Date:- 20.01.

2009 Submitted By:- Pratik Jain

Tuesday {0781563908}
Operation Management
M.B.A—Sec-‘A’—N.I.E.C
Assignment-1

Explain:- Value Analysis/Value Engineering

 Introduced in the present form after World WarII, in U.S.A.

 Credited to Mr.L.D. Miles of General Electric.

 Cost reduction Technique.

 Aim: ” To achieve the required function at lowest cost”.

 Value Analysis( VA) refers to study of an existing product.

 Value Engineering(VE) refers to study of a product at design

stage i.e. before it is manufactored.

Value Engineering is an organized effort that employs functional

analysis of systems, sub-systems, equipment, services and supplies to
achieve the essential functions at the lowest life-cycle cost consistent
with required performance, reliability, quality and safety.

Value engineering is also referred to as "value management" or

"value methodology" (VM), and "value analysis" (VA). VE is above all a
structured problem solving process based on function analysis—
understanding something with such clarity that it can be described in
two words.

Value engineering is sometimes taught within the project

management or industrial engineering as a technique in which the
value of a system’s outputs is optimized by crafting a mix of
performance (function) and costs. In most cases this practice identifies
and removes unnecessary expenditures, thereby increasing the value
for the manufacturer and/or their customers.

Steps in VA/VE

1. Product Selection for V.A.

 2. Information Gathering
3. Defining the function of Product
4. Exploring Alternatives
5. Recommendations/presentation to top management
6. Implementation
7. Follow-up

Technique of VA/VE

VA/VE require creative thinking and speculation of new alternatives. This is achieved
by:-

BRAINSTORMING SESSIONS OF MULTI-DISCIPLINARY TEAMS:

Where questions similar to following are considered:-

 Eliminate?
 Modify?
 Use a ‘standard’ part/product?
 Is it oversized?
 Is it over weight?
 Can an inferior material be used?
 Can the design be simplified?
 If you buy it from outside, will it cost less?
 Can the ‘tolerances’ be increased?
 Can the function be performed by cheaper alternative? etc.

Difficulties/Hardwares in implementing VA/VE

 Resistance to change

 Lack of motivation

 Lack of patience

 Lack of knowledge about the construction & function of the

product.

 Difficult to get the Team to meet.

 Lack of initiative.

 “Let someone else try it first” – attitude.

  “It will not work in our Organisation”. Etc.

Value Engineering Change Proposals (VECPs)

VECPs are formal proposals submitted by suppliers under existing

contracts that meet two basic requirements:

-- The VECP’s implementation must be effected via modification

of the contract.
-- The VECP must provide an overall cost savings to the federal
government

The purpose of the Value Engineering Change Proposal (VECP) Program

is to incentivize the contractor to propose contract modifications which
reduce cost without reducing product or process performance. Two
aspects of the VECP make it unique in achieving its purpose: the
requirement that the VECP result in a contract modification, and the
incentive paid to the contractor for reducing costs.

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