Value Engineering and value analysis with example

Value Engineering and value analysis with example

1. Valueiswhatthecustomerarewillingtopayfor.
Customercangetvaluefromaphysicalgood,a
serviceorevenanexperience.
Valueisdifficulttoquantifybecauseitisdirectly
relatedtocustomerperception,contextand
purpose.
Buyingfood
Taxiride 1
Value

2. Inmanufacturing,theconceptofthevalue??
Inservice&supportfunctions,theconceptof
thevalue??
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Value

3. Thequestionisalwayshowtoestimatehow
externalcustomersbenefitfromaninternal
processandthepricetheyarewillingtopayforit.
Customerscanalsohavedifferentperceptionof
thevalueofsamegoodsorservice.
Companiesprefercustomersegmentations.
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Value

4. Fromabusinessperspective,companies
activitiescreatevalueonlywhenthe
customeriswillingtopayforthem.
Socompaniesfirstneedtoclearlydefinethe
valuefortheendcustomer,andthenidentify
thoseactivitiesthatcreatesthisvalue.
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Value

5. Notalltheresourcesareusedtoproducethe
samequantityofvalue.
Asaresult,howmuchofacompanycosts,to
createavalueortocreateawaste??
Whatpercentageofcostcreatingavalueand
whatpercentageofcostcreateswaste??
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Value

6. Onaverageonly10or20%costcreate
value,while80or90%ofcostusually
createwaste.
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Value

7. Qualityisimperativeinallproductsanditisamisconceptionon
thepartofthecompaniestothinkthatvalueiscreatedbecause
ofthequalityoftheirproduct.
Qualityisimportant,butconsumerspurchaseaproductnot
becauseithasquality,buttheywillnotbuyitintheabsenceof
quality.
Valueisafunctionofperformanceandthecostoftheproduct
andifperformanceisgreat,customersdonotmindpayinga
higherpriceforaproduct 7
Value & Quality

8. Ifweweretodifferentiatebetweenqualityandvalue,
wewouldbesurprisedtofindthatitiscustomerwho
definesvalueofaproductbymakingananalysisof
theperformanceoftheproductrelativetoitscost.
Ontheotherhand,qualityofaproductisalwaysin
thehandsoftheorganizationanditdependsuponthe
abilityofacompanytoprovideaproductthatgivesa
performancethatcustomerisseeking.
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Value & Quality

9. Companiesneedtodistinguishactivitiesthat
createvaluefromthoseactivitythatcreate
waste.Sothattheycanfocusonvaluecreation
activities.
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Value
A firm's value creation strategy

10. Value Management
Valuemanagementcanbeconciselydefinedas
asystematicandfunctionbasedapproachto
improvethevalueofproducts,projectsor
processes,usingamulti-disciplineteam
endeavoringtothebestvalue.
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11. Value Engineering
ValueEngineeringisanorganized/systematic
approachdirectedatanalyzingthefunctionof
systems,equipment,facilities,services,andsupplies
forthepurposeofachievingtheiressentialfunctions
atthelowestlife-cyclecostconsistentwithrequired
performance,reliability,quality,andsafety.
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12. Value Analysis
Associatedwithapplyingvaluetechniquestosystems,
organisation,strategicplanning,standards,quality
control,environmentalimpacts,etc.
Itcomprisesagroupoftechniquesaimedatthe
systematicidentificationofunnecessarycostsina
productorserviceandefficientlyeliminatingthem
withoutimpairingitsqualityandefficiency.
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13. Value Analysis
Itendeavorstoachievethemaximumpossiblevalueforagiven
costbyacontinuousprocessofplannedactionandaimsatcost
reductionfromthepointofviewofvalue.
ThedifferencebetweenVAandVEisnotintheapproachtakenor
toolsusedbutinthepointatwhichtheyoccurinthelifecycleof
theproduct.
VEisusedduringtheproductdesignanddevelopmentstages,
whileVAisusedforthemanufacturingstageandforpurchased
parts.
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14. Value Engineering
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15. VA JOB PLAN
AValueAnalysisstudyiseffectiveinimprovingthevalueofa
product,process,projectorservicebecauseitisundertakenina
systematicapproachknownasaJobPlan.
TheValueAnalysisJobPlanisaseriesofspecificsteps,orphases
whichareusedtoanalyzeaproductorserviceinordertodevelop
alternativestoachievetherequiredfunctions.
TheJobPlan’scombinationofcreativeandanalyticaltechniques
enablestheVAteamtoeffectivelyandefficientlyidentify
alternativewaystoachievethedesiredoutcome.
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16. VA JOB PLAN
Attheheartoftheprocessistheuseoffunctionsorverbnoun
combinations.
FunctionAnalysis,Function-BasedBrainstorming,Functional
PerformanceSpecificationTechnique,andFunctionAnalysis
SystemTechniquealldemonstratethepowerofstatingneeds
throughfunctions.
Thestatementofneedinafunctionalformwithoutreferenceto
solutionsstimulatescreativityandthedevelopmentofinnovative
alternativesolutions.
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17. VA JOB PLAN
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1Selection(selection of projects for VE analysis)
2Investigation(gathering of information)
3Function Analysis
(analyzingfunctions, worth, cost, performance and quality)
4Creative(speculating using creative techniques to identify alternatives
that can provide the required functions)
5Evaluation
(evaluating the best and lowest life-cycle cost alternatives)
6Development
(developing alternatives into fully supported recommendations)
7Presentation(presenting VE recommendations for review, approval,
reporting and implementation)
8Implement Alternatives
9Audit Results

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1Selection(selection of projects for VE analysis)
Selection of Project
2Investigation(gathering of information)
Projectrelatedinformationanddataisreviewedtohelptheteamestablisha
thoroughunderstandingoftheobjectivesandthecontext.Thecomplexityofthe
project,theamountofinformationandtimeavailablewillinfluencethelevelof
effort,andtimedevotedtotheInformationPhase.
ThesuccessofaValueAnalysisStudyisdependentupononhavingrelevant,
accurateinformationthatissignificanttotheproject,productorserviceunder
examination.

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3Function Analysis (analyzingfunctions, worth, cost, performance and
quality)
FunctionAnalysisisatechniqueusedtoidentifyandunderstandtheneedsofthe
project,productorservice,(whatdoesitdo,whatmustitdo).FunctionAnalysis
isanessentialcomponentoftheValueEngineering/ValueAnalysisprocess.
InFunctionAnalysis,functionsaredescribedintwo-word(action)Verband
(measurable)Noundefinitionsthatdescribetheneedsoftheproject,productor
servicebeingexamined.Thetwowordsusedtodescribeafunctionincludean
activeverbandameasurablenoun.
Themeasurablenounidentifiessomethingthatcanbedescribedandquantified.
Althoughthefunctionofaproject,productorservicecouldbeprovidedina
descriptiveparagraph,averb-noundefinitionensuresconcisedescriptionsthat
focusononefunctionatatime.

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3Function Analysis (analyzingfunctions, worth, cost, performance and
quality)
Forexample,inthecaseofhighwayditch,oneofthefunctionsoftheditchisto,
"channelwater".Theword'channel'isanactiveverb.Theword'water'isa
measurablenounastheamountandtypeof"water"canbedescribedand
measured.Ifthehighwayditchisalsoneededto"supporthabitat"theareaof
focusmightchange.
FunctionAnalysissupportscreativeproblemsolvingbymovingthefocusaway
fromtheexpectedsolutionandplacingthefocusontherequiredperformanceor
need.
Verbnoundefinitionsenabletheindividualorteamtoclearlyunderstandand
agreeontheactualwantsandneedsrequiredoftheproject,productorservice
withoutreferencetoaspecificsolution.Theuseoftwoworddescriptionsof
functionsallowstheteamtocommunicateinacommonlanguage.

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3
Function Analysis (analyzingfunctions, worth, cost, performance and quality)
Apencilmaybeusedtomakealist,sketchadiagram,ormarkaboardforcuttingbutwhat
mustthepencildoineachoftheseapplications?Whatisthebasicfunctionofthepencil?
Theverb-noundefinitionforthefunctionofapencilcouldbeto“marksurface”.Ifthepencil
doesnot“marksurface”itcannotachieveitsbasicpurposeorfunction.Theverb“mark”isan
activeverbandthenoun“surface”ismeasurableandcanbedescribed.

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3Function Analysis (analyzingfunctions, worth, cost, performance and
quality)
WherecanFunctionAnalysisbeused?
DefiningProjectrequirements.
Identifyingneedsandpurpose.
ProblemSolving.
Definingandspecifyingrequirementsforservices
ProjectPlanningwithstakeholders(toreachcommonunderstandingof
Projectgoals).
DefiningrequirementsforInformationTechnologyProjects.
DevelopingPerformanceBasedSpecifications
Understandinghowanexistingactivity,process,orsolutionaddressesthe
needsofaproject,serviceorproduct

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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
Atechniquetodevelopagraphicalrepresentationshowingthe
logicalrelationshipsbetweenthefunctionsofaproject,product,
processorservicebasedonthequestions“How”and“Why”.

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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
HowToCreateaFASTDiagram??
ThreekeyquestionsareaddressedinaFASTDiagram:
Howdoyouachievethisfunction?
Whydoyoudothisfunction?
Whenyoudothisfunction,whatotherfunctionsmustyoudo?
Thefollowingdiagramillustrateshowafunctionisexpandedin"How"
and"Why"directionsinaFASTdiagram

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26. VA JOB PLAN
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27. VA JOB PLAN
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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
ConstructFASTDiagramLefttoRight,andCheckitRighttoLeft
IdentifywhatyoufeelistheBasicFunction.
PlaceSecondaryFunctionstotherightoftheBasicFunction.
Askthequestion:“HowisthisFunctionactually
accomplished?”
ChecktheFASTdiagrambystartingattherightandworking
left.Askthequestion:“WhymustthisFunctionbeperformed?”

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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
FASTdiagramisacreativethoughtprocesswhichsupports
communicationbetweenteammembers.
ThedevelopmentofaFASTdiagramhelpsteamsto:
Developasharedunderstandingoftheproject
Identifymissingfunctions.
Define,simplifyandclarifytheproblem.
Organizeandunderstandtherelationshipsbetweenfunctions.
Identifythebasicfunctionoftheproject,processorproduct.
Improvecommunication
Stimulatecreativity.

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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
StepsinconstructingtheFASTDiagram??
StartwiththeFunctionsasidentifiedusingFunctionAnalysis:
Expandthefunctionsinthe"How"and"Why"directions:
Buildalongthe"How"pathbyasking'howisthefunction
achieved'?Placetheanswertotherightintermsofanactive
verbandmeasurablenoun.
Testthelogicinthedirectionofthe"Why"path(righttoleft)
byasking'whyisthisfunctionundertaken?'
Whenthelogicdoesnotwork,identifyanymissingor
redundantfunctionsoradjusttheorder.

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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST)
StepsinconstructingtheFASTDiagram??
Toidentifyfunctionsthathappenatthesametime,ask"whenthis
functionisdone,whatelseisdoneorcausedbythefunction?“
Thehigherorderfunctions(functionstowardstheleftontheFAST
Diagram)describewhatisbeingaccomplishedandlowerorder
functions(functionstowardstherightontheFASTDiagram)describe
howtheyarebeingaccomplished.
"When"doesnotrefertotimeasmeasuredbyaclock,butfunctions
thatoccurtogetherwithorasaresultofeachother.

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32. VA JOB PLAN
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Components Function (verb-noun)
Basic (B) /
Secondary (S)
Lead Mark Surface B
Body (Wood)
support lead or protect lead, provide
grip,
S
Coating on Body
improve appearance, make attractive,
protect body, deliver message
S
Metal cap support eraseror hold eraser S
Eraser Removemark or erase mark S
Lead Pencil FAST Diagram

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Lead Pencil FAST Diagram

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Lead Pencil FAST Diagram

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Overhead Projector FAST Diagram
???

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Overhead Projector FAST Diagram

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Overhead Projector FAST Diagram

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Overhead Projector FAST Diagram

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Useful Verbs in Describing Functions

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Useful Nouns in Describing Functions

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3Function Analysis
1) FUNCTION ANALYSIS SYSTEM TECHNIQUE
(FAST)
Thereisno'correct'FASTdiagrambutthereisavalid
methodofrepresentingthelogicinadiagram.The
validityofaFASTmodelforagivensituationis
dependentonknowledgeandscopeoftheworkshop
participants.

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4Creative(speculatingusingcreativetechniquestoidentify
alternativesthatcanprovidetherequiredfunctions)
TheCreativePhaseisanopportunityfortheteamtousetheircreativity
andproducealternatemeansofperformingthefunctionsassociated
withtheproduct,serviceorproject.Thegoalistogenerateasmany
ideasaspossibleinashortperiodoftime.Thiscanbeaccomplished
throughFunction-basedBrainstorming.
TheCreativePhaseisalsosometimesreferredtoastheSpeculation
phaseoftheVAjobplan.
Generateasmanyalternateideasaspossibleforaccomplishingthe
functions.Thegreaterthenumberofalternativesproduced,themore
likelythatvaluecanbeimproved.

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4Creative(speculating using creative techniques to identify
alternatives that can provide the required functions)
Brainstormingisagroupcreativitytechniqueusedtogeneratealarge
numberofideas.InatraditionalBrainstormingsession,thefacilitator
mayaskforideasfortoimprovethedesignofachairandthe
participantswillsuggestchairimprovements.
InaFunction-BasedBrainstormingsession,thefacilitatormayaskfor
creativeideasbasedonspecificfunctionsofachair,suchassupport
weight.Inresponse,participantsmightsuggestwaystosupportweight.

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4Creative(speculating using creative techniques to identify alternatives that can
provide the required functions)
Function-BasedBrainstormingObjectives:
Generatemanyalternativeideas.
FocusonBasic(mostimportant)functions.
Generateideaswithoutreferencetothecurrentsolution.
Function-BasedBrainstormingRules:
Quantitycounts.Themoreideasgeneratedthebetter.
BePositive.DonotcriticizeorjudgeideasduringtheBrainstorming
session.
WelcomeOut-of-the-boxideas.Imaginativeideascanleadtonew
approaches.
Piggy-backorcombineideas.Goodideasmaybecombinedtoforma
singlebetteridea.

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4Creative(speculating using creative techniques to identify
alternatives that can provide the required functions)
Function-BasedBrainstormingisausefultechniquetofocusthe
attentionofagroupongeneratingcreativeideasinsituationssuch
as:
Projectsorproblemswithanimpasseorwhenstuckonaproblem.
Wherethesamesolutionhasalwaysbeenusedandsomethingnewis
needed.Forexample,whenanexistingsolutionhasbecome
entrenched.
Generatingcreativeapproachestostakeholderconsultation.
Whenworkingaloneandthereisaneedtochallengeyourideas.
Problemsolving.
Identifyingalternatives.
Identifyingideastoreducecost.
Generatingideastostreamlineaprocess.

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5Evaluation(evaluating the best and lowest life-cycle cost alternatives)
ThisiswheretheideasgeneratedfromtheCreativePhasearesystematically
evaluated,screened,prioritizedandshort-listedfortheirpotentialtosavecost
and/orvalue.
Ideasfoundtobeirrelevantornotworthyofadditionalstudyaredisregarded;
thoseideasthatrepresentthegreatestpotentialforcostsavingsand
improvementsareselectedfordevelopment.
Ideally,theteamwouldliketoevaluateallattractiveideasbuttimeconstraints
oftenlimitthenumberofideasthatcanbedeveloped.Asaresult,theteam
focusesonthehigherrankedideas.
Thisphaseisdesignedsothatthemostsignificantideasareisolatedand
prioritized.

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6Development(developing alternatives into fully supported
recommendations)
TheDevelopmentPhaseinvolvesexploringindetailtheideasselectedinthe
EvaluationPhase.
Theprocessinvolvesobtainingcosts,creatingdrawings,schedulesandanyother
datathatwillallowtheideatobecomparedtotheoriginalsolution.
TheobjectiveoftheDevelopmentPhaseistodeveloptheidea/alternativein
sufficientdetailfortheideatobecomparedtheoriginallyproposedsolution.
Thiswillenabletheownerordecisionmakertomakeaknowledgeabledecision
onwhethertoacceptandimplementtheproposal.
Detailedtechnicalandeconomictestingisconductedandtheprobabilityof
successfulimplementationisassessed.

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6Development(developing alternatives into fully supported
recommendations)
Developmentphaseobjectives:
Developideastoenoughdetailthattheycanbecomparedagainstthe
originalsolution
Demonstratedepth,knowledge,andthoroughnessinordertosupportthe
decisionmaker’sacceptanceofideas.
Provideopportunityfordecisionmakerstoquestionteamandassess
recommendations.
Developthechosenideasintowrittenrecommendationsthatmayinclude:
oSketches
oCosts
oPerformanceMeasures
oRisks
oAdvantagesanddisadvantages

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7Presentation(presentingVErecommendationsforreview,approval,
reportingandimplementation)
ThePresentationPhaseistheteam'sopportunitytopresenttheproposalsthey
havegenerated,andthattheybelieverepresentbettervaluethantheoriginally
proposedsolution.
ThePresentationPhaseisalsoanopportunityfordecisionmakerstoquestion
theteamandassessthedepthofanalysisthathastakenplace.
Thepresentationofcrediblerecommendationsthatimprovevaluesubstantially
increasesthelikelihoodofaproposalbeingimplemented.
Confidenceinthevalueteamandtheirrecommendationsflowsfromacarefully
structuredpresentation.

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7Presentation(presentingVErecommendationsforreview,approval,
reportingandimplementation)
Preferably,theentirestudyteamattendsthepresentationtodemonstrate
confidenceintheirrecommendations.
Questionsraisedbydecisionmakersandstakeholdershighlightthedepthof
analysis.
Thisfurtherincreasesconfidenceintheteamandthelikelihoodthatproposals
willbeapproved.

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8Implement Alternatives
Translate Plan into Action
Overcome Problems
Expedite Action
Monitor Project

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9Audit Results
Audit Implementation Results
Evaluate Project Results
Present Project Results

53. Matrix Method
Matrixmethodofvalueanalysisisusedtocompare
thefunctionsofvariouscomponentsofaproduct
accordingtotheirimportance.
Theproductisbrokenintosmallerelementsand
functionsandcostsofeachelementaredetermined.
Inamatrixform,thesefunctionsarecomparedon
somenumericalscale,e.g.5-pointratingscale.
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54. Matrix Method
Finally,weightsofthesefunctionsarecalculatedona10-pointrating
scale.Anexampleofvalueanalysisofagraphitepencilbymatrixmethod
isgiveninfigure.
ApencilworthRs3isconsideredforvalueanalysis.Thepartsusedto
makeapencilarewood,lead,adhesive,paintandembossing.Now,value
ofeachpartofthepencilisapproximatedasmentionedbelow:
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55. Matrix Method
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56. Matrix Method
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Theresultsofthepairwisecomparisons(AtoB,AtoC,andsoon)are
calculatedandenteredtogivearelativeimportancefactor,orweight,for
eachcriterion(showninnextfigure).
Theprocedureforthisistoentertheletterofthecriterionjudgedtobe
mostimportantateachintersectionontheweightingmatrix.Addtothat
letteranumber(1to3)signifyinghowmuchmoreimportantisthat
criterion.Ifbothcriteriaatanintersectionareequallyimportant,entera
zero.
Forexample,thefirstmatrixentryinFigure,A-3isattheintersectionof
rowAandcolumnB.ThisindicatesthatcriterionAismoreimportantthan
criterionBbyafactorof3(onascaleof1to3).Therawscoreshowninthe
rectangleontherightisthesumofalltheA’s(24),B’s(7)andsoforth.

57. Matrix Method
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Now, the ranking through weightage is done using the matrix shown in Figure
Combined matrix for value analysis of a pencil

58. Matrix Method
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Ifanyrawscoreiszero,thenentertherawscoreforthatcriterion,an
amountequaltoone-halfofthelowestvalueshownforanyoftheother
criteria.Inthiscase,rawscorefor‘G’willbehalfoftherawscoreof‘I’,i.e.,1.
Theweightisdeterminedbyrescalingtherawscoresintoa0to10scale.
Thecriterionwiththehighestrawscoreisgivenaweightof10whilethe
othersareproportionedtothathighestscore.Forexample,theweightof
criterionA,tomakeamark,inFigure,is10.
Thevaluecanbefoundbydividingtheweightofthefunctionsofthepart
calculatedfromthematrixbythecostofthecorrespondingpart.