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Value Engineering

Value engineering is an approach to productivity improvement that attempts to increase the value obtained by a customer of a product by offering the same level of functionality at a lower cost.

The term Value Engineering is sometimes used to refer to the application of this process of cost reduction prior to manufacture, while Value Analysis refers to the process when appied to products currently being manufactured.

Both attempt to eliminate costs that do not contribute to the value and performance of the product or service. The approach is more common in manufacturing.

VE originated in General Electric (under Lawrence Miles) during the Second World War. They were seeking ways to make the most efficient use of war-limited funds and raw materials. They found in most cases alternative materials and processes delivered performance and cost at least as good and often better than the original. This led them to formalise the approach and devise a team-oriented technique that determines the value of each part and each product.

Value engineering critically examines the contribution made to product value by each feature of a design. It then looks to deliver the same contribution at lower cost.

Different types of value are recognised by the approach:

  • Use value relates to the attributes of a product which enable it to perform its function.
  • Cost value is the total cost of producing the product.
  • Esteem value is the additional premium price which a product can attract because of its intrinsic attractiveness to purchasers.
  • Exchange value is the sum of the attributes which enable the product to be exchanged or sold.

Although the relative magnitude of these different types of value will vary between products, and perhaps over the life of a product, VE attempts to identify the contribution of each feature to each type of value through systematic analysis and structured creativity-enhancing techniques.

Value engineering programs are best delivered by multi-skilled teams consisting of designers, purchasing specialists, operations personnel, and financial analysts.

Pareto analysis is often used to prioritise those parts of the total design that are most worthy of attention. These are then subject to rigorous scrutiny. The team analyses the function and cost of those elements and tries to find any similar components that could do the same job at lower cost.

Common results are a reduction in the number of components, the use of cheaper materials, or a simplification of the process.

See Lawrence Miles Value Engineering Reference Center

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