Value Analysis (VA)
and Value Engineering (VE):
Definitions and Benefits

Essential Product Development for Engineers

Value Engineering

Value Engineering (VE) is concerned with new products. It is applied during product development. The focus is on reducing costs, improving function or both, by way of teamwork-based product evaluation and analysis. This takes place before any capital is invested in tooling, plant or equipment.

This is very significant, because according to many reports, up to 80% of a product’s costs (throughout the rest of its life-cycle), are locked in at the design development stage. This is understandable when you consider the design of any product determines many factors, such as tooling, plant and equipment, labour and skills, training costs, materials, shipping, installation, maintenance, as well as decommissioning and recycle costs. Therefore value engineering should be considered a crucial activity late on in the product development process and is certainly a wise commercial investment, with regard to the time it takes. It is strongly recommended you build value engineering into your new product development process, to make it more robust and for sound commercial reasons.

What is Value Engineering - Dr Mike Clayton
(Courtesy of Online PM Courses)

 

Value Analysis

Value Analysis (VA) is concerned with existing products. It involves a current product being analysed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These include costs, function, alternative components and design aspects such as ease of manufacture and assembly.

A significant part of VA is a technique called Functional Analysis, where the product is broken down and reviewed as a number of assemblies. Here, the function is identified and defined for each product assembly. Costs are also assigned to each one. This is assisted by designing and viewing products as assemblies (or modules). As with VE, VA is a group activity that involves brainstorming improvements and alternatives to improve the value of the product, particular to the customer.  

Note: Many refer to Value Management as an umbrella term, which encompasses value engineering and value analysis.

Value Analysis in a Nutshell - Clearly Explained for Manufacturers
(Courtesy of Alpine Engineering & Design Inc)

Reducing Costs by Using Value Engineering in Conjunction with other World Class Manufacturing Techniques

Before we move on and examine the specifics of value analysis, it is worth pointing out some of the best performers in industry often use value analysis, in conjunction with other world class manufacturing techniques, such as Lean Manufacturing. They do this in order to reduce their costs not only in product development, but in all areas of the business, particularly production. Please see the Lean Manufacturing Essentials section for specific details about production-based cost reduction.

Functional Analysis Explained: A Key Part of VA

Reasons for Value Analysing Existing Products

The majority of the information here is geared towards New Product Development and New Product Introduction. In contrast to this, as stated above, VA is based upon products you already sell. On the face of it, the reasons for value analysing existing products may seem obvious. However you may find yourself in a situation where you need to convince others and make the case for undertaking a VA exercise. Senior managers may require justification as to why it’s worth the investment of time and effort. Below are some points that may help. Consider applying them to your specific situation.

• VA reduces costs (in all areas such as materials, parts and production), as well as improving product function. Therefore, the value of the product is increased to the customer.



• Reducing the cost of products increases revenue and profit per product. Therefore, giving your company the option of reducing price to sell more or investing in R&D.



• VA enables improvements to be made to the product in a variety of areas, such as design and engineering, material selection, testing, manufacturing, assembly, shipping, installation, use by the customer, service, maintenance and recycling.



• For many manufacturing businesses their product range has evolved over time, as a collection of solutions to meet new customer needs, rather than being the result of strategic planning. Often products have been developed under tight time constraints and as a result, a wide variety of parts and materials have been sourced and used. This leaves lots of scope for component rationalisation across the range.  In-turn this opens the door to cost reduction negotiations based on ordering greater quantities and economies of scale. A value analysis exercise can deliver this.



• A VA project enables your business to take commercial advantage of the constantly falling price of some technologies, as well as source alternative components and materials.



• The above factors all increase perceived value of the product by all those who interact with it, throughout its product life (including of course, the customer).



• The prestige value of the product increases, therefore making ownership more desirable, which should help product sales (and indeed the process of marketing and selling it).



• A customer who perceives the value of the product as being more prestigious is more willing to pay a premium for it or choose it over rival products if it is priced the same.



• An all-round better quality product is easier and less costly to produce, assemble, ship, install, use, service and recycle. The result is to reduce all associated costs throughout the product lifecycle (importantly, including ownership costs for the customer).



• VA, in conjunction with other world class manufacturing techniques, can help realise substantial company-wide improvements, thereby delivering significant competitive advantage.

Value Analysis

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