Introduction to IE_Productivity_Value engineering.pptx

Basic introduction of Industrial engineering, Productivity and Value engineering.

1. Dr. Ramesh R. Rajguru Industrial Engineering

2. Industrial engineering is a branch of engineering dealing with the optimization of complex processes or systems. Industrial Engineering integrates knowledge and skills from several fields of science. The Industrial Engineer comprehends knowledge in those sciences in order to increase the productivity of processes , achieve quality products and assures Labour safety . Depending on the sub-speciality( ies ) involved, industrial engineering may also be known as operations management, management science, systems engineering, or manufacturing engineering.

3. In general engineers are concerned with the analysis and design of systems. Like, Electrical Engineers are concerned with electrical systems, Mechanical Engineers are concerned with mechanical systems, Chemical Engineers are concerned with chemical systems, and so forth. Industrial Engineers are concerned with production systems.

4. Industrial engineering determines the most effective ways to use the basic factors of production such as men, machines, materials, information, and energy to make a product or a service. These factors of production form the link between management goals and operational performance. Industrial engineering is a process of planning, organizing, directing, controlling and managing the activities of any industry/organization. It organizes and transforms the inputs using various resources of the organization into value-added products in a controlled and an effective manner . Industrial engineering deals with increasing productivity through the management of men, methods and technology.

5. Definition Industrial Engineering American Institute of Industrial Engineers (AIIE) defines Industrial Engineering as follows; Industrial Engineering is concerned with the design, improvement and installation of integrated system of men, materials and equipment. Industrial engineering may be defined as the art of utilizing scientific principles, psychological data, and physiological information for designing, improving, and integrating industrial, management, and human operating procedures. (Nadler 1955).

6. Objectives of Industrial Engineering The basic objectives of Industrial Engineering departments are; To establish methods for improving the operations and controlling the production costs. To develop programmes for reducing these costs. To develop methods for handling and transporting materials. Development of production planning and control procedures. To increase/maximize productivity through the management of people, methods of business organization, and technology.

7. Objectives of Industrial Engineering The basic objectives of Industrial Engineering departments are; Develop management control systems to aid in financial planning and cost analysis. Redesign and standardization of manufacturing processes. Design production planning and control systems to coordinate activities and ensure product quality. Develop wage and salary administration systems and job evaluation programs. Determine the product requirements. To eliminate worker fatigue. To increase/ maximize efficiency.

8. to increase/maximize productivity through the management of people, methods of business organization, and technology to design or to improvement systems for the physical distribution of goods and services and to determine the most efficient plant locations. to design or to improvement systems for the physical distribution of goods and services and to determine the most efficient plant locations . to develop methods for handling and transporting materials redesign and standardization of manufacturing processes to eliminate worker fatigue determine the product requirements . develop wage and salary administration systems and job evaluation programs develop management control systems to aid in financial planning and cost analysis development of production planning and control procedures design production planning and control systems to coordinate activities and ensure product quality Objectives of Industrial Engineering

9. to design or to improvement systems for the physical distribution of goods and services and to determine the most efficient plant locations. Roles undertaken by industrial engineers: Energy engineering and management Facilities engineering Financial engineering Human factors and safety engineering Information systems engineering and management Manufacturing engineering Methods engineering Operations engineering, management and optimisation Organisation development and change management Policy planning Quality and reliability engineering Supply chain management and logistics Systems engineering, simulation and analysis

10. Role of Industrial Engineer An Industrial Engineer is an engineer who works in a factory. His job is to solve any problems which come up when the factory is making a product which has been designed by Design Engineers . The role of the Industrial Engineer is to effectively and efficiently utilize software technologies, machine tools, and scientific concepts, and human resources in order to solve problems, provide products or services at minimal cost, and produce on time at the optimum output level to satisfy customer demands .

11. Techniques of Industrial Engineering Following tools and techniques are used to improve productivity of the organization by optimum utilization of resources. 1- Method Study. 2- Time Study (Work Measurement ). 3- Motion Economy. 4- Financial and Non Financial Incentives. 5- Value Analysis. 6- Production, Planning and Control. 7- Inventory Control. 8- Job Evaluation. 9- Material Handling Analysis. 10-Ergonomics (Human Engineering ). 11- System Analysis. 12- Operations Research Techniques.

12. Contributions to I.E . The evolution of industrial engineering has been defined in five different stages. These stages are mentioned below as: Phase 1: Pre-Industrial Revolution Era: Phase 2: Industrial Revolution Era Phase 3: Scientific Management Phase Phase 4: Operations Research and Quantitative Management Phase Phase 5: Automation and Computer-Integrated Manufacturing (Modern Management)

13. Contributions to I.E . Adam Smith James Watt Charles Babbage Frederick Taylor Henry L. Gantt Frank and Lillian Gilbreth Harington Emerson L.H.C. Tippet

14. Contributions to I.E . Phase 1: Pre-Industrial Revolution Era: 1774: James Watt developed the steam engine. 1776: Adam Smith wrote The Wealth of Nations and advocated the concept of division of labour, skill development, specialization, etc. (Smith 1776). 1798: Concept of interchangeability of parts was developed by Whitney and was used in manufacturing of musket .

15. Contributions to I.E . Phase 2: Industrial Revolution Era Industrial engineering emerged as a profession during the Industrial Revolution. This was due to the requirement of technically qualified and skilled people, who were needed to plan, organize and control the manufacturing processes.

16. Phase 3: Scientific Management Phase Following contributions, as mentioned in chronological order, form a major part of Scientific Management: 1910: F. W. Taylor’s Scientific Management Fredrick Winslow Taylor (Popularly known as F. W. Taylor) is considered the Father of Scientific Management. 1911 : Gilbreth’s Motion Study 1913: Gantt’s Scheduling Chart 1917: Harris Inventory Control 1924: Shewart’s Statistical Control Chart 1927–33: Elton Mayo’s Motivation Theory 1932: Babbage Wage payment and Time Study 1933: Barnes Work Study

17. Contributions to I.E . Phase 3: Scientific Management Phase Taylor’s four principles are enumerated as follows (Taylor 1911): 1 . Replace working by ‘rule of thumb,’ use the scientific method to study a work and determine the most efficient way to perform specific tasks. 2. Job specialization, i.e. rather than simply assign workers to do any job, match worker’s capability and motivation to their jobs, and train them to work at maximum efficiency. 3. Monitor worker performance, and provide instructions and supervision to ensure that they are using the most efficient ways of working. 4 . Allocate the work between managers and workers so that the managers spend their time on management, allowing the workers to perform their tasks efficiently.

18. Contributions to I.E . Phase 4: Operations Research and Quantitative Management Phase During World War II, concepts of Operations Research were developed and used to optimize the resources allocated in the war. During this phase, the concept of linear programming (LP) was developed by Dantiz . Some of the major developments observed during this phase are mentioned below as: 1956: First NC machine was developed. 1961: First time Robot was used. 1965: Flexible automation was used . Phase 5: Automation and Computer-Integrated Manufacturing (Modern Management)

19. Contributions to I.E . Phase 5: Automation and Computer-Integrated Manufacturing (Modern Management ) Today’s industrial engineers use computer simulations and design to map and analyse systems and processes ready for optimisation . The future looks set to see the continued use of such tools alongside data science and machine learning in order to further improve processes and procedures . As the Internet of Things becomes more prevalent, so this is now becoming an important part of industrial engineering and it seems that this trend will continue and expand in the future to unite employees, machines, materials, information and more to create better practices .

20. Techniques of Industrial Engineering 1- Method Study. 2- Time Study (Work Measurement). 3- Motion Economy. 4- Financial and Non Financial Incentives. 5- Value Analysis . 6- Production, Planning and Control. 7- Inventory Control. 8- Job Evaluation. 9- Material Handling Analysis. 10-Ergonomics (Human Engineering ). 11- Operations Research Techniques.

21. Inputs: Men Materials Machines Information Capital Transformation Process: Product Design Product Planning Production Control Maintenance Outputs: Product Services Continuous: Inventory Quality Cost Environment Feedback Information Production System

22. The production system of an organization is that part, which produces products of an organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. A simplified production system is shown above. The production system has the following characteristics: 1. Production is an organized activity, so every production system has an objective. 2. The system transforms the various inputs to useful outputs. 3. It does not operate in isolation from the other organization system. 4. There exists a feedback about the activities, which is essential to control and improve system performance. Production System

23. Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems. Production / Operations Volume Output / Product Variety Continuous Production Mass Production Batch Production Job-Shop Production Characteristics Advantages Limitations

24. EXTERNAL ENVIRONMENT INPUT OPERATION PRODUCTION SYSTEM FEEDBACK and CONTROL OUTPUT   Proper use of Input (Efficiency) Proper use of System (System Effectiveness) How well Input gets converted into Output (Productivity of System) Productivity

25. Capital Material Quality Material Availability Labour Quality Energy Plant Capacity Organisation Product Mix Management Level of Technology Utilization of Machines Plant Utilization Proper use of Inputs so that better Output is achieved + Quality mind set EFFICIENCY Proper use of Systems and tools of doing things well + Continuous Improvement EFFECTIVNESS Product Quality Service Quality Customer Delight Low Cost High Production Better Resource Utilization   PRODUCTIVITY

26. Productivity Definition Productivity has been defined as the ratio of output to input. An increase in productivity means an increase in output that is proportionally greater than increase in input . The productivity can be improved by increasing the output for same inputs or keeping constant output for deceased amount of inputs or increasing the output in greater proportion than the increase in inputs.

27. Production and Production System Q1. A company produces 160Kg of casting parts of acceptable quality by consuming 200Kg of raw materials for a particular period. For the next period the output is double (320Kg) by consuming 400Kg of raw material and for the third period the output is increased to 400Kg by consuming 400Kg of raw material.

28. Production and Production System During the first year, production is 160Kg Therefore, Productivity = Output/Input = 160/200 = 0.8. Further, second year, production is increased by 100% Productivity = Output/Input = 320/400 = 0.76. For third period, production is increased by 100% Productivity = Output/Input = 400/400 = 1.0. Comments: The above illustration it is clear that, for second period though production has doubled Productivity has decreased from 80% to 76%. For period third, Production is increased by 150% and corresponding productivity increased from 80 to 100%.

29. Production and Production System Q2. A company is manufacturing 24,000 components per month by employing 100 workers in daily 8 hour shift. The company gets additional order to produce additional 6000 components. The management decides to employ additional workers. What will be production and productivity level when the number of additional employed workers are ( i ) 30, (ii) 25, and (iii) 20.

30. Production and Production System Production is concerned with the transformation of inputs into the required outputs. In other words, production is a value-addition process through which raw material is converted into finished goods. High Profitability Low Costs Low Unit Costs High Throughput Less Variability High Utilization Low Inventory Quality Product High Sales Many products Fast Response More Variability High Inventory Low Utilization Short Cycle Times High Customer Service

31. Production and Production System Production is concerned with the transformation of inputs into the required outputs. In other words, production is a value-addition process through which raw material is converted into finished goods . At each stage of the production process, some values are added. Some examples of production are producing furniture, mobile phone, computer, car, etc. A production system consists of inputs, i.e. raw materials, conversion subsystems, i.e. man and machine, control system, i.e. quality control and reliability, and outputs, i.e. finished products.

32. Dynamics of Productivity change

33. Dynamics of Productivity change Productivity improvement results in lower cost per unit by effective utilization of all the resources and reducing wastage. Lower cost per unit contributed increased profit levels so that company can reinvest the surplus in new technology, equipment and machines. This will result in further increase productivity and also there is a greater employment generation due to new investments. The productivity increase results in higher wages to employees as profit potential of the company increase thereby increasing purchase power of workers

34. Productivity Types Productivity may be measured either on an aggregate basis or individual basis. On aggregate basis, output is compared with all inputs taken (added) together. This is called as total productivity . On individual basis, output is compared with any one of the input factor and this is called as partial productivity or factor productivity .

35. Productivity Types Partial Factor Productivity : Considers a single input in the ratio. - Partial-factor productivity would be - the ratio of total output to a single input. -Output/labor , output/machine, output/capital, or output/energy. Multi Factor Productivity : Utilizes more than a single factor. - Multifactor productivity is the ratio of total output to a subset of inputs: - A subset of inputs might consist of only labor and materials or it could include capital. Total Factor productivity : Measured by combining the effects of all the resources used in the production of goods and services (labor, capital, raw material, energy, etc.) and dividing it into the output.

36. Productivity Types Q3.The data for output produced and inputs consumed for a particular type of a manufacturing organization are given below in constant money value. Find out the partial, total factor and total productivity values. Output = Rs 3000.00 Labour input = Rs 600.00 Material input = Rs 300.00 Capital input = Rs 800.00 Energy input = Rs 150.00 Other expenses input = Rs 75.00

37. Productivity Types Q4. Table 1 gives the comparative study of several items of a motherboard for the years 2013 and 2014. Compute the changes in all productivity indices.

38. Q5. Using the information given in Table 2 , calculate the index for the following: (a) Direct labour productivity, (b ) Capital depreciation productivity (c) Capital book value productivity, ( d) Direct cost productivity (e) Total cost productivity, ( f) Energy productivity Table 2: Comparative study of productivity for the years 2012 and 2013.

39. Q6.The price index for year 1998 and 1999 are given in table below for 100 being in 1997 as base year. Calculate different productivity measures for a factory whose financial statement is given below: Item 1998 1999 Current Rs .(in 000’s) Price index Current Rs.(in 000’s) Price index Net Sales 1500 107 2200 130 Labour 200 108 380 135 Materials 800 105 1200 140 Services 300 106 370 120 Depreciation (After compensated for price rise) 90   - 120 -

40. Item 1998 1999 Productivity Rise 1998 to 1999 Current Rs.(in 000’s) (a) Price index (b) Compensated at 1997 (a)/ b)*100 Current Rs .(in 000’s) Price index Compensated at 1997 (a)/ b)*100 1. Net Sales 1500 107 1402 2200 130 1692   2 Labour 200 108 185 380 135 355   3 Materials 800 105 762 1200 140 857   4 Services 300 106 283 370 120 308   5 Depreciation (After compensated for price rise) 90   - 90 120 - 120   6 Total Inputs(2+3+4+5)     1320     1640   7 Net output(1-3-4)     357     527   8 Labour Capital Input = (2+5)     275     475   9 Labour Productivity = (7/2)     1.93     1.48 -23.31% (Fall) 10 Labour Capital Productivity = (7/8)     1.298     1.109 -14.56% (Fall) 11 Total Productivity = (1/6)     1.062     1.032 -2.82% (Fall)

41. Factors Influencing the Productivity There are various factors that influence productivity of an organization, such as man, machine, materials, space, energy, time and finance . Material: The following factors affect the productivity of a material: 1. Right quality 2. Right quantity 3. Substitutes for the existing material 4. Inspection and quality control programmes 5. Cost of material procurement and handling .

42. Factors Influencing the Productivity Man : The productivity of man depends on the following processes: 1. Selection of an employee. 2. The training given to employees. 3. Number of personnel required for a job. 4. Provision of incentive for workers . Machine: The productivity of a machine depends on the following factors: 1. Number of machines employed 2. Replacement policy for existing machines 3. Maintenance plans to avoid machine breakdown

43. Factors Influencing the Productivity Time: It affects the productivity in the following ways: 1. Inspection time for raw material 2. Inspection time for finished products 3. Production time 4. The time required to repair and maintenance work Space: Utilization of space affects the productivity in the following ways: 1. Plant layout 2. The total area covered for production work 3. Location of different departments and shops .

44. Factors Influencing the Productivity Energy: Use of energy affects the productivity in the following ways: 1. Energy-saving schemes 2. Use of renewable energy sources 3. Use of solar energy Finance: Availability and efficient use of financial facilities affect the productivity. .

45. Reasons for Lower Productivity There are various reasons of poor productivity. Some of them are mentioned as follows:: 1. Poor production planning and control 2. Low motivation of people 3. Lack of coordination 4. Unavailability of right tools , material and human force 5. Poor product design 6. Lack of standardization 7. Poor working environment 8. Non-standard methods of working 9. No accountability for loss of production 10. Government rules and regulations 11. Old age of plant and equipments 12. Weak R & D.

46. Six lines of attack to improve the productivity Improve the basic process by research and development. Provide more and improved physical means to motivate the workers. Simplify and improve the product and reduce the variety. Improve the methods of operation. Improve organisation , Production planning and control Improve manpower efficiency at all levels. Work study is the most popular technique and it can help to solve all sorts of problems concerning productivity.

47. Ways to Improve Productivity The productivity of any system can be improved either by proper use of resources or by effective utilization of the system or its processes. Some action plans for productivity improvement are listed below: Machine 1. Manual labour is replaced by machines 2. Reliable machines 3. Automation. Management 1. Motivated workforce 2. Better planning and coordination 3. Effective control over the system.

48. Ways to Improve Productivity Process 1. Computerization of the system 2. Use of Management Information System (MIS) 3. Improvement in scheduling 4. Better material flow 5. Fast and accurate retrieval of parts . Work design 1. Improved job design 2. Better work method 3. On-job training Work environment 1. Better lighting and illumination 2. Better ventilation 3. Safe workplace

49. Ways to Improve Productivity Programmes : 1. Quality circle 2. Suggestion scheme 3. Incentive scheme 4. Revise pay or policy. External environment: 1. Better political stability 2.Boosting economy and purchasing capacity of buyers 3. Globalization and open market economy

50. Ways to Improve Productivity Technology 1. Acquiring new technology such as Electro-Chemical Machining (ECM), etc. 2. Acquiring automated assembly line, for example, Surface-Mounting Technology (SMT) for printed circuit board assembly unit. 3. Acquiring computer-controlled machines, such as Computer Numerical Control (CNC) or Direct Numerical Control (DNC). 4. Using Automated Guided Vehicle (AGV) for material transportation.

51. The Technology used to Improve Productivity 1.Technology-based techniques: Computer-Aided Design (CAD), Computer-Aided Design and Drafting (CADD), Computer-Aided Engineering (CAE), Computer-Aided Process Planning (CAPP), Computer-Aided Quality Control (CAQC), Computer- Aided Instruction (CAI), Computer-Aided Manufacturing (CAM), robotics, Group Technology (GT) and Total Productive Maintenance (TPM).

52. 2 . Product-based techniques: Reliability, simplification, standardization, diversification and Research and Development (R & D). 3. Material-based techniques: Material Requirement Planning (MRP), Economic Batch Quantity (EBQ), Economic Order Quantity (EOQ), JIT and material handling . 4. Task-based techniques: Work simplification, work measurement, time study, method study, job analysis, job evaluation, merit rating, job safety and production scheduling. 5. Employee-based techniques: Incentive scheme, management by objective, job enlargement, job enrichment, recognition and punishment, Total Quality Management (TQM) and zero defects.

53. Higher Productivity

54. Module:01 Value Engineering and Value Analysis: Distinction between value engineering & value analysis and their significance. Steps in value engineering & analysis and Check lists.

55. Value Engineering Analyses Function of Product Service System Achieve Required Function Lowest overall cost Value Performance Reliability Appearance Maintainability Service Life Range of Operation Safety Alternatives, etc. What is Value Engineering? Value engineering is an organised creative technique directed at analysing the function of a product, service or a system with the purpose of achieving the required functions at the lowest overall cost consistent with all the requirements, which comprise its value such as performance reliability maintainability appearance etc.

56.   Category   Item Function   Value Verb Noun Product Shaft Transmits Power Use Pillers Hold Roof Use Cloth Covers Body Use Blanket Provides Warmth Use Old stamp Exchange Money Exchange Book Enriches Knowledge Use Luxury car Makes Proud Esteem Services Consultant Consults Client Use System Org. Facilitate Mngt Use Function is what makes an item useful. For every product (or services), there must be reasons to justify why it is of any use. This is answered by a verb. For example, pencil (which is product) makes a mark (a function). Other examples are given in Table Function and Valve. Function

57. The Five Key Questions of Value Engineering The essence of the value engineering process can be captured in five questions identified by L. D. Miles, the founder of value engineering. These questions are: What is it? What does it do? What does it cost? What else will do the job? What does that cost ?

58. The Five Key Questions of Value Engineering The first question deals with identifying the focus of analysis. When associated with a target costing program, the initial focus is the new product itself. However, as the value engineering process continues the focus of analysis shifts to major functions and then components. The second question deals with identifying the functions that the product is expected to perform. Function analysis is at the heart of VE.

59. The Five Key Questions of Value Engineering Two types of functions are identified, basic and secondary:' basic function: the principal reason for the existence of a "thing,'' secondary function: a function that occurs because of the method selected to carry out the basic function, or those functions that support the basic function. Secondary functions can be wanted or unwanted. The fourth and fifth questions deal with finding alternative solutions to product design that provide increased value. This step can require great creativity on the part of the engineers. They must develop innovative solutions to the design problems they face. Cumulatively they must both increase the functionality of products and reduce costs.

60. Pencil Makes marks Eraser Removes marks Band Secures eraser, Improves appearance, Transmits force Body Supports lead, Transmits force Displays information Paint Protects wood, Improves appearance Lead Makes marks

61.   Remove Marks Secure Eraser Improve Looks Make Marks Transmit Force Display Info. Support Lead Protect Wood Components   %   %   %   %   %   %   %   %   (Cost Cents)   Cost cents Cost cents Cost cents Cost cents Cost cents Cost cents Cost cents Cost cents Eraser   100                   14.0               Metal band     50   25     25.0             2.5   1.25     1.25       Lead         100                   6.0         Body           50.0   10.0   40.0               2.5   0.5   2.0   Paint       50.0           50.0         2.5           2.5 Total   40   7.10   10.60   17   10.60   1.50   6.00 7.10       14   2.50   3.75   6   3.75   0.50   2.00   2.50

62. Meaning of value Value is a broad term often used to denote cost and Price . Value = Worth / Cost OR Value of an item = Performance of its function / Cost OR Value = Σ (+) / Σ (-) = Σ (Benefits) / Σ (Costs)

63. At the heart of VE lie two simple equation :  Value = function/cost ( 1) and Perceived value = perceived benefits/price (2)  Equation (1) reflects the perspective of the producer , and equation (2) reflects that of the customer . Value = function/cost. Can maximum value ever be achieved? One could achieve greater value by increasing performance and holding cost the same, or decreasing cost and holding performance the same .

64. Different types of values 1 ) Cost Value: It is the sum of all the cost incurred in manufacturing the product. The cost value is the sum of raw material cost, labour cost, tooling cost and other overhead costs to produce the product. 2) Exchange Value: It is the measure of all the properties and features of the product which make the product possible for exchange with other products. 3) Use Value: It is that value of the product which constitutes the amount of its cost included to make the product work. 4) Utility value : How useful / functional the product is seen to be.

65. Different types of values Esteem value: the value that customer / user gives to product attributes, not directly contributing to utility but more relating to aesthetic and subjective value. Esteem issues and functionality should not be overlooked or compromised . Market value: what market is prepared to pay for the product . Market value = Utility value + Esteem value

66. What is Value Engineering? A deep understanding of perceived value is critical if the firm's VE programs are to increase the value of products and keep these products within their survival zones Value Engineering as a functional balance Between cost quality and performance.

67. Value Engineering Today we live in an extremely dynamic and fast changing world Spectacular advances are taking place in science, technology and innovation We progress into the future with escalated endeavors to discover new technologies, new inventions, and new innovation and so on. New products, new processes, new methods, new tools, new techniques, new way of making current products as well as new products. New is the way of life today. New means change. Value engineering is change. It creates change on purpose to manage cost and performance needs.

68. Value Engineering Value engineering is most effective modern management technique successfully applied To any economic activity in trade, industry, transport etc. To any level of work at the shop floor, departments, corporate head quarters, To any product or service be if tiny or massive, simple or complex, customer built to mass product. To any job planning, Designing, Construction, Operation, Production, Maintenance. To any process procedure or any practice in any nation.

69. Value Engineering Value analysis, value engineering, value management, value control, value assurance call it by any name it is highly potent and powerful management technique created to effect improvements . Improvement in Design, Performance, Life, productivity, maintainability, service and warranty Improvement in size, shape, features, style, appearance, characteristics Improvement in quality, reliability, quality pre cost. Improvement in cost of production, maintenance, Improvement of all kinds, all types, all areas and faces Continuous and continuing improvements

70. Value engineering or value analysis had its birth during the Second World War. Needless to say, this was a fertile period for its growth due to world-wide shortage of essential materials. Lawrence D. Miles was responsible for developing the technique and naming it. Through its application, G.E.C saved nearly 70 million dollars and after that it was a question of time before the technique caught on and spread like wild fire .

71. Definition of Value Engineering Value Engineering can be defined as an organized approach to the identification and elimination of unnecessary cost. Unnecessary cost is Cost which provides neither use, nor life, nor quality, nor appearance, nor customer features. Value Engineering is an organized procedure for efficient identification of unnecessary cost. Value Engineering is the study of the relationship of design, function and cost of any project, material or manufactured by more efficient process, change in source of supply(external or internal), or possible elimination or incorporation in a related item .

72. Projects that use Value Engineering in the early development or conceptual stages are generally more successful due to common understanding of the objectives, deliverables, and requirements. At this point, major design and development resources have not yet been committed and the manner in which the basic function of the project is to perform has not been established, so alternative ways may be identified and considered. Applied with flexibility and creativity, Value Engineering is almost unlimited in its ability to identify areas of potential savings.

73. What are some of the reasons for unnecessary cost ?: • Lack of complete information • Lack of measuring value • Lack of cost knowledge • Honest wrong beliefs • Lack of communications • Poor human relations • Fear of embarrassment • Customary habits and attitudes • Traditions/customs • Rushing the project to completion

74. Commandments of Value Engineering: Do not use a part that does not contribute to the value of the product. Do not use a part whose is cost is not proportional to its usefulness. Do not provide any features to a component that are unnecessary. Accept the change if part of the required quality can be made out of cheaper and easily available material. Use standard parts wherever possible. If the part of required quality is made by a process or method costing less, then do not use any alternative method or process. Use proper tooling and manufacturing methods taking into consideration the quantities. Use material and part which is best suited for the purpose. Purchase the part instead of manufacturing in house if suitable supplier can provide the part of good quality at the reasonable price.

75. Advantages of Value Engineering: Provides a method of generating ideas and alternatives for possible solutions to concern. Provides a means for evaluating alternatives. . Allows one to evaluate and quantify intangibles and to compare apples with oranges. Provides a vehicle for dialogue by allowing large amounts of data to be summarized in concise form, allowing new and better questions to be asked, and using numbers to communicate in an information-searching mode. Documents the rationale behind recommendations and decisions. Materially improves the value of goods and services.

76. VE Methodology & Techniques

77. Get all available cost Brain storing Blast Create Refine Use specialized knowledge Methodology of Value Engineering Avoid generality Use information from best source Identify and overcome road blocks Identify key tolerance not to be too light Pay for vendor/Subcontractor supplier skills Utilize the strength and synergy of supply chain/value chain Reduced cost in supply chain --------------------------------------- Improved function of production

78. Value Engineering Methodology Function Cost Identify Function Criteria & Constraints Alternate Methods Ideas vs. Criteria Cost Reduction Obtain Costs Compare Costs Evaluate Cost Identify Opportunity Fact Finding Ideation Judgments & Selection Creative Problem Solving Development of Ideas Technical Review Team Review

79. Is the Cost of useful product reasonable? Can lower cost design works as well? Can another less costly item fill the need? Will loss expensive material do the job? Does the function contribute value? Are the features reasonable? The following questions often lead to creative thinking Can we do without it? Why this particular shape? (If it is flat) can it be round? Or vice versa Can two parts be combined? Can one component be made into two? Why does it need to be so thick? Can standard part be used? Can we busy it at cheaper rate?

80. The modern version of VE has the following eight steps: Orientation phase Information phase Functional phase Creative phase Evaluation phase Development phase Presentation phase Implementation and Follow-up The Job Plan

81. Identify issues Prioritize Issues Drafts scopes and objective Establish evaluation factors Determine Study Team Collect Data Prepare for value study The Job Plan 1. Orientation Phase

82. Further familiarization of the project by the team; all team members participate in determine the true needs of the project. Areas of high cost or low worth are identified. All the information related to project are gathered and formatted properly . The Job Plan 2 . Information Phase

83. Functional analysis outlines the basic function of a product using a verb and a noun such as ‘boil water’ as in the case of our kettle. The Job Plan 3. Functional Phase What is the Function? “ Boil Water ” (Verb) (Noun)

84. This step requires a certain amount of creative thinking by the team. A technique that is useful for this type of analysis is brainstorming. This stage is concerned with developing alternative. The Job Plan 4. Creative Phase

85. In this phase of the workshop, the VA team judges the ideas developed during the creative phase. The VA team ranks the ideas. Ideas found to be irrelevant or not worthy of additional study are disregarded. Those ideas that represent the greatest potential for cost savings and improvements are selected for development. The Job Plan 5. Evaluation Phase

86. The team develops the selected ideas into alternatives (or proposals) with a sufficient level of documentation to allow decision makers to determine if the alternative should be implemented. The Job Plan 6. Development Phase

87. The presentation phase is actually presenting the best alternative (or alternatives) to those who have the authority to implement the proposed solutions that are acceptable . The Job Plan 7. Presentation Phase

88. Develop an implementation plan Execute the plan Monitor the plan to completion Objective : During the implementation and follow-up phase, management must assure that approved recommendations are converted into actions. The Job Plan 8. Implementation And Follow Up

89. Case Study A Divan is manufactured in Gayarti Industries Pvt. Ltd. Sangli , Maharashtra (India) since 5 years.The major products of the industry are Different types of Computer work stations, Office Tables, Bed, Benches, Wardrobe, Study Table, TV Stand, Stools etc. Part name Steel Frame ( Complete, A) Bed Top (Divan Top, B) Side Strip ( Long, C) Side Strip ( Short, D) Leg Strip(E)

90. Value Engineering is applied as per the following steps: 1. Functional Analysis Worksheet is prepared for the different parts of the product. 2. Functional Evaluation is done of each part 3. Numerical Evaluation Sheet is prepared 4. Creativity Worksheet 5. Selection of alternative is done through Decision Matrix 6. Finding and Recommendation 7. Conclusion

91. Part Name/Description Quantity Function Part Assembly 1 Verb Noun Basic Secondary Basic Secondary Steel Frame (Complete) Hold Assembly X X Hold Parts X Provide Strength X Provide Grip X Bed Top ( Diwan Top) 1 Holds Material X Provide Surface X Improve Appearance X Side Strip (Long) 2 Support Frame X Improve Appearance X Side Strip (Short) 2 Support Frame X Improve Appearance X Leg Strip 4 Support Frame X Improve Appearance X

92. Key Letter Part Function Weight % Cost A Steel Frame (Complete) Hold Assembly 12 32.43% B Bed Top ( Diwan Top) Provide Surface 06 30.47% C Side Strip (Long) Support Frame 02 24.90% D Side Strip (Short) Support Frame 01 7.28% E Leg Strip Improve Appearance 01 4.92% Functional evaluation:- B C D E A A3 A3 A3 A3 12 Major Performance -3 B B2 B2 B2 6 Medium Performance -2 C C1 C1 2 Minor Performance -1 D D1 1 E 1 Pairwise comparison:- Part name Cost( Rs ) Steel Frame ( Complete, A) 1x495.00 Bed Top (Divan Top, B) 1x465.00 Side Strip ( Long, C) 2x380.00 Side Strip ( Short, D) 2x111.00 Leg Strip(E) 4x75.00 Total 1526.00

93. Creative phase: The following ideas were generated during this phase: 1. Make the design simpler 2. Use the wheels for movement 3. Make it in powder coating 4. Reduce the thickness of the board 5. Use waste pieces of required size in some places 6. Reduce the size of the board in same places 7. Reduce the gauge of the pipe No. of Comparison Parameters 1 2 3 4 5 Total % Durability 1 1 2 20 Maintenance Cost 1 1 2 20 Stability 1 1 1 3 30 Compactness 1 1 10 Appearance 1 1 2 20

94. Function Existing Cost in Rs . Worth Value Gap Ranking Verb Noun Tentative Alternative Estimated Cost in Rs . Hold Assembly 495 M.S. 390 105 1 Provide Surface 465 Board 400 65 3 Improve Appearance 380 Board 340 40 4 Improve Appearance 111 Board 80 31 5 Improve Appearance 75 Eliminate 0.0 75 2 Total 1526 1180 346 Table: Functional Cost Worth Analysis (FCWA)

95. Evaluation phase: Parameters a) Rigidity b) Light Weight c) Durability d) Appearance Alternative –I : Change gauge of material (Pipe) Alternative –II: Reduce thickness of Board ( Wherever Required) B C D Raw Score Final Score A A3 A2 A2 7 7 B B2 B2 4 4 C C1 1 1 D 1 1 Table: Weightage of the Parameters

96. Different parameters i.e. Rigidity, weight, durability and appearance are calculated for existing and proposed furniture product by using evaluation matrix as shown in the table above Parameters Weightage Alternative Rigidity Light Weight Durability Appearance Total Evaluation Matrix 7 4 1 1 Excellent 5 Existing 4 3 3 3 46 Very Good 4 28 12 3 3 Good 3 Alternative - I 4 4 3 3 50 Fair 2 28 16 3 3 Poor 1 Alternative - II 4 5 3 3 54 28 20 3 3

97. Based on Evaluation Matrix as well as the cost benefit analysis, alternative II is recommended. The total saving which can be incurred per product by the implementation of both the alternatives are 19.60% for alternative-II and 14.61% for alternative-I. Sr. No Parameters Existing Alternative I Alternative II 1 Steel Frame 495.00 297.00 297.00 2 Plywood 781.00 756.00 680.00 3 Hardware 50.00 50.00 50.00 4 Frame Painting 100.00 100.00 100.00 5 Other 100.00 100.00 100.00 Total 1526.00 1303.00 1227.00

98. FAST DIAGRAM FAST diagram is an effective graphical cum analytical tool in VE. FAST stands for Function Analysis System Technique . In 1964, Charles Bytheway Basic steps: Information gathering, Function analysis, The customer wants a function! Use functions, Aesthetic function What is Function? Active Verb and Measurable Noun

99. FAST DIAGRAM FAST diagram based on the Why -How- When logic Why? How? When? Three key questions are addressed in a FAST Diagram: How do you achieve this function? Why do you do this function? When you do this function, what other functions must you do?

100. FAST DIAGRAM Basic Functions Secondary Functions Dependent F Independent F Support F Higher order Function Lower order Function

101. Steps in constructing the FAST Diagram : Expand the functions in the "How" and "Why" directions: Build along the "How" path by asking 'how is the function achieved'? Place the answer to the right in terms of an active verb and measurable noun. Test the logic in the direction of the "Why" path (right to left) by asking 'why is this function undertaken?' When the logic does not work, identify any missing or redundant functions or adjust the order.

102. Steps in constructing the FAST Diagram : To identify functions that happen at the same time, ask "when this function is done, what else is done or caused by the function?" The higher order functions (functions towards the left on the FAST Diagram) describe what is being accomplished and lower order functions (functions towards the right on the FAST Diagram) describe how they are being accomplished. "When" does not refer to time as measured by a clock, but functions that occur together with or as a result of each other.

103. MATRIX METHOD IN VALUE ENGINEERING In matrix method the most suitable alternative is selected by using a numerical evaluation technique. Step1: List all functions required to attain the desired objectives. Step2: Generate a relative importance matrix by comparing each factors among them. A1 is filled if function of a row is more or equally important than the function in column. For example, in table F1 is more important than F3 but less important than F4. Step3: Sum all rows. Step4: Arrange functions in descending order of the sum in last column. This is the relative rank of functions. For example, in Table, the relative rank is F2, F5, F4,F1 and F3. Step5: Create a weight factor (Wi) for each factor (Fi).(Wi) is determined on the basis of the impact of Fi on the overall product.

104. Function F1 F2 F3 F4 F5 Sum Of Importance F1 1 1 2 F2 1 1 1 1 4 F3 1 1 2 F4 1 1 1 3 F5 1 1 1 1 4 Table: A sample of relative importance matrix

105. MATRIX METHOD IN VALUE ENGINEERING Step6: Evolve alternatives ( Aj ) to satisfy the overall objective of the product/service. List cost ( Cj ) for each Aj . Step7: Fill evaluation factor ( Fij ) for each combination of alternative ( Aj ) and function (Fi) in the main evaluation matrix. Fij is between 0 to 10 and depends upon the degree of attainment of the function. Step 8: Calculate the sum of product Wi and Fij for each alternative ( Aij ). List it in last column as Gj . Step 9: Select alternative on one of the following criteria given below: S.No . Criteria Measure Example 1 Lowest cost alternative Lowest ( Cj ) A1 2 Best Product Highest ( Gj ) A4 3 Best product per unit cost Highest ( Gj / Cj ) A3

106. Function F1 F2 F3 F4 F5 Sum Of Importance F1 1 1 2 F2 1 1 1 1 4 F3 1 1 2 F4 1 1 1 3 F5 1 1 1 1 4 Table: A sample of relative importance matrix

107. Weight (W) Ranked Function (Fi) Cost ( Cj ) Sum of Product, Gj Ratio ( Gj / Cj ) F2 F5 F4 F1 F3 Weight (W) 0.3 0.25 0.20 0.15 0.1 Alternative ( Aj ) Value of Evaluation factor ( Fij ) A1 3 7 8 4 1 4.98 4.95 0.99 A2 2 6 5 1 4 5.1 3.65 0.71 A3 6 8 4 2 5 5.2 5.4 1.04 A4 5 9 2 3 9 8 5.5 0.68 The value for Fij and Cj in the matrix are hypothetical Table: Sample of main evaluation matrix

108. MATRIX METHOD IN VALUE ENGINEERING Select alternative on one of the following criteria given below: S.No . Criteria Measure Example 1 Lowest cost alternative Lowest ( Cj ) A1 2 Best Product Highest ( Gj ) A4 3 Best product per unit cost Highest ( Gj / Cj ) A3

109. Case Study Of Tata Nano NANO

110. Case Study Of Tata Nano: Main Objective Introduction To meet customer’s Requirement - Thinked to Launch cheap, small, reliable and fuel efficient car - Benchmarked its competitor Maruti - Sets target to launch car under price tag of Maruti 800

111. Comparison of Maruti 800 Vs Tata Nano Maruti 800 Tata Nano Engine 800 cc 623 cc Length 3.335 m 3.1 m Width 1.440 m 1.5 m Height 1.405 m 1.6 m Top speed 120 km/hr 90 km/hr Cost 2.25 Lakh (on road) 1.26 lakh (on road)

112. Comparison of Maruti 800 Vs Tata Nano Maruti 800 Tata Nano Engine Type Petrol / LPG Petrol / Diesel Seating Capacity 5 4+1 Fuel Tank Capacity 28 Ltr (Petrol) , 19.2 (LPG) 30 Ltr ( Petrol) Weight 650 kg 600 kg Wheel Base 2175 mm 2230 mm Brakes Front Disk , Rear drum Front Disk , Rear drum

113. SWOT Analysis STRENGTH Price, mileage, Style, Brand name, All weather vehicle, Low cost WEAKNESS Fiber body, Low suspension power, Low engine capacity, Light vehicle, Not suitable for hilly areas OPPORTUNITY Large market for selling, First car in low range, Can hit a global market THREAT Company rivals , Not sure to hit in rural and semi urban areas

114. Cost Efficiency of Tata Nano

115. Final Cost Comparison Particulars Tata Nano Maruti 800