagram • 3. List all functions in Verb Noun format and processes that would satisfy or produce each product or service in the previous step. • Generate all functions, basic, secondary, support without regard to relationship. Kill Mice • Trap Mice • Electrocute Mice • Shoot Mice • Gas Mice • Drown Mice • Use Snake • Poison Mice

FAST Diagram 4. Select each function from the previous step starting with what you believe to be the basic function. Ask HOW this basic function might be accomplished. HOW

Eliminate Mice

Use Cat Create Virus Kill Mice Eliminate Food

KILL MICE

POISON MICE

Trap Mice Electrocute Mice Shoot Mice Gas Mice Drown Mice Use Snake Poison Mice

•Spray Poison •Inject Poison •Step on Poison •Eat Poison •Shoot Poison

FAST Diagram 5. Continue to answer the HOW and place the answer • directly to the right. • Related functions that are at the same level, stack above or below the CRITICAL PATH HOW

Eliminate Mice

Use Cat Create Virus Kill Mice Eliminate Food

KILL MICE

POISON MICE

Trap Mice Electrocute Mice Shoot Mice Gas Mice Drown Mice Use Snake Poison Mice

•Spray Poison •Inject Poison •Step on Poison •Eat Poison •Shoot Poison

EAT POISON •Eat Bait •Drink Bait •Smell Bait

FAST Diagram 6. Continue to answer the HOW and place the answer • directly to the right. • Related functions that are at the same level, stack above or below the CRITICAL PATH HOW KILL MICE Trap Mice Electrocute Mice Shoot Mice Gas Mice Drown Mice Use Snake Poison Mice

WHY POISON MICE

•Spray Poison •Inject Poison •Step on Poison •Eat Poison •Shoot Poison

EAT POISON •Eat Bait •Drink Bait •Smell Bait

EAT BAIT •Attract Mouse •Trap Mouse

ATTRACT MOUSE

FAST Questions • How do we perform the function? • Why do we perform the function? • When do we perform the function? • What is the Desired Outcome? • Where do we perform the function? • Who performs the function?

The Technical FAST Model H OW?

WHY? INDEPENDENT FUNCTION (SUPPORTING)

OBJECTIVES OR SPECIFICATIO NS (concept)

OUTPU T MISSION, OBJECTIVE, OR HIGHER ORDER FUNCTION

BASIC FUNCTION

DEPENDEN T FUNCTION

(concept)

W H E N

DEPENDENT FUNCTION

MINOR CRITICAL PATH INDEPENDEN T FUNCTION

B

A

D

(AND)

C

ACTIVITY 1

MAJOR CRITICAL PATH SCOPE OF THE PROBLEM UNDER STUDY HIGHER ORDER FUNCTIONS

LOWER ORDER FUNCTIONS

E

ACTIVITY 2

INPUT

LOWEST ORDER FUNCTION

Critical Path HOW

CONVEY Information

PROJECT IMAGE

F.A.S.T MODEL OVERHEAD PROJECTOR

WHY

(concept)

GENERATE LIGHT (concept)

CONVERT ENERGY

RECEIVE CURRENT

TRANSMIT CURRENT

Supporting Functions F.A.S.T MODEL OVERHEAD PROJECTOR

WHY

HOW

(concept)

W H E N

CONVEY Information

PROJECT IMAGE

FOCUS IMAGE SUPPORT IMAGE

AMPLIFY IMAGE

GENERATE LIGHT

(concept)

CONVERT ENERGY GENERATE HEAT

DISSIPATE HEAT

GENERATE NOISE

RECEIVE CURRENT

TRANSMIT CURRENT

Objectives or Specifications HOW

F.A.S.T MODEL OVERHEAD PROJECTOR

WHY FACILITATE PORTABILITY

ALLOW SAFETY

OBJECTIVES OR SPECIFICATIONS

(concept)

W H E N

CONVEY Information

PROJECT IMAGE

FOCUS IMAGE SUPPORT IMAGE

AMPLIFY IMAGE

GENERATE LIGHT

(concept)

CONVERT ENERGY GENERATE HEAT

DISSIPATE HEAT

GENERATE NOISE

RECEIVE CURRENT

TRANSMIT CURRENT

Add Scope Lines HOW

F.A.S.T MODEL OVERHEAD PROJECTOR

WHY

FACILITATE PORTABILITY OBJECTIVES OR SPECIFICATIONS

ALLOW SAFETY OUTPUT

W H E N

CONVEY Information

INPUT

(concept) PROJECT IMAGE

FOCUS IMAGE SUPPORT IMAGE

AMPLIFY IMAGE

GENERATE LIGHT

(concept)

CONVERT ENERGY GENERATE HEAT

DISSIPATE HEAT

GENERATE NOISE

RECEIVE CURRENT

TRANSMIT CURRENT

FAST Example - Overhead Projector HOW?

WHY?

F.A.S.T MODEL OVERHEAD PROJECTOR FACILITATE PORTABILITY OBJECTIVES OR SPECIFICATIONS

ALLOW SAFETY OUTPUT

W H E N

CONVEY Information

INPUT

(concept) PROJECT IMAGE

FOCUS IMAGE SUPPORT IMAGE

AMPLIFY IMAGE

GENERATE LIGHT

(concept)

CONVERT ENERGY GENERATE HEAT

DISSIPATE HEAT

GENERATE NOISE

RECEIVE CURRENT

TRANSMIT CURRENT

Creativity Techniques- Brainstorming  Generate a large number of ideas - quantity, not quality.  Free-wheeling is encouraged - Listen and improve on the ideas of others.  Don’t criticize - No evaluation of ideas  Encourage everyone to participate  Record all ideas presented  Time to let ideas “incubate” should be allowed.  Select an appropriate meeting place

Function Analysis 

Function Analysis is the key to understanding the problem.



Brainstorm all possible functions



Next, build a FAST Model to help identify any missing functions.

Other tools that can work with VE  Activity Based Costing (ABC)  Cost Function Matrix  Failure Modes and Effects Analysis (FMEA)  Risk Analysis Tools  Other traditional quality tools such as pareto analysis, ishakawa diagrams, scatter diagrams, etc. Function analysis is the key to understanding the system and what it does. Function analysis enables you to analyze the problem from a system perspective.

The Planning & Reporting Phases •

Planning What is recommended? Who has to approve it? What is the implementation plan? Are mockups or prototypes required to verify final decisions? What are the cost, schedule, and deliverables? ROI?

ACTION PLAN GUIDELINES “What needs to be done?”  Identify the actions needed to “solidify” the proposals.

“Who should be assigned the action?”  Assign a team member.  Assign a completion date for the action.

“When should the task be completed?”  Plan regular team status meetings.  Anticipate 4-6 weeks to complete the actions.

Implementation Planning Ideas must be planned and managed to ensure implementation. Proposed actions should be managed like a project with specific end products, defined start and end dates, and funding limits.

The Planning & Reporting Phase



Reporting Give oral presentation. Support it with written executive brief. Be clear, concise, and positive. Anticipate roadblocks

Analysis of Each Component • Can any part be eliminated without impairing the operation of the complete unit? • Can the design of the part be simplified to reduce its basic cost? • Can the design of the part be changed to permit the use of simplified or less costly production methods? • Can less expensive but equally satisfactory materials be used in the part? • Design simplifications frequently are more apparent than is possible under the original design

The Value Engineering Checklist 1. Can the item be eliminated? 2. If the item is not standard, can a standard item be used? 3. If it is a standard item, does it completely fit the application, or is it a misfit? 4. Does the item have greater capacity than required? 5. Can the weight be reduced? 6. Is there a similar item in inventory that could be substituted? 7. Are closer tolerances specified than are necessary?

The Value Engineering Checklist 1. Can you make the item less expensively in your plant? If you are making it now, can you buy it for less? 2. Can cost of packaging be reduced? 3. Are suppliers contributing suggestions to reduce cost?

Concluding Remarks • The design stage provides the greatest opportunity to reduce costs

REMEMBER ! Value Analysis is a continuous process