Value is
calculated as a ratio of function to cost. A business can add value to a
product by either cutting down on cost or improving the function. Most
companies use value engineering as a cost-cutting strategy, where the basic
function of a product is preserved – not sacrificed – in the process of
pursuing value improvement.
Value
engineering can be broken down into the following phases:
1. Information
The information
phase involves gathering project information and refining the goals of the
project. They obtain project data, present the original design or product
concepts, and understand the project scope. Schedule, costs, budget, risk, and
other non-monetary issues are studied until the team is comfortable with the
concept of the project, what it is to produce, and who its end users are. Data
is collected and analyzed, and the information obtained is used to finalize the
priorities of the project and areas of improvement.
2. Function
Analysis
The function
analysis phase involves determining the functions of the project and
identifying them with a verb/noun combination for every element under
evaluation.
Functions come in four forms:
- Basic function is the specific purpose for which the items exists, answers the “how” question.
- Higher order function is the specific need for which the basic functions exist, answers the “why” question and is outside the scope of the subject.
- Primary functions are those that represent the reason for the project’s existence.
- Secondary functions are those that the project serves without being core to the project.
There can also
be all-the-time functions, one-time functions, unwanted functions, and lower
order functions.
Each of the
identified functions is analyzed to determine if there are improvements to be
made and if a new function is required. An example of a function can be
“disinfect water.”
The function
should be as non-specific as possible, to leave room for multiple options that
perform the function presented by the project. A cost is assigned to each
identified function.
3. Creative
The creative
phase follows the function analysis phase, and it involves exploring the
various ways to perform the function(s) identified in the function analysis
phase. This allows team members to brainstorm alternatives to existing systems
or methods that are in use.
Brainstorming
forces people to be creative and allows team members to speculate on all
possible solutions to the problems presented, or alternatives to the function.
The team is required to develop a list of potential solutions to the function
formulated by the verb/noun combination.
4. Evaluation
In the
evaluation phase, the merits and demerits of each of the suggested solutions
and alternatives from the creative phase are listed. The team should describe
each advantage and disadvantage in general terms.
When the
disadvantages exceed the advantages, the alternative is dropped in favor of
other solid alternatives. The team performs a weighted matrix analysis to group
and rank the alternatives, and the best alternatives are selected for
consideration in the next phase.
5. Development
Once the value
improvement options have been whittled down to the ones that make sense, the
value engineering team conduct an in-depth analysis of each best alternative to
determine how it can be implemented and the cost involved. The examination of
each alternative may involve creating sketches, cost estimates, and other
technical analysis. They must be clearly written and explained so that the
project owner and stakeholders can understand how it benefits the project and
act on it. Any potential negative factors are identified. Potential costs and
cost savings are itemized. Team members formulate an implementation plan for
the project, which describes the process to be followed in implementing the
final recommendations.
6. Presentation
The
presentation phase is where the team meets with the management and other
stakeholders to present their final report. The team is required to present
their findings to the decision-makers using reports, flow charts, and other
presentation materials to convince them that the final ideas from the
development phase should be implemented.
The ideas
should be described in detail, including associated costs, benefits, and
potential challenges. The final report acts as a record of the team’s
accomplishments during the study and a summary of the team’s deliberations and
findings. It can also act as a reference tool for the company in future
projects.
Implementation
of the project begins after the management’s approval of the team
recommendations. If there are changes requested by the management or other
decision-makers, these changes should be incorporated into the implementation
plan before the implementation begins.
When implementing
the project, the team should ensure that the primary goal of increasing value
is achieved. The actual cost savings of the project should be determined based
on the implementation of the recommendations.
