1996 - June Value World

alue
WORLD
Volume No.19
I Number 2 I June 1996
c o n t e n t s
1. Value Engineenng: Paradigm Pliancy in Action
Scot McClintoch, PE, CVS
2. Taking V A / V E into the 21st Century
H.B. Greenfield, PE., CVS
and S. Mendelsohn,
CVS
3. Environmental Value Engineering o f the
Design and Selection o f Materials in Buildings:
The Process and Future
Dr. Kwaku Tenah. P.E.
4 '
4. Value Analysis Techniques applied to

Project Concept & Development
Michael Thiry. CVS
5. Competitive Management for Product
Performance, Productivity and Cost
JJ. Riordan and A.R. Tocco, CVS
14
6. Value Analysis: A n Effective Tool in

Process Re-engineering
Roch Prud'homme,
ing.
22
7. Meeting the Requirements for Future

Competitiveness through Value Analysis
Dr. Anwar
Mustafa
25
i n s i d e
t h i s
i s s u e :
8. The Value Management Model

Donald Godfrey, CVS
30
Expanding Value
9. Thunder: Ghost Surveys that Backfire

Thomas R. King, CVS, FSAVE
33
Engineering
n e x t
i s s u e s :
Transportation and M a n u f a c t u r i n g
Knowledge
Value Engineering: Paradigm Pliancy in Action

Scot McCIintoch, PE, CVS
1 n reading Future Edge by Joel Barker, the futurist who has

brought the word paradigm into everyday usage, I was struck
by the themes common to Value Engineering (VE). V E is in
itself a paradigm. As a refresher:
"A paradigm is a set of rules ... that... establishes or defines
boundaries and ... tells you how to behave inside the boundaries in order to be successful."
"A paradigm shift... is a change to ... a new set of rules."
In other words, a paradigm shift forces you to look in a different direction, much as a V E workshop often does. These
common themes are discussed below to gain insight into
how and why V E works so well, and explore how understanding the paradigm concepts can improve the application
of V E to anything.
Paradigm Shifters and Reactions to Them
As you know, a paradigm doesn't shift by itself. The human
prod is known as a paradigm shifter. Most likely they will be
outsiders to the paradigm they are shifting. Barker identifies
four types of paradigm shifters. The first type is the young
person fresh out of training who doesn't know any better,
"doesn't know how we do things around here." The second
type is the "older" person who is shifting fields to the new,
unrelated field. Both these types share an operational naivete
which allows them to ask "dumb" questions and boldly try to
do things that can't be done and, as a result, are. The third
type is the maverick, working within and knowledgeable
about the paradigm but not a captive of it. Although unpopular due to constant questioning, the maverick is likely to
recognize the problems the current paradigm cannot solve
first. Finally, there are the thikerers who, in fixing their specific problem, stumble on a new paradigm. How many VE
practitioners do you know that fit these categories?
The response to the paradigm shifter is somewhat predictable and very similar to what V E practitioners face constantly -resistance to change. Those who have had success
under the old paradigm resist strongly. The higher their position, the more risk they feel as they contemplate shifting paradigms. The better they are at the old paradigm, the more
they've invested in it, and the more they feel they have to
lose. The paradigm shifters, especially i f they are outsiders,
have nothing invested. This makes them very amenable to
V A L U E W O R L D , Volume No. 19, Number 2, June 1996
change which is good, but also gives them no credibility in

the eyes of those captive to the old paradigm.
Those who follow the paradigm shifters into the brave new
world of the new paradigm are known as paradigm pioneers.
In a simplistic analogy, the V E team member who comes up
with a breakthrough idea is the paradigm shifter and the rest
of the team, in supporting development of the breakthrough
idea, are the pioneers. Being a paradigm pioneer often
requires an act of the heart based on courage and intuition
since the majority of the data still point to the old paradigm.
A V E workshop is the perfect environment for expressions
of such acts. At the end of the V E workshop, the decision
makers who agree to go with the V E team's new paradigm
are also paradigm pioneers, and much more so, as they proceed to implement the new paradigm in the less friendly
environment of the old.
Of course, most of the recommendations of a VE workshop
are not paradigm shifts. Most could be classified as paradigm enhancements, i.e., changes that improve the present
paradigm. Such recommendations are easier for the present
paradigm captives to understand and, therefore, to accept.
Notice it's easier but not necessarily easy! Even small
changes meet resistance. These paradigm enhancements can
result in substantial improvements and/or savings in the present paradigm, as reflected in the predictable success of VE.
You will not identify a paradigm shift in every V E workshop
as many times the present paradigm is still very effective.
But VE practitioners should try to find one because most
major breakthroughs take the form of a paradigm shift.
Barker identifies seven key characteristics of paradigms, four
of which are instructive here. First, there is almost always
more than one right answer. This is a key reason for VE success. Second, those held captive by a paradigm can develop
paradigm paralysis, in which any alternative is "not the way
we do things around here." V E practitioners run into victims
of this disease all the time which is why they have to work so
hard to get VE recommendations implemented. Third, people
can choose to change their paradigms, to "see the world
anew". V E helps them identify these changes, offering this
new view in an environment conducive to change. Finally,
paradigm pliancy (the opposite of paradigm paralysis) is the
best strategy for these turbulent times. It is the purposeful
seeking of new ways. That, in a nutshell, is VE.
Paradigm Pliancy, V E , Managers, and Leaders

Paradigm pliancy, with V E one of its most useful tools, is a
must for the managers of today. These are turbulent times
with constant changes, and new ways must be sought constantly. Managers must facilitate and encourage cross talk:
between departments, with suppliers, with customers, with
competition, with end users, etc. V E can be one of his tools.
He must pay attention to screwy ideas, which are his "leverage for innovation." V E can help him find them and listen to
them. V E practitioners also need to work on the pliancy of
their V E paradigm as we go forward.
Insights are also presented on managers versus leaders, leading me to a conclusion that the VE practitioner is and must
be a leader. A manager tends to manage within his paradigm. Their job traditionally is enhancement of that paradigm. A leader is one who leads between paradigms.
Whatever their official role in the organization, they will be
viewed as leaders i f they can drag the organization kicking
and screaming in a new direction which improves a situation
or solves problems the old paradigm could not solve.
The recognized differences between managers and leaders
indicate that V E can help us be leaders. Managers administer while leaders innovate. Managers take the short range
view while leaders look at the long range. Managers ask how
and when, but leaders want to know what and why. The
managers eye is on the bottom line while the leaders eye is
on the horizon. Finally, a manager accepts the status quo, but
the leader challenges the status quo, exercising his paradigm
pliancy, innovation, long range view, what, why, the horizon, and challenging everything are all attributes we observe
in the accomplished V E practitioner.
The V E Paradigm
What about the V E paradigm? Is it the same after 50 years?
Although it shows remarkable consistency over this long
time period, there have been significant enhancements to this
resilient paradigm over time. As we discuss them, let's
remember to keep our paradigm pliancy ready at all times
moving forward as those in the examples have done in the
past. The V E paradigm needs further enhancements. To deny
this would be succumbing to paradigm paralysis. Like a dermatologist with acne, paradigm paralysis would not say
much for a VE practitioner's abilities to be, or lo help others
to be, creative and innovative.
Larry Miles started it all by defining a new set of rules, a paradigm, which he called value analysis. The rules developed
during the war effort as American manufacturers sought new
ways to do things out of sheer necessity. At the request of his
employer, General Electric, Larry packaged these rules
together to create a G.E. standard, or paradigm, in 1947. One
of these rules was a technique Larry had developed called
Function Analysis. This technique is the key to the success
of V E and has benefitted from several enhancements over
the years.
2
Charlie Bytheway of Sperry Univac developed a major paradigm enhancement in 1964 which we know as Function
Analysis System Technique (FAST). FAST provided a way
to present the interrelationship of the identified functions,
thereby aiding the classification of functions into basic, secondary, higher order, etc. Further enhancements to FAST
were developed by Wayne Ruggles; Dick Park and Frank
Wojciechowski; Ted Fowler and Tom Snodgrass; and others. By keeping pliancy in our paradigm, we can employ the
function analysis and FAST techniques which best suit our
individual situations.
A concentration on customers has led to further enhancement of the V E paradigm. Customer Oriented V E (COVE),
as described by Tom Cook and John Bryant, and Customer
Oriented Product Design (COPD), as developed by Tom
Snodgrass and Muthiah Kasi, are examples. Although some
may argue these are new paradigms, they share so much with
traditional V E that paradigm enhancement is a better
descriptor.
Quality Function Deployment (QFD), on the other hand, is a
new paradigm. Developed in Japan by Mitsubishi Heavy
Industries Ltd., it is used widely in Japan and increasingly so
in the U.S. as a customer focused VE type methodology for
products. In some circles, the QFD paradigm has replaced
the V E paradigm as paradigm theory would predict.
However, these two paradigms compliment each other and
can be integrated to great benefit in many situations. VE
practitioners should not fear QFD. There are plenty of problems left that the more easily applied V E paradigm can
solve, which is why it has enjoyed a long history and retains
a bright future.
A final example deals with the creative phase of the VE paradigm. An enhancement to this phase was developed by Jim
Hudson, one of the trail breaking V E practitioners in construction. Known as the premise plateau, it is intended for
those situations where the V E team jumps to a solution too
quickly. For example, say the team decides a concrete holding tank is going to be rectangular. The V E practitioner leading the team can ask them to develop an effective alternative
using a round tank. The premise of a round tank is used to
force the team to consider a completely different set of possibilities, one of which may actually be a better solution.
The above examples show paradigm pliancy in action
throughout the history of VE. It is one of the reasons why V l i
is so effective. However, at times, VE practitioners have
shown a lack of paradigm pliancy in their attitudes toward
other practitioners. Statements such as " i f you don't develop
a FAST diagram, it's not VE" or "VE cannot Ik- effective if
it's not conducted over five consecutive clays" indicate paralysis of their V E paradigm. For VE to continue as a powerful
paradigm for a turbulent world, we must apply it with pliancy, customizing it to f i t the customer's situation. We ate all
in this together, even i f we operate a little differently within
the V E paradigm.
V A L U E W O R L D , Volume No. 19, Number 2. June 19%
Final Considerations
In the study of paradigms, we have learned several things.
First, people's perceptions are influenced by the paradigms,
within which they operate and people resist change because
they are so good at their existing paradigms. The V E paradigm helps us liberate our customers from their paradigms in
a supportive, creative, "pliant" environment so they can
accept enhancement of their paradigm, or even a paradigm
shift. Second, it's an outsider who usually leads to a paradigm shift or enhancement. The VE practitioner is well
equipped to be that leader, or "paradigm shifter".
Third, those who apply the paradigm enhancement or shift
their paradigm first, through what is mostly an act of faith,
will gain the most. Especially with a paradigm shift, where
everyone goes back to zero, the ones using the new paradigmwill enjoy great success while everyone else scrambles to "
understand what happened and catch up. With the application of VE, our customers are much more likely to be there
when the paradigm shift occurs.
Finally, a new paradigm, or even a significant paradigm
enhancement, gives us a new way to see the world and a new
approach to solving our problems. We know VE has always
succeeded because we do look at the world a different way
through function analysis and we tend to challenge everything. The consideration that what we are doing may be leading to a paradigm shift, however, may be new to us. It serves
to remind us that our VE paradigm is a powerful tool, one that
can have a profound effect on the world around us. As VE
practitioners, we need to continue to wield it for a wider range
of customers, with increased urgency, scope, and pliancy.
References
1. Barker, Joel Arthur, Future Edge: Discovering the New
Paradigms of Success, New York: William Morrow and
Company, Inc., 1992.
2. Shillito, M . Larry and DeMarle, David, Value: Its
Measurement, Design, and Management, New York: John
Wiley & Sons, Inc., 1992.
Scot A McClintock, PE, CVS is President, Mid -New York

State Chapter of SAVE and Principal of McClintock Value
Professionals of Liverpool, New York, with expertise in
training and construction workshops. His project experience
includes over 20 years in environmental, military, transportation, and educational facilities.
Taking VA/VE into the 21st Century

Howard B. Greenfield, PE, CVS
and Sol Mendelsohn, CVS
T h e industrialized nations of the world cannot escape the
fact that the remainder of the 20th century will involve them
in a race to survive. The present trend to implement the "re"
principle by reengineering, reinventing, revamping and
rethinking will occupy corporations, institutions, and governments worldwide. Renewal is not relegated to any one
activity, product, process, system, organization, form of government or group of people. Management can no longer be
content with gradual change but has instead opted for dramatic major changes by either reengineering, downsizing or
rightsizing. It is therefore imperative that there be a method
to the revolution, that change be a result of a proven methodology and not a product of chance.
While the fallout from this trend towards renewal through
the application of the "re" principle is felt by companies
everywhere, the results are polar. Some of the changes are
the result of well-conceived studies involving organizational
restructuring, total quality management, outsourcing,
automation and improvements in productivity. Such companies have developed alternatives and weighed the risk of failure before embracing their decisions to implement changes.
However, more often than not, companies are reactive and
merely mimic their competitors. Even worse, many are
swayed by what they have read or heard without regard to
the impact on their employees, customers, morale or image.
In their attempt to adapt the "re" principle while it is fashionable, these organizations have misinterpreted reengineering for downsizing, and they have done so with no awareness of the consequences.
The downsizing or rightsizing frenzy we are witnessing
today is not new. It can be compared to the model developed
by many manufacturing companies who, when faced with
recession or changes in the market place, chose to dramatically cut costs in order to survive. Inevitably these cuts devastated the ranks of their creative personnel, engineers, value
specialists, marketing, advertising and sales personnel.
Downsizing was executed blindly, with the objective limited
to keeping the machines running and maintaining the flow of
work in process until the market situation improved.
This short-sighted and desperate strategy - cutting costs with
no structured analysis of value - worked for some and virtually destroyed others, who found that they were left behind
with obsolete products that represented poor value to their
customers. The application of the "re" principle without a
sound basis will similarly result in widespread failure,
sprinkled with "by chance" successes.
It holds forever true that in order to provide value to cus-
tomers, management everywhere seeks to promote major

change in order to enhance growth and maintain profitability. However, this age of information poses a formidable task
for companies, which are inundated with dozens of management techniques, computer applications and information
highways, along with a worldwide economy, global competition, and all the many market stresses which influence their
very existence.
The problem remains that no comprehensive approach has
sought to integrate the multitudinous attributes of these
tools. While the often implemented techniques, such as
TQM, benchmarking, concurrent engineering, just-in-time
manufacturing, QFD, etc., are being used to independently
attempt solutions, they have not succeeded in taking the
probability of chance out of change.
To this end, Value Management Dynamics (VMD) propels
value engineering/value analysis into the 21st century by
bridging the gaps between these techniques and maximizing
their effectiveness.
Founded in value engineering/value analysis (VE/VA) practices, V M D is a methodology for converting design criteria
and specifications for processes, products, projects, or systems into function descriptions. The V M D Approach
requires multi-disciplinary teams composed of the organizations' own personnel, the customer, and outside experts.
Within this team structure, V M D provides a common language to enhance communication and invite creative
response, while giving an opportunity to explore and challenge the function of every step in a process. In this way, the
multi-disciplinary team reduces each criteria into a function
description. The team then relates the functions directly to
cost and improves value by creating alternatives which fulf i l l the function requirements and objectives for cost, performance and schedule. The team uses tools derived from
many sources, including all of the currently fashionable "re"
techniques, and judiciously implements these into the phases of the V M D program. While the resulting change occurs
in a variety of areas such as product, process, organization,
operations, and market focus, the change is a result of a
proven methodology which promotes value and not cost-cutting. Thus, while the "re's" are accomplished and the customer is satisfied, the V M D process brings about quantum
leaps of improvement for the organization.
Here's how it works. A manufacturer of Heat Recovery
Steam Generators (HRSGs), located in the Netherlands had,
over the past two years, been faced with decreasing business
and increasing sales costs. Using the V M D structure and
language, an audit/assessment was conducted by the multi-
disciplinary team which analyzed existing conditions and

discovered that the company was experiencing a change in
the marketplace. Its market had been transformed from a
technical base, where its product had to meet rigorous technical requirements distinct to each client, to a market where
the buyer was concerned primarily with the price of the unit.
Further analysis discovered three things: 1) sales were price
driven and not technically driven; 2) the number of proposals generated needed to be increased, while the cost of producing a proposal needed to be decreased; and 3) the engineering of the product, currently highly customized, needed
to become more generic.
Once the problems had been defined, solutions were not far
behind using the function analysis approach. First, the team
reorganized the proposal process from one which originally
required 25 people, to a streamlined process necessitating only 5 people. Secondly, the manner in which the engineering department functioned was altered from a sequential
"over-the-wall" approach to a team approach. Finally, the
product itself was improved to promote value. Research and
development recommended by the team is currently underway.
Another company, a leader in the design and fabrication of
reciprocating compressors for the gas processing industry,
similarly benefited from V M D . This company, too, had
been faced with a decreasing profit margin and commissioned a study. During the Assessment phase of the V M D
study, the team made a revelation. It discovered that the
company was responsible for only a small percent, approximately 17%, of the total cost of the product. Thus, although
it had successfully controlled its costs, prices had risen in
areas over which they had no control, resulting in a reduced
profit margin.
While the V M D system is flexible, it does demand that a

team follow a systematic plan that facilitates creativity,
ensures objectivity, and forces the team to look at every
function through the eyes of the customer. V M D also aims
to eliminate or minimize circumstances which have hindered
real progress in the application of value engineering/value
analysis, such as:
Lack of top management support/goals/objectives

Lack of proper V M program integration
Lack of emphasis/focal point
Lack of good human relations
Underselling the importance of:
a) Function evaluation
b) Teamwork
c) The job plan
d) Motivation/participation/rewards/recognition
e) Planning and expanding the range of application
The lack of management encouragement of and ability
to deal with change
The transition from V A / V E to Value Management

Dynamics broadens a company's ability to motivate people,
develop teamwork, eliminate unnecessary functions,
improve communication and cooperation among personnel
and increase profits. V M D helps the organization respond in
today's highly competitive environment which demands that
every process be subjected to analysis to meet the challenge
of tomorrow.
Reprinted with the permission of AACE International, 209
Prairie Ave., Suite 100, Morgantown, W V 26505, USA;
phone 800-858-COST/304-296-8444; fax 304-291-5728.
In order to survive the company had to change. The team,

using the function analysis of VMD, set forth solutions. In
addition to reducing cost and improving value to its own portion of the total product, the company needed to renegotiate
with suppliers and work with them to reduce their costs.
Moreover, new products and services needed to be developed to complement their technical expertise in compressors.
These successes are not isolated cases. Benefits which have
been derived from the V M D approach regularly include:
Increased profits/improved growth potential

Reduced time to market
Lower product and operating costs
Better use of resources/conservation
Increased competitiveness
Better communication/improved level of involvement
Customer satisfaction/better value
Increased employee involvement and motivation
Less paperwork/less regulation
Creation of an environment for change
Environmental Value Engineering of the Design

and Selection of Materials in Buildings: The
Process and Future
Dr. Kwaku Tenah, P.E.
INTRODUCTION
THE E V E PROCESS
JLhe design and selection of materials in buildings have

been recently thought of in terms of energy and life-cycle
ecological management for the entire building life from
manufacture of material through construction to disposal.
Energy used in the manufacture of certain products has not
been evaluated in terms of energy conservation and impacts
on natural resources. Recent research studies analyzing various built environment alternatives to minimize environmental impacts are based on (a) effects the construction has on
other built environment and (b) the current rate of consumption and degradation of the natural resources. This paper
examines the EVE process which is based on the merging of
three aspects: (a) Value Engineering, (b) Environmental
Factors and (c) EMERGY Analysis.
Kibert (2) defines EVE as "the re-orientation or adaptation of

VE process for the consideration of the environmental
aspects of construction". This potential ability of VE to assist
decision making relative to environmental effects is a powerf u l enhancement to its traditional role of selecting alternatives
having the greatest value from the many options available.
Because the costs associated with extraction of natural
resources are increasing, proper implementation and maintenance of quality environment is increasing and being passed
on to the private citizen and industry. The construction industry is one of many that utilizes natural resources to manufacture building materials and products. The EVE process is
based on the merging of three aspects of Value Engineering,
Environmental Factors and Emergy Analysis (2,8).
TRADITIONAL V E PROCESS
Factors Considered in E V E Process
Value Engineering has been incorporated into the construction industry as a means of determining the best alternatives
to high cost items of a project from a "Cost/Worth" analysis
based on function (2). Life-cycle analyses are then conducted to further determine total savings over the entire life of
the building.
EVE takes the approach that building materials can be valued

a number of ways via their life cycle phases (8) which are:
The traditional purpose of V E studies of construction projects has been to examine the "Cost" versus "Function" of
building components to optimize the value delivered (2).
When value engineers examine a building as a candidate for
their work, the areas of interest include the original cost of
an item or system type, the life cycle cost of the system or
product based on the usable life within the building, and the
potential salvage value of each item. In only rare instances
are the environmental costs considered. The result is a
myopic value engineering decision that ignores: (a) the true
initial and future costs of a building system or product within the larger scale fabric of the environment and (b) the
degree wastes plays within the use of the building system or
product. As a result, irrevocable damage to the environment
and wastes of resources continue. Environmental and waste
costs appear to fall into the category of intangible components that at first seem difficult to quantify (2). I f environmental cost is factored in, it is conceivable that one alternative might surpass others in terms of a combination of life
cycle costs and minimization of environmental damage and
wastes of resources.
natural resource formation (a)

natural resource exploration and extraction (b)
material production (c)
design (d)
component production (e)
construction (f)
use (g)
demolition (h)
natural resource recycling (i)
disposal (j)
The above phase require the inputs of the environment (E),
fuel energy (F), goods (G), and labor or services (S) as
shown in the energy system diagram Figure I (5,8).
When value engineering a design, aesthetics are often d i f f i cult to associate with a true cost; the V E results tend to be
undervalued. Environmental impact is treated similarly,
often because no true method exists to evaluate its cost. This
is no longer true because EVE is the detailed assessment of
all environmental input required of a building material (8).
Figure 1 Energy Systems Diagram of Built Environment
Alternatives EMERGY Inputs (5,8)
An environmental value engineer considers these phases

based upon the inputs indicated in Figure 1. In order to quantify such inputs, the use of EMERGY analysis is employed.
Developed by Dr. Howard Odum of the University of
Florida, EMERGY, or embodied energy, is part of a life cycle
analysis methodology that uses the solar emjoule as its unit in
combination with a transformity value, which is basically a
conversion factor, for each material used in the building and
labor or services put in during construction (6). Based upon
the direct and indirect energy inputs throughout the entire life
of a building material, the environmental impact of each
material, system or product choice within a building can be
evaluated objectively by a value engineer in order to make a
sounder value based suggestion.
and comparative analyses allow all steps to be examined and

weighed on the same scale in this value adding process. As a
result, this methodology offers a more powerful tool for making an educated and value-based decision.
E V E Example
Using this tool, it might be instructive to examine the components of an ecologically sound house. The house is a mythical house based on the "Eco-House" competition results
from New Zealand (9). The goal of the competition was to
produce the most ecologically sensitive home for a set cost
given identical programmatic and budgetary requirements.
Since many common building materials are imported to this
island nation, this unique location represents an exaggeration
Establishing the E M E R G Y Requirements
of the problems faced in the United States regarding embodied energy requirements for harvesting and hauling raw mateUsing this technique, a table of transformities and several' , rials and resources before use on a jobsite. For example, the
options (See Table 1), a value engineer can calculate the true
wall system specified by the competitors was light timber
frame sheathed in wood cladding and heavily insulated to
reduce energy loads. While the type of wood specified
E12 S E J
ENvnONMEOTVU. VALUE ENQMEEROTO PHASES
changes from place to place, this choice of wall construction
H
1,000,000
1
4
is common among light construction throughout the world.
ioo om
Additional wall choices includes the use of wood or plasterboard

as the interior finish material and double glazed win_
dows occupy openings throughout the scheme.
ll
1.000
100
10
1 |1
HI I " I I Hill' lllll'l
'
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DDDnQGDDDDnDQnnaannonnonnnnnnnn
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|
Table 1 EMERGY Signature (8)
life cycle costs of such options as well as determine the magnitude of importance the degree of wastes plays within the use
of that material or building system. For example, a concrete
masonry wall is evaluated based on the quantity and transformities of all of its components -including block, mortar, labor,
concrete fill and reinforcement (8). The embodied energy
required to produce the natural resources, to use such
resources in order to produce a material for use within the wall
system, to place the material on a site within a built system, to
recycle the material when necessary and to dispose of the material after use are all included in the value engineering decision.
Once embodied energy input data has been calculated, a chart
or graph similar to the one in Table 1 is made in order to create a graphical representation of maximum energy input.
Conducting Sensitivity and Comparative Analyses
Once the EMERGY requirements are established, sensitivity
and comparative analyses can be performed as with any other
value engineering process after converting each step regarding not only the use but also the life of a material into embodied energy, haul distances, mining techniques, recycling
processes, design and many other activities. The sensitivity
Given these few parameters, an examination of this ecologically friendly wall construction can be considered using the
EVE approach. By examining the basic components of the
wood wall versus concrete wall, tranformities indicate that
wood requires lower energy input throughout the natural
resource formation to disposal cycle. This initially identifies
wood as the appropriate choice, but, when considering the
heat loss due to a construction type that uses less mass and
has a lower R-value, concrete may become a more environmentally economical selection especially given the fluctuation of energy values. Simply stated, there is less energy
input required in all steps leading to placing wood in a structure, but in making this choice, much more energy for heating and cooling is expended throughout the usable life of the
building. As the useful life of a structure lengthens and the
cost of energy escalates, concrete becomes a more environmentally friendly choice.
From this EVE example, an interesting lesson regarding
embodied energy requirements is learned and that is, the
greater the mass of a material, the more embodied energy that
must be invested for its use (1). This conclusion was arrived by
Edwards (1); it did not, however consider conductivities of the
materials in addition to their masses as well reduction of all
materials to common R-values before making comparisons.
E V E VERSUS V E
Let us now consider how this fact relates to lessons typically
learned and reinforced by regular or normal value engineering
(VE) processes. Normal value VE operations which consider
only three main factors - original cost, life cycle costs and sal-
vage value -typically lead to one major relationship for investigation. Given a building material such as a single pane of glass
which costs $7.00 per square foot and tinted, double pane glass
which might cost $13.00 per square foot, the prime concern
when making the choice would be to discover when the initial
investment into the higher quality glass will result in overall
savings due to energy cost reduction (See Figure 2 below).
Tim*
Figure 2
Lessons Learned in E V E vs. V E

Three crucial lessons are learned by the application of the
embodied energy methodology. These lessons are: ( a ) The
use of double pane glass, by virtue of the aforementioned
greater mass rule, will only push the net savings crossover
point farther into the future; (b) also, since most building projects are speculative and as most owners aim to sell their
property well before the end of its lifespan, there is now even
less incentive to use environmentally friendly materials; and
(c) far overshadowing all other areas, the transport of materials during stages of the environmental life cycle represents
the greatest energy input during the useful life of a material,
good or service. Thus, as the economy strives toward becoming more global and begins to operate at an increasing
turnover rate with regard to the cycle of design, construction
and sale, the impetus for making environmentally conscious
choices is dwindled.
While the general population learns more and more about
environmental impact, the construction industry struggles to
react to such new information regarding the areas of maximum waste of energy within the industry. The globalization of
the industry will only lead to more energy input in the transport of construction materials, goods and services than ever
before. The result is a population moving toward a state of
environmental consciousness and energy savings and an entire
industry that is plodding onward in an opposite direction.
F U T U R E O F E V E AND T H E C O N S T R U C T I O N
INDUSTRY
This section will consider two simplified scenarios regarding the future of EVE and the construction industry.
The first scenario assumes that the industry continues to

progress as before. Under this scenario, wasteful operations
will continue for many more years, and contractors and suppliers will expend massive quantities of energy while moving
materials, goods and services throughout the world. The second scenario presents a group of contractors and suppliers
that understand the information that the EVE process offers
and begin to make concerted efforts to effect change for the
sake of the environment and our depleted natural resources.
The consequences of each scenario are dramatically different.
The first scenario will: (a) lead to self-destruction; (b) see each
passing day making wastes become more and more critical;
and (c) eventually get to a point where contractors notice
prices rising beyond control and that other material choices
previously thought to be too expensive suddenly become reasonable. For example, because of the increasing demand for
water and the impurities found in the current supply, only a
few years ago desalinization of sea water was investigated as
a method for providing safe drinking water in the State of
Florida. Although capable of providing a suitable product, the
idea was abandoned because of the extreme expense. The cost
was too great to justify the production of drinking water from
salt water; the energy input required far outweighed the benefits of such a system. Earlier in 1995, those same individuals
who thought the idea to be too costly suddenly find it reasonable. Why is this so? In the time that has passed, the cost of
water has increased along with the demand. Unfortunately, the
water quality has decreased. Although not becoming any
cheaper or energy efficient, the desalinization project suddenly seems cost effective due to the increase of water treated by
normal means. From EVE perspective, the decision makes little sense because the embodied energy demand throughout the
entire system is still significantly greater. The final outcome of
the issue will be based on the consumer. Is the escalation in
water costs acceptable? I f so, then it will not matter how the
water is treated because the consumer has mandated the additional expense. Eventually, the consumer will not agree and
problems will be even more significant.
The consequences of the first scenario are: crisis occurs,
shortages result and prices rise exponentially. I f the gas and
oil crisis of the 70's is any indicator, the current population
will react similarly and suddenly embrace technology as a
panacea for the current dilemma. Fortunately, technology
continues to be an area of interest for the researchers in the
construction industry, and the solutions are often available
immediately. The difficulty tends to occur during implementation of such new technology, especially during a crisis.
The second avenue for the future requires that a population
understands the concept of EVE and sees where the waste lies
within the existing and new technologies. This leads to a population that effects change before a crisis occurs. Instead of
simply spending more in terms of time, energy and money,
those supporting this route seek to minimize the true causes
for waste within the system. I f over transportation of goods
and services is the source of waste, then it must be addressed
by this form of thinking. The result is a population that views
all material production, development and use as a process to

be evaluated from beginning to end with the understanding
that waste anywhere in the life of a product represents a burden to all who interact with that product. Crushed concrete as
a recycled form of aggregate offers the potential for tremendous cost savings but the embodied energy in equal amounts
of crashed concrete aggregate and normal aggregate is often
greater in the crushed concrete (4). From a normal value engineer's point of view, the crushed concrete may have appeared
to be the most environmentally conscious choice, but a value
engineer applying the EVE approach developed by
Roudenbush will realize that the embodied energy of
crushed concrete is greater due to the extra effort required in
processing the crushed concrete (7). In this way, the value
engineer can suggest the source of waste and aid in the development of new technology and recycling processes.
At present, both scenarios exist within our society. One part
of the industry views technology as the solution for our current environmental problems. The other part only sees the
waste that exists within existing methods. The answer is a
combination of the two opinions. Ideally, current construction techniques are streamlined based on a wholistic approach
to energy consumption as the source for estimating value,
and technological innovations are thoroughly tested and studied in order to reduce implementation wastes. Should this situation occur, V E will become more of a design tool for predicting true life cycle costs rather than a way of simply reducing the budget of a single structure.
CONCLUSIONS & R E C O M M E N D A T I O N S
The United States faces problems in ecological management
of its natural resources, and in increased energy use (3). The
design and selection o f materials have just been thought of in
terms of energy and life-cycle ecological management for
the entire product life from manufacture through disposal.
Energy used in the manufacture of certain building products
are now being evaluated in terms of energy conservation and
impacts on natural resources. Products, at the end of thenuseful life are currently being disposed of in landfills. These
practices present problems in both hazardous waste and lost
opportunities for recycling. A l l of these current practices
must be quantified in a manner that will allow an honest
evaluation of systems, materials, techniques and methodologies incorporated into the construction industry. The creation
of various products in our society are not evaluated in terms
of the overall life cycle from raw materials to final disposal,
particularly those items associated with buildings and civil
projects (3). The construction industry could serve as a basis
for an alternative and innovative approach to this problem.
The steps of raw material acquisition, manufacturing, assembly, occupancy, and demolition and disposal must all be
evaluated. The methods of EVE is a positive approach to
quantifying and evaluating these practices. The situation
would be that the major decisions affecting the environment
can be incorporated into the CSI specifications, and that
materials categorized in the 16 sections of CSI will contain
these parameters. The outcome of evaluating construction
from an environmental and energy conservation standpoint

is the production of buildings that create both a healthier
environment in which to live, produce a large reduction in
the use of our natural resources and reduce wastes.
Based on the findings and the conclusions of this study, it is
recommended that value engineers must (a) take a more
detailed look at the energy required to produce a material or
building system as well as the affect its presence has upon the
environment and (b) calculate the true life cycle costs of all
options as well as determine the magnitude of importance the
degree of wastes plays within the use of that material or
building system for each option.
References
1. Edwards et al., (1994), "Evaluating Embodied Energy Impacts

in Buildings: Some Research Outcomes and Issues" in Kibert ,
Charles J. (Ed.), Proceedings of the First International Conference of
CIB TG 16 on Sustainable Construction.. pp. 173-182
2. Kibert, C. J., Roudebush, W. H. and Waller, D. L., (1991),
"Environmental Value Engineering", Value World, pp. 2-5.
3. Lozar, C. C., (1992), "An Optimization Framework for Facility
Life Cycle Analysis of Construction Materials to Minimize Energy
and Environmental Impacts", Proceedings of the Third Annual
Rinker International Conference on Building Construction, pp. 1-19
4. MacSporann et al., (1994), "Recycling Concrete and Energy
Expenditure -a Case Study", in Kibert, Charles J. (Ed.), Proceedings
of the First International Conference of CIBTG 16 on Sustainable
Construction, pp. 343-352
5. Odum, H.T., (1983), Systematic Ecology: An Introduction. New
York, John Wiley and Sons.
6. Odum, H. T., (1991), Emergy Analysis and Systems Ecology.
New York, John Wiley and Sons.
7. Pinto, T., et al., (1994), "Construction Waste as Raw Materials
for Low -Cost Construction Projects" in Kibert, Charles J., (Ed.)
Proceedings of the First International Conference of CIB TG 16 on
Sustainable Construction, pp. 317-323.
8. Roudebush, Wilfred H., (1994) "Using Environmental Value
Engineering (EVE) to Assess the Environmental Impact of Built
Environment Waste", in Kibert, Charles J. (Ed.), Proceedings of the
First International Conference of CIB TG 16 on Sustainable
Construction, pp. 317-323.
9. Store J.B., et al., (1994), "The Embodiment of Embodied
Energy- A New Zealand Perspective", in Kibert, Charles,!, (Ed.),
Proceedings of the First International Conference of CIB TG 16 on
Sustainable Construction., pp. 251-260.
Dr. Kwaku A. Tenah is an Associate Professor at the M.E. Rinker,

Sr. School of Building Construction, University of Florida located in
Gainesville, Florida.
Value Analysis Techniques applied to Project

Concept & Development
Michel Thiry, RA, PMP, CVS
INTRODUCTION
This discussion is intended to illustrate the use of Value
Management in the early phases of a project. It will demonstrate the potential and feasibility of the integration of Value
Management (VM) and Project Management (PM) with the
advent of new techniques that make it possible for Value
Analysis/Engineering (VA/VE) to be implemented much
earlier than it used to.
Parker and Dell'Isola have built a FAST diagram that

"indicates that one controls cost by controlling scope, not
dollars" and that "The key to achieving cost control
through scope control lies in the definition of scope."
7
We can also reference Howard Ellegant who states, from

diverse studies, that 65% of facility managers blame poorly defined user's requirements for cost overruns, 38% said
designs do not reflect needs for the same reason.
The author will illustrate the importance of project scope

definition in the control of a project, which consists of identifying and correcting/optimizing any deviation from scope.
The Project Management Institute (PMI) already determines
V A and V E as techniques of Product Analysis.
Better User's Requirements Definition cannot guarantee

finding the right solution to a problem, but it can reduce
the amount of risk and guesswork involved in designing its
solution by issuing an accurate statement of the problem to
be solved.
A value techniques integration plan will be outlined from the

author's experience on actual projects, putting a strong
emphasis on customer-oriented project management.
It must be understood that a project w i l l evolve as more

detailed data becomes available and assumptions are
replaced by fact. The project manager should take this
into account and provide for a good Change Control
System. VAAÊ can be effectively integrated into this system to provide quality alternatives within the approved
scope, schedule and budget.
Framework
Basically, the project management process can be summarized in three steps:
1.
STATE THE PROBLEM
2.
FIND A SOLUTION
3.
IMPLEMENT IT
V A A / E will specifically be used to reinforce steps 1 and 2 of

this process.
Whereas most VAJVE workshops are still held during the
second half of the development phase (35% to 60% of the
design) ; all value engineering authors agree that Value
Management techniques are implemented with the highest
rate of success in the two first phases, early in the briefing/design process .
2
CONCEPT
SEVfLOMWMT
EXECUTION
FMKH
PROJECT PHASES
A report by the US General Accounting Office (GAO, 1978 in

Kelly & Male 1993) as well as studies by many other
authors - - , confirms that in the latter phases, the level of effort
(cost of implementation) is too high for the results obtained
(influence on cost of project). Wideman (1991) even goes so
far as to consider early action as "constructive opportunity"
and late action as "destructive intervention" (see Figure 1-1).
Figure 1-1 Net Savings Potential of VA/VE Study Adapted from

Kelly & Male (1993), Fig. 2.1 & 2.2 and Dell'Isola (1988), Fig 1
5 (see also Sievert (1991), Fig. 4 & Wideman (1991), Fig m.3d)
3 4 5
These studies, along with new techniques developed by

practitioners enable Value Analysis to be applied successfully to the the "Statement of the Problem " which consist of
establishing the scope of the project and assessing the
resources needed, thus increasing greatly the Net Savings
Potential of VEAÂ proposals.
10
VALUE INTEGRATION
We will first discuss the phases of a project and where
VAA/E should be introduced; we will then see how VAAÊ
can complement the PM process and which V A / V E techniques can be used to enhance their accuracy in the development phase of a project. The objectives and contents of
Project Definition and Brief will then be examined.
Project Phases
The PMI has denned four basic phases in construction projects: CONCEPT, DEVELOPMENT, EXECUTION AND FINISH. The
concept phase is where economic, opportunity, definition or
site (for construction projects) studies are undertaken to
decide i f the project is feasible. A t the end of that phase, the
client must decide i f he is going to go forth with the project.
being defined as the capacity to fulfill the needs and cost,

being defined as the quantification of the resources needed to
obtain this quality.
John Bryant, in his Customer-Oriented Value Engineering
(COVE) article in Value World (June 1986) gave the following definition of Customer Value: "... a ratio of wants plus
needs, to the required resources (money and people) to
obtain those wants and needs."
8
To ascertain that the project definition will accurately state the

problem by corresponding to the Client's wants and needs, the
project manager has to establish the actual functions of the
project, and then, classify and estimate them. He will therefore have to rely on function analysis in the concept phase of
the project to create a baseline for change management.
Customer Value
= Wants + Needs
Resources
What Value Analysis brings to Project Management is this

Customer-Oriented approach.
VALUE TECHNIQUES
To develop the project plan, one needs to examine the best
alternatives to the problem stated by the project definition. ' ,
Different value techniques will be used along the project to
These alternatives must stay within the fixed boundaries of
identify, analyze, classify and synthesize the required inforscope, quality, schedule and budget of the project and must
mation. We will now discuss the techniques that are being
also aim at lowering the risk factor. A value analysis workused by the author in conjunction with project management
shop will be scheduled in the pre-design phase to develop the
and, in particular, during the project concept and pre-design
plan with all participants under the guidance of the va pracphases. The proposed techniques involve the spreading
titioner; it will be based on the function analysis that took
(splitting) of the traditional job plan over a certain period of
place in the concept phase; the resulting document will be
time and within a number of workshops from the project
used as the baseline of the project.
start to its final design.
Later, at the end of preliminary design, a value analysis
workshop will be held to control conformity to the project
plan and generate alternatives to any change in scope that
have occured due to unforseen conditions.
Subsequently, value workshops should be held only i f need
ed due to a significant divergence with the project parameters, though value techniques should be used on an ongoing
basis during the whole course of the project to find the best
alternatives to arising problems.
This process needs to be fully integrated into the project life
cycle to be effective and the project manager must make sure
that the outputs generated in one phase will become the
inputs of the next.
By involving all participants very early in the project, VA
will facilitate the implementation of the chosen solution
since no firm commitment has been made at that stage and
everybody has participated in determining the solution.
Project Definition & Plan
The Project Definition will establish the SCOPE of the project.
To complete the Project Plan we w i l l assess the
RESOURCES (Time, Money, Human) needed to implement
the solution.
Function Identification
The first step in project definition is to identify the actual
needs and objectives of the client. The Value team must
analyse them and come to a consensus on those which will
be retained to establish the scope of the project.
Function Analysis Workshop
A function analysis workshop (FAW) is the first step
towards project definition. During this workshop, the participants will identify the functions, compare them and classify them to build a function model of the project.
Though the author has never used it on an actual project, he
would recommend to investigate the possible use of "Quality
Modeling", as developed by SH&G , to ponder decisions
concerning alternatives.
910
Participants
It is essential that the participants in the workshop include
representatives of all parties involved with the project concept, development, execution, O & M and use; because needs
and objectives should be defined and evaluated from every
possible angle for the function model to be endorsed by
every participant.
Function Definition
In short, the Project Definition qualifies the project and

the completed Project Plan quantifies it. Which brings
us back to the Value equation of Quality to Cost: quality
"Assigning functions to activities [in the building] is the initial step in developing design criteria for the spaces in which
11
these activities will occur." In order to do this, we build a

function model of the project. We have called it "Function
Breakdown Structure" (FBS); it is very close in structure to
the customer-oriented FAST. It will be used to build both
the Technical and Functional Program (Space Model) and
the Budget of the project.
Once the FBS is completed and endorsed by the team, area
and/or technical factors are assigned to each function of the
lower level in order to estimate their cost and translate it into
space and elemental models of the project.
taking appropriate corrective action as needed".

The project team must develop a comprehensive change
control system of which V A control workshops should be
an integral part. The change control system should be based
on five elements:
a) a coherent baseline to compare to;
b) a good information system to monitor deviation;
c) an efficient analysis tool to evaluate consequences;
d) a sharp alternative generator to provide solutions;
e) a quick approval and authorization system to
implement change.
Modeling
Space Model
A space model is basically a graphical representation of the
functions/components of a building. Areas are calculated
according to regulation and client requirements for each
function as well as population estimating. Technical
requirements are then added to each component to produce
the Architectural Program.
CostAVorth Model
From the FBS, the team establishes a CostAVorth Model that
can be rendered in a graphical form such as a Gannt Diagram
(bar chart) or a table.
Work Breakdown Structure (WBS)
FAW helps build a WBS of the building (product) that is
coherent with the customer's needs and wants. Once the
FBS is completed to the satisfaction of participants and the
building components level has been completed, a WBS can
be built, that will reflect the client's objectives and value
optimization, by going back from the lower levels to the
upper levels, replacing functions by higher level project
components.
Elemental Model
The building is divided into Major Groups, Groups and
Elements that can be modeled as a WBS; it is then easy for
the team to identify high cost elements. I f one decides to
make an Elemental Model, it has to be built on the basis of
technical performance functionality rather than serviceability and it will not be as much customer-oriented.
FOLLOW-UP AND CONTROL
More and more clients are asking project managers to work
in a Design to Cost (DTC) context. This means that, with
leaner budgets, they are asking the project team to be more
imaginative and creative to control projects in order to stay
within the fixed boundaries of the agreed upon scope.
According to the PMI (1994), control is "the process of comparing actual performance with planned performance,
analyzing variances, evaluating possible alternatives, and
12
We have established that the FAW and FBS are essential

prerequisites to any Control process since they helped provide the baseline. The way V A strengthens the information
system and the approval/authorization process has been discussed earlier. It seems obvious that a V A workshop is the
ultimate tool to provide efficient analysis and generate consistent alternatives.
Not all changes should go through the process of a V A workshop though; the change control system must also include
procedures to handle changes of lesser significance automatically.
Value Control Workshops (VCW)
Arnold M . Ruskin says that [in Design To Cost projects]
"the single greatest source of cost overruns is the cost of
finding flaws and fixing them. [...] Timely detection of flaws
is therefore crucial..."."
Using the input from the project definition's FAW, the VCW
should directly address the creative and judgment phases,
pertaining that the participants are the same as those who
participated in the earlier workshop. Development of the
proposals can be made outside the workshop environment.
A mandatory VCW should be held at the end of the design
development phase, before final design is approved. This
workshop will specifically address conformity of design to
the project brief. It will confirm scope compliance or deviation from baseline regarding quality, schedule and cost. In
case of deviation, the team will identify alternative proposals to bring the project back within limits.
A more targeted type of Value Workshop can be held at any
time in the project life cycle in case of serious deviation with
the project scope. In this case, the cause of the deviation
should be quickly identified and addressed.
Implementation of Proposals
Howard Ellegant affirms that by using a peer review team on
a VE Workshop, you create "adversarial relationship between
the design team and the VE study team" and that "The very
people who have to approve and implement the recommendations have no ownership of them and no stake in a positive
outcome!" Our experience has proven likewise and the

author has been a strong adversary of "peer review teams"
for many years, except under very specific conditions.
So, the very first tenet of efficient V A proposal implementation is: "Work with the actual design team"; second: "Get
the Project Manager on your side"; you can do that by
showing him how VA/VE techniques will facilitate his job
and alleviate his workload; this will enable him to concentrate his energies on the most important issues.
And, last but not least: "Show your client the potential
results"; it is very important that the client be convinced that
the money he/she spent is put to good use. The use of graphical models and tables will ease communication and understanding of the problems and their proposed solutions.
No proposal will be implemented i f it does not have a cham-'
pion; VA/VE proposals are no exception and it is important
to secure, from the client, a commitment to assign accountability for implementation of the V A team proposals to an
actual person, preferably the project manager. Don't forget
that the real success of V A will not be measured by the
amount of proposals generated in the creative phase, but by
the success of proposal implementation. "This profusion of
ideas [in the creative phase] are the seeds from which project
value enhancing changes are grown through thoughtful evaluation, careful development and owner buy-in."
6
3.
Howard Ellegant Associates (HEA), "Value Engineering for

Construction", HEA Brochure, Evanston, II., USA
4.
Wideman, M. R., A Framework for Project and Program

Management Integration (The PMBOK Handbook Series-
Volume No.l), Drexel Hill, PA, Project Management Institute,

1991
5.
6.
Sievert, R. W. Jr., "A Review of Value Engineering as an

Effective System for Planning Building Projects", Project
Management Journal, Drexel Hill, PA, Project Management
Institute, March 1991
Parker D. E . , Dell'Isola A., Project Budgeting for Buildings,
New York, NY, Van Nostrand Reinhold, 1991

7.
Ellegant H., "Modern Value Engineering: A Proactive Tool

for Project Management", The Project Manager, Summer
1993
8.
Bryant J . W., "Customer Oriented Value Engineering

(COVE)", Value World, SAVE, June 1986
9.
Kirk, S. J . , "Quality Modeling: Defining

Expectations", SAVE Proceedings, 1994
Project
10. Smith, Hynchman & Grylls Associates, Inc. (SH&G),

"Project Budgeting for Buildings", Seminar given in
Montreal, February 1995.
11. Ruskin A. M., "Managing Design To Cost Engineering
Projects", Project Management Journal, Drexel Hill, PA,
Project Management Institute, September 1995
CONCLUSIONS
Michel Thiry has over twenty years of experience in Architecture

and Project Management.
A l l elements of the system outlined in this article have been

implemented on diverse projects and the author's firm has
started offering this VM/PM integrated concept to clients as
a "prevention" method as opposed to the "curing" method
usually expected.
During his carreer, he has been involved on such projects as the

Montreal Convention Center, the Montreal World Trade Center
and Inter-Continental Hotel and the Montreal Casino.
This method ensures the customer that the end result will fulf i l l his needs; it will save significant amounts in unnecessary
design fees, claims, loan interests, life cycle costs, return on
investment and payback period, due to budget and schedule
overruns and scope misinterpretation. But, in order to use it
to its full potential, it is very important to get all the participants commited early in the project and to convince the
client that the V A team should be involved from the start.
He was a guest speaker at the Quebec Association of Energy

Optimization annual Congress and will speak on Value Integration
in Project Management in Paris, at the '96 World Congress on
Project Management in June and in Boston at the Annual PMI
Seminar/Symposium in October.
Although this concept has been developed and implemented

on building construction projects, it is definitely adaptable to
any project. As long as basic project management techniques apply; only the terminology will change.
References
1.
PMI Standards Committee, A Guide to the Project

Management Body of Knowledge
(PMBOK) Exposure draft,
Drexel Hill, PA, Project Management Institute, Aug-1994

2.
Kelly, J . , Male, S. Value Management in design and construction (The economic management of projects), London,
U.K., E & FN Spon, Chapman and Hall, 1993.
13
Competitive Management for Product,

Performance, Productivity and Cost
John J . Riordan and Anthony R. Tocco, CVS
L e t it be said at the outset, that addressing experienced
industrial managers on the subject of "performance, productivity and cost" evokes no little apprehension in the souls of
its authors. This anxiety derives from the nagging thought
that the audience might react impetuouslyif prematurely
to the title of the paper and murmur phrases like "old hat," "de
ja vu" and "I've heard it all before." Even i f such a reaction
should materialize, probably the repetition of a call for managerial reform is good for the collective managerial psyche.
However, this tome is focused on "how" not on "what" needs
doing. Specifically, it suggests managerial strategy for confronting the intensive, competitive climate, domestic and
international of 1995 and beyond. The climate of 1995 might
be characterized by a paraphrase of a statement credited to
Winston Churchill after an important victory in World War TJ.
"This is not the end. It is not even the beginning of the end.
But it is, perhaps, the end of the beginning." The current climate of intense competition has its roots in new technologies
and global competition that are readily transferable. To a significant extent this ability to compete has been nurtured by the
overall effect of the adoption by many countries of advanced
manufacturing technology, labor cooperation and senior management's sophistication in technical areas such as design
review. This is not to ignore the cultural, political and other
circumstances that differentiate the newer countries from
those that reached their industrial maturity in the forties and
retained outmoded managerial practices in subsequent years.
Accordingly, industrialized countries no longer can monopolize any field of industryexcept at risk to their own economic viability.
In order to be competitive in world markets, senior management must confront and resolve problems not traditionally
considered in the advanced industrial countries as matters of
top level management concern. These problems are numerous but particularly involve the formulation by senior management of strategy for (1) participation in product design
review; (2) the development, interpretation and application of
voluntary and mandatory (i.e., governmental) manufacturing
systems and product standards, specifications and codes: and
(3) auditing of manufacturing practices, including procedures
for assimilating the experience of the work force into higher
level decision making.
Reduced to a few words, this thesis is essentially what the
chairman and chief executive officer of a large U. S. corporation wrote recently, "Now is the beginning of a time when
attention to detail must ratchet up to a higher level." Areas as
standards and specifications, quality and reliability can be
accomplished by an objective reordering of priorities along
14
executive row and the inventive development of management

practices that make it possible for management to impose its
perspective on "oversight" areas without assuming that managers must be men and women for all seasons.
Let us propose one managerial strategy (with no claims of
novelty) for confronting these neglected problems that ultimately affect productivity, product performance and costs.
But before getting down to the nuts and bolts of strategy, it
might be well for managers to indulge in an "examination of
conscience" and ask themselves i f they and their immediate
staffs are technologically up to speed. Are they "technically
illiterate" as alleged by a Japanese citizen and professor at the
City University of New York when he wrote, in part, the following article in The Washington Post.
"We have compared the top three executives of 24 leading
Japanese manufacturers with the top three executives of 20
leading American competitors in such fields as semiconductors, computers, consumer electronics, steel, autos, chemicals, pharmaceutical, industrial equipment and processed
foods....The differences are dramatic.
Two thirds of the
Japanese executives had science or engineering degrees,
compared with only one-third of the American ones....Also,
the Japanese executives with non-technical backgrounds were
heavily schooled in domestic and international sales operations, while the American executives with non-technical backgrounds have mostly risen through advertising careers and
corporate planning. This is typical of the career track of the
new breed of American manager with an MBA degree."'
In any event the issue on the agenda, so to speak, is how best
can management operationallyhands ontackle problems
that so substantially affect competition. As previously stated,
management is burdened enough with financial, takeover,
regulatory and a maze of other problems. Nonetheless, there
is a strategy by which management directs functions that for
too long have been routine in the company's operations and
subject to management direction, including internal technical
auditing. (Essentially a management systems standard is
management's prime tool for getting a handle on certain basic
and costly functions.) It should be noted here that the development of a company systems standard while not an easy task
is not as formidable as it first appears. In fact numerous systems standards have been published by the U. S. and other
governments and by non-public standards-setting organizations that can either be used as is or can be used as models for
an in-company systems standard.
Implement the standard. This does not mean recruiting additional staff although that may be necessary. It is important,
however, not to identify particular elements of the standard as

"special subjects" in a managerial sense. For example, the
procedures for assuring conformance of products to company
specifications are a company-wide responsibility and, therefore, management should cautiously consider the role of a
quality assurance manager. Such a manager may well serve
an essential purpose. But this purpose must be clearly defined
as to preclude the possibility that quality, reliability or product performance generally is not the responsibility of the quality assurance staff. The same comment is applicable to Value
Engineering and other technical "specialties" that every so
often emerge on the horizon.
At the risk of being overly formalistic, i f not bureaucratic, let
us now ask, "what are the steps by which this proposed systems plan/standard is developed and applied? For expository
purposes the development of a systems plan can be brokendown into eight steps as follows:
1.
2.
3.
4.
5.
6.
7.
8.
Company policy formulation and QA/GMP Plan

Company information collection (database)
Inventory of existing operations
Administrative planning
Writing the systems standard
Coordination/try-on-for-fit
Implementation of plan
Distribution
There is no magic in eight. This is simply an arbitrary breakout of actions that help facilitate planning in a rational and
orderly way. Now let's take a closer look at each of these
steps.
STEP I - Policy: Policy is a statement of top level management's intentions and commitments to particular identifiable
objectives and what actions management proposes to institute
to achieve these objectives.
"It is true of course that 'policy' is often mere platitude, wishful thinking or contrived window dressing. At the same time,
however, we also know that to get anything done it is necessary to start out with some basic idea, fundamental concept or
commitment to principle. In the absence of policy, administrators, employees and customers are at a loss to know exactly what the outlook of an organization is."
Assuming that an industrial organization is intent on manufacturing products, for example, that are hazard-free, its thinking, outlook and commitment to good product performance
should be made known within, and outside, the organization.
This kind of "thinking" translated into words is "policy." A
policy statement is really a reservoir from which the different
divisions and departments of an organization derive and
develop management-mandated programs related to their own
operations. The formulation of policy is an occasion for selfanalysis and for asking questions ordinarily dismissed in the
helter-skelter of everyday business.
STEP I I - Information Collection: There are some background documents that should be consulted and digested by
management before embarking on the development of a
systems plan. Among documents that are particularly importantfor legal reasonsare regulations pertinent to a specific
industry and issued by federal, state, international, or local
agencies. These agencies relate to both procurement (e.g.,
Department of Defense) and regulation (e.g., Food and Drug
Administration).
STEP HI - Inventory of Existing Operations: This is a plant
walk-through. It helps management to assess how sizeable
and costly its systems plan is likely to be. Find out what your
organization is already doing or not doing. Management
sometimes tends to think that it knows just about everything
that needs to be known about the company's design, manufacturing, distribution and other practices. Probably so! More
likely, probably not! In any event, visit the drafting rooms
and the factory floor. In the light of knowledge acquired,
compare what the company is doing with what needs doing.
When going from shop to shop, pay particular attention to
three aspects of the operations. First, find out i f fabrication
and testing procedures are documented. Are these operations
performed in accordance with "Work Instructions," or "OP
(Operation Sheets)" or some other kind of formalized guidance? Second, are records maintained of inspections, tests,
calibrations and other operations that affect product performance, costs and safety to the extent required by government
or contractual requirements? Third, if something goes wrong,
is there an established arrangement for taking corrective
action? While there are other topics to which attention should
be directed, these questions pinpoint aspects of manufacturing
on which government regulations tend to focus.
STEP IV - Administrative Planning for the Program: A t this
stage, decisions are made regarding such issues as who is
responsible for developing the plan needed, the schedule for
its completion and the training necessary. Undoubtedly there
are other details unique to each organization that should be
included in this planning stage.
STEP V - Writing the Systems Standard: The realities of
actually translating ideas into words is now confronted. How
can company policies be stated in a way that is clear and practical? To whom or to what unit or organizational sections are
the plan applicable? To what degree should various specific
requirements be described? What forms will be used: How
best can the Scylla and Charybdis of systems documentation
be avoidedwriting too much or too little? These are among
the many questions that will arise during this stage. These are
not mere matters of semanticstheir costs and legal implications are substantial. Please remember this plan must be
developed in collaboration with the heads of those divisions
of the company responsible for their implementation. This is
a plant-wide function. Except for the CEO, it is not the sole
responsibility of any single unit or person. Therefore, its
drafting is a matter of plant-wide interest.
15
STEP V I - Coordination/Try-on-for-Fit: Let us assume that

your systems plan is tentatively drafted. It must now be
coordinated with concerned persons throughout the company and possibly elsewhere. Solicit comments from various
divisions of the company by asking forthright questions.
For example, is the plan clear and descriptive of actual or
proposed practices? Does it reflect company policies and
objectives? Does it satisfy regulatory and procurement
requirements? When these and many other questions are
resolved, the draft of the standard is revised to accommodate constructive comments and suggestions. With these
revisions the standard or plan is ready for implementation.
and easy way. The authors have found it practical to break

the presentation of each aforementioned canton into seven
parts as follows:
STEP V I I - Implementation: The challenge now is to apply

the plan fully and effectively on a firm schedule. Some of
its provisions, of course, may already be implemented as
normal company practice. Other provisions might have
been implemented more recently on the initiative of department and division managers in anticipation of the issuance
of the systems plan. A t this stage, the systems plan could
easily become a token exhibit. Whatever happens will be
largely predetermined by how tactfully its groundwork was
laid during the previous phases and by the vigor and clarity
of upper-level management direction. I f the planned implementation is not guided and pushed by management, don't
waste further time and money.
This format makes it relatively easy to accommodate any facts

or ideas that are considered pertinent to the treatment of a particular topic.
The company systems plan, itself, must not be developed.

Here is an outline of such a plan with some commentary on
most of its elements. It may do no harm to repeatto
protest, i f that is the wordthat either this plan contributes
to the company's bottom line and helps the company to
retain harmonious relations with various government agencies or it is a waste of time and money.
A Suggested and Selective Text of a Management Systems

Standard
STEP V I I I - Distribution: This encompasses packaging,

shipping and, most important, for legal reasons, labeling.
The Management Company Systems Standard
Purpose
There is no question or ambiguity regarding the exact purpose of the proposed systems plan for a company. Its purpose is to define a strategy for management to get a handle
on expensive, critical, but elusive, technical functions that
are inherent in manufacturing regardless of the new and revolutionary role of robotics, computers, instantaneous communications and technology transfer.
Like mathematics, there still remain basics that are the foundation of successful industryparticularly knowledgeable
top management. Here then is an outline (a selective outline) of topics that might be included in a systems standard,
or call it a management control standard. Note again the
foregoing word "selective." No standard applies to all
industry. Ultimately each standard must be customized,
defined, or otherwise depict these controls in a neat, clear
16
Packaging Information
1. Purpose
2. Policy
3. Applicability
4. Operations
5. Personnel
6. Definitions
7. Addenda
Keep in mind that the purpose of the systems standard is to

give visibility to the company's overall management systems
program. Obviously depictions of these controls should not be
mere pious protestations of virtue. They should be so clear and
explicit that the reader readily senses that the company has a
well planned and comprehensive management control capability. It goes without saying that the proof of the pudding is in
the eating. It would make no sense to create a fancy rhetorical
standard without implementation on the factory floor.
Now let's briefly examine the aforementioned seven selected

topics of the systems standard. (Again, please note the word
"selected"; this is not all inclusive.)
1. Design Review. The term "design review" refers to a procedure by which new or redesigned products are systematically and critically analyzed to identify design deficiencies.
It is usually conducted by persons or departments not directly responsible for the design(s) being critiqued. This object
of this review is to prevent downstream problems by:
(a) Exposing the product design to persons with viewpoints and opinions rather than those of product design
and development engineers.
(b) Assuring that the product can be produced economically.
(c) Maximizing protection against oversight that might
adversely affect product quality, safety and efficiency.
Using the aforementioned seven part descriptive scheme for
this and other functions, here is an example for getting ideas on
paper as expeditiously as practical. This is merely an example
of reducing a description of a function to seven sections.
Design Review
1) Purpose. The purpose of the design review is threefold:
(a) To confirm the adequacy of the product design by
independent evaluation performed by persons other
than the original product development engineers.

(b) To assure that the product is economically producible.
(c) To maximize protection against oversight that might
adversely affect the product performance, safety, and
costs.
2) Policy. Prior to operations, all new products or redesigned
products are subject to design review, independent of the
department (or persons) that developed the product.
assuring that:
(a) Operations minimize personnel hazards.
(b) Mix-ups of any kind (e.g., materials) are prevented.
(c) The manufacturing environment is pollution-free as
required by government regulations.
(d) Conditions such as temperature, humidity, dust, filtration of air, etc. assure that products are free from contamination. The details necessarily reflect regulatory
and local circumstances.
3) Applicability
(a) Product design and engineering
(b) Manufacturing
(c) Quality assurance
(d) Value Engineering - Function Analysis
(e) Packaging
4. Production and Process Control. There is one topic under

this title that for good reason deserves managerial attention. It
is the current trend to revive and apply rather extensively statistical techniques for controlling processes. Without inciting
a controversy, it is suggested that while statistical methods are
very important for process control when used judiciously, it is
easy to go overboard on this subject and trumpet statistical
4) Operations
(a) Prior to routine production, an ad hoc design review ' techniques as the control weapon for keeping processes within their specification hmits. There are numerous other congroup is appointed by senior management.
trols, for example, materials, mechanical or electronic assem(b) The chairperson of the group is a senior officer of the
bly techniques and others, that together with statistical procecompany.
dures are essential to fabricate satisfactory products at mini(c) The group consists of persons representing concerned
mum costs. Statistical process control would not, to borrow a
functions.
legal term, be considered "sui genesis," a lone wolf of sorts,
(d) The design is evaluated by criteria established by mandisassociated from other manufacturing disciplines.
agement. As a minimum, the following questions are
addressed:
(1) Can the product consistently perform its assigned
5. Labeling and Packaging. It would seem to be a simpler
function:
matter to design and affix correct labels to manufactured
(2) Are there any characteristics that make the product
products. But for some mysterious reason labeling repeatedin any way defective or unsafe?
ly is a source of embarrassment not to mention more serious
(3) Can the design be replicated by available producconsequences to manufacturers. Understandably, the control
tion equipment, or by equipment already scheduled
of labeling is a matter of no minor importance.
for procurement?
(4) Are existing facilities and testing equipment adequate?
Of greater technical difficulty is good packaging, particularly
for sensitive instruments or when sterility must be maintained.
(5) Have suppliers of materials and components the
capability to deliver quantity items on schedule?
To verify the effectiveness of packaging, destructive testing
might be necessary. Thus, manufacturers must make deci(6) Is production economically feasible? Has the
design been value engineered?
sions regarding statistical risks that are to be taken when
determining how many units of a device are to be (destruc(7) Does the product design satisfy regulatory and contractual requirements?
tively or non-destractively) tested.
5) Personnel
6) Definitions
In summary, action is necessary to assure that (1) the infor7) Addenda
mation on labels is complete and accurate; (2) labels are controlled in such a manner that mix-ups are precluded: (3) the
2. Value Analysis. At times this function has been
traceability of a product's manufacturing history, when
"overblown" as is true of other disciplines that emerge on the
required, is possible; and (4) the products are so packaged
scientific, engineering, medical and sociological scenes.
that, on delivery to customers, they are protective.
Nonetheless, for reasons of cost and because Value Analysis
is a requirement in some government contracts, it is a subject
6. Records and Documentation.
that needs close managerial attention and evaluation. Value
Without records and documentation requirements, a manageEngineering or Analysis may be defined as follows:
ment standard is practically worthless. True, it may serve some
internal purposes. But it will not satisfy the regulatory agencies.
"An organized effort directed at analyzing the funcNor will it be a source of support in the event of kability litigations of goods or services for the purpose of achieving the
tion. Like it or not, keeping records is an integral part of life,
necessary functions and essential characteristics at the
both personal and business. Anyone who has had an encounter
lowest cost, consistent with business objectives"
with the Internal Revenue Service will testify to that melancholy fact. The primary function of records is to substantiate
3. Environmental Control. This section is directed toward
that manufacturing operations conform to government regula2
17
tions and to customer and internal specifications. Put succinctly, records and documentation serve three purposes.
(a) Internal control and documentation of manufacturing
processes, quality assurance and testing.
(b) Substantiation that products conform to requirements
established in-house, by customers or by the government.
(c) Traceability of the manufacturing history of a device.
Of all the criticism directed at systems programs the most vocal
relates to record keeping. This is understandable. It is also
understandable that government regulation and litigation for
various real or imagined grievances are almost inevitable.
Granted, records are expensive. But thoughtful upstream planning, before a standard is implemented, can substantially
reduce data costs and possibly save a company from drowning
in an ocean of paper. There is one aspect of the record-keeping function that truly justified top-level concern, namely, confidentiality and accessibility. Confidential and nonconfidential
data and information should be clearly marked. When representatives of regulatory agencies (and possibly other persons)
have "need to know," and such need is confirmed, and specific records are identified, accessibility to records (or release of
records) may be authorized buy a senior officer. Otherwise
protect all information and data, even if unclassified.
7. Government Relations. When implemented, the standard
must be reflected in current de facto practices. Government
investigators want to know what is being accomplished today,
not what is planned for some time in the future. Keep in mind
that in doing business with the government, whether with a
regulatory, procurement, security or other governmental
activity, documentation is the company's coat of armor. Oral
verbiage evaporates to your disadvantage. Assign one or
more reliable, responsible and informed persons to receive
and to escort visiting government investigators. Do not leave
these responsibilities to mere chance, to whomever happens to
be available on a particular hour or day. Be cordial and fully
cooperative with government investigators. In a technical
sense, the company and government are adversaries, not personally but functionally. Keep in mind that no matter how
reasonable or friendly an investigator is, he/she has a job to
doto examine operations and report his/her observations to
higher authorities. Need anymore be said'?
8. Internal Management Audits.
Introductory Note. Government regulatory agencies
attach major importance to the establishment and implementation of internal company audits. Perform such
audits if you want your relations with government to be as
constructive as possible. This is not to suggest servility. It
is to suggest enlighten prudence.
Audit Procedures. Planned and periodic audits of operations
should be implemented to verify compliance with the standard's requirements. The audits should be performed in
accordance with written procedures by appropriately trained
individuals not having direct responsibilities for the matters
being audited. Audit results should be documented in written
18
audit reports. Followup corrective action including reaudit of

deficient matters must be taken when indicated.
After expending considerable resources of time, manpower
and money to develop a standard, it would be foolhardy for
management to assume without sufficient verification that all
departments and personnel are complying with established
procedures. Just as the reliability of a fiscal accounting
system is validated by an audit, a manufacturing system
should also be audited.
While there are many problems inherent in auditing, the
development of an auditing capability is dependent largely on
the formulation of the company's auditing policy and on
established administrative mechanisms for implementing that
policy. Thus, your standard should serve to define auditing
policy, and to establish auditing practices appropriate for your
company. (It may not be necessary in a small business to
establish formal auditing practices.)
*
Finally, a word of caution. There should be clear understanding within management regarding what should be reported in
writing and what should be reported orally. Avoid heavy,
wordy reports in writing. After all, the purpose of the audit is
to effect improvements, i f needed, by in-house action. Keep
the paper lean.
The following is a sample of the audit section of a management standard.
Internal Administrative Audits
1. Purpose. This company's audits serve two purposes:
a) To confirm or negate that management-prescribed
policies and procedures are properly implemented.
b) . To effect necessary improvements internally.
2. Policy. Either by senior management or at the direction of
senior management, internal audits are periodically conducted
of operations and technical procedures. Audits are performed
by persons not administratively responsible for the functions
audited except, of course, top management who have company-wide responsibility. The results of audits, with directions
for corrective action, i f they are needed, are distributed to
responsible department managers.
3. Operations
a) Each audit is conducted in accordance with explicit
directions that specify the operation or area to be audited, define the purpose and scope of the audit, provide
a checklist of details to be reviewed, designate the
membership and the senior person responsible for performance of the audit, and establish the schedule for its
initiation and completion.
b) audit committees may, at management's option, be
appointed ad hoc. They are then dissolved on completion of assigned tasks. Persons responsible for a
function being audited are excluded from audit
committees.
records are maintained showing operations or functions audited, the identity of the audit or membership
of the audit committee, significant results, and corrective actions that have been instituted. While the details
of the auditor's (or committee's) observations may be
conveyed orally to senior management, the aforementioned records itemize essentials (e.g., date, membership, results, action).
4. Personnel. Internal audits are conducted by experienced
department managers or staff engineers at the direction of the
general manager. Auditors are advised clearly that audits are
not "investigations," but in the tradition of financial audits are
independent and objective reviews to confirm the effectiveness of operation and procedures and to identify possible
oversights and to recommend corrective actions as necessary.
5. Definitions
6. Addenda
c)
Supplier Relations. Even a cursory reading of industrial or

technical literature reveals the new emphasis major manufactures are placing on the procedures and policies by which materials and components are acquired from suppliers. Some major
automotive manufacturers have established explicit testing and
inspection requirements for purchased components. There are
sound reasons for this development. Components or materials
that appear to be inconsequential can be the cause of subsequent major problems in the manufactured end-item into which
they are assembled. At the same time there is also a trend
toward specifying rigid delivery schedules to preclude the need
for end-item manufacturers to support substantial inventories
of components. Supplier relations is accordingly no minor
matter. How these relations are structured affects end-item
costs, quality and consumer acceptance.
Most products are amalgams of materials, parts, components
and assemblies acquired from suppliers. Unless these materials are cost effective and reliable, it can hardly be expected
that the final product will be cost-effective and reliable.
The control of materials and products acquired from suppliers
is necessary:
a) To assure that acquired materials and products conform to established standards,
b To make it possible to trace them to their source,
c) To expedite corrective actions, including device recalls.
Supplier control practices normally include:
a) Evaluation and control of sources from which supplies
are purchased to assure their reliability.
b) Preparation and review of documents used to place
purchase orders from supplies.
c) Evaluation (inspection and/or test) of supplies received.
Below is an example of how the supplier relations provisions
of a management standard might be drafted. This is not to
suggest that all of the actions mentioned below are pertinent
to all suppliers or that all requirements are covered. This sec-
tion, as is true of all sections, must be tailored to reflect the

purposes of a particular end-product manufacturer.
Supplier Relations
1. Purpose. Supplier validation assures that supplies and services conform to standards established in-house, by regulatory agencies, or by suppliers themselves. In the event
that standards are established by suppliers these must be
compatible with in-house requirements.
2. Policy. Suppliers are viewed as extensions of in-house
manufacturing. Accordingly the essentiality of controlling
the quality, cost and safety of components, raw materials
and services acquired from suppliers is recognized and,
therefore, appropriate controls are essential.
3. Applicability.
a) Product engineering
b) Manufacturing
c) Purchasing
d) Quality assurance
4. Operations. The following practices will be used to assure
the adequacy of supplier materials and products:
a) Verification of Sources. Only those suppliers whose
competence is verified will be sources of supplies and
services. This competence may be demonstrated by satisfactory past experience or, in the case of new suppliers, by reliable test data or other pertinent information.
b) Review of Purchase Orders: Before a purchase order
is transmitted to a supplier its technical accuracy and
completeness will be reviewed by appropriate departments. This review encompasses requirements for:
(1) Product inspection and testing. (If an item is critical to the end product, 100% inspection and testing
are required. Sampling procedures and tables for
inspection by attributes (MIL-STD-105D) will be
followed where appropriate.)
(2) The establishment of a quality assurance program
when the character of the product suggests a need
for such a program.
(3) Control of product configuration.
Suppliers are required to provide notification when any
changes are made in item design, testing or in manufacturing operations that could affect the form, fit, or any
other variable affecting the reliability of the supplied
item.
c)
Receiving Inspection. Unless formally exempted from

this requirement, all purchased products w i l l be
inspected on receipt even i f previously inspected at
source. Inspection plans will identify:
(1) Characteristics to be inspected or tested.
(2) Sampling procedures, i f any. (If the item is critical
to the performance of the final product, and i f a supplier's performance history has not been satisfactory,
100% receiving inspection and testing is continued
even though the supplier performs 100% inspection.)
(3) Inspection and testing procedures, including identi-
19
fication of pertinent measuring instruments.

(4) Reserve quantities required for critical components.
In the event that an item does not conform to requirements, it
will be clearly identified and segregated from conforming
items. The supplier will then be notified promptly of the
specifics of nonconformance and directed to take corrective
action.
d) Receiving-Inspection Records. The results of all
inspections and tests will be recorded. Data will be
periodically reviewed to evaluate trends of suppliers'
product quality. When corrective action is required by
suppliers, the details of action requested and instituted
by suppliers will be retained as an element of the
receiving-inspection record.
e) Traceability of Critical Items. I f an item procured from
a supplier is critical as defined by company engineering, special action will be taken to assure that such
items are identified to effect traceability from receipt
through manufacturing operations to shipment. This
control is in addition to the inspection and testing
requirements specified above.
f) Storage. In the event that it is necessary to store supplier items, arrangements will be made to assure that
identical items are grouped together, that damage or
adulteration is prevented, that items received first are
used first, and that shelf life requirements, i f any, are
satisfied.
5. Personnel. As representatives of management personnel
responsible for supplier relations will be trained and supervised with respect to identifying the requirements for supplier
items, using measuring/test equipment, record-keeping and
taking corrective actions.
6. Definitions
7. Addenda
Final (Finished) Product Inspection Testing
The performance of a product depends on the combined outcome of (1) effective process control, and (2) final/finished
inspection. Both are essential. Common sense, of course,
dictates the essentiality of final product inspection and testing. Despite manufacturing controls, final inspection and
testing are necessary to detect deficiencies or inadvertent
oversights that might have previously escaped notice or
might not have been detectable at an earlier period. The
inspections and tests ordinarily should not duplicate those
previously performed unless the product was subsequently
processed in a way that might have modified its performance
or configuration. Final inspection and testing serve to assure
that (1) the product satisfactorily performs its intended
function, and (2) those characteristics or properties not previously inspected or tested are verified for conformance to
specifications requirements.
Below is an example of an inspection and testing section of a
20
management system standard. It is included here as another

example of a standard's text with respect to a universal and critical function. Because final inspection and testing is so conventional, it is discussed in some detail in the following text.
Final (Finished) Product Inspection and Testing
1. Purpose.
Prior to shipment, final (finished) product
inspection and testing are performed to assure that measurable characteristics pertinent to product performance conform to all requirements, including design, labeling and
packaging.
2. Policy. Final (finished) inspection and testing encompass
characteristics not previously inspected or testing as well
as characteristics that are reviewed for reason of prudence.
Unless sampling is formally authorized, final inspections
and tests are conducted on each unit of product in accordance with written procedures.
3. Applicability, (on a discretionary basis) *
a) Design Review/Value Analysis
b) Product engineering
c) Manufacturing
d) Quality Assurance
4. Operations. These operations are accomplished prior to
distribution:
a) The "unit of product", that is, the particular entity to be
evaluated, is clearly identified.
b) The particular characteristics of the "unit of product"
are also clearly identified, directly or by reference.
c) Instruments necessary to conduct inspections and tests
are identified by name and number.
d) Operationally important characteristics are checked
100%.
e) Other characteristics may be sampled in accordance
with statistically valid sampling procedures (e.g., M I L STD-105D).
f) The results of inspection and tests, including information regarding the disposition of the product, are
recorded and quality trends are analyzed.
g) The shipment of each lot of product must be approved,
by initials or a stamp, by the designated quality assurance person and by the general manager or their formally designated representatives.
h) Samples from lots that have been shipped are retained
for inspections and tests to be conducted after specified
time intervals to assure that products delivered to users
conform to original inspection and testing criteria.
i) The results of final product inspection and tests are
stored and preserved and are retained for two years or
for the expected life of the product plus one year,
whichever is longer.
5. Responsibilities.
a) Product Engineering. Specifies inspections and tests.
b) Manufacturing. Positions products so as to be readily
available for final inspection and testing.
c) Quality Assurance or Its Equivalent as Mandated by
Management. Implements inspection and test require-
merits, maintains records, approves or disapproves

shipment and advises general manager, analyzes quality trends, informs engineering and operations of these
trends and of problems needing resolution.
6. Personnel
7. Definitions
8. Addenda
Postscript: Readers familiar with the systems planning
scene will sense that the substance and proposed management strategy does have a nuance suggestive of systems
standards published by many U. S. and other governments or agencies (e.g., Canada, NATO, Federal Aviation
Administration and Food and Drug Administration). As
this paper previously stated,
...its authors are proposing that private industry adopt tech- ,
niques used with reasonable success by governmentsat sizeable developmental expense. Of particular usefulness would
be the Food and Drug Administrations "Good Manufacturing
Practices (GMP) for Medical Devices.
3
Even though this regulation pertains to medical devices, it

applies substantially to most manufacturing industries. It is a
good source of ideas and their rationale. The same might be
said of Canadian and NATO documents but the FDA's
"GMP" has the merit of being readily available at the price of
a postcard. A more exhaustive treatment of GMP's is the subject of a publication of the Association for the Advancement
of Medical Instrumentation.
Verbum Sat!
References
1) Yoshi Tsurumi, The Incompetent Americans. The Washington
Post, July 31
2) A. R. Tocco and J. J. Kaufman, Encyclopedia of Management,
Reinhold Press (1982), 3rd Edition.
3) Regulation: Good Manufacturing for Medical Devices (1978),
Food and Drug Administration, Bureau of Medical Devices, 8575
Georgia Avenue, Silver Spring, MD 20910.
John J. Riordan, is a former Director, Product and

Production Engineering, Office of the Secretary of Defense,
and Anthony R. Tocco, CVS, is past National President of the
Society of American Value Engineers and a former member of
Technical Staff, TRW.
Value Analysis: An Effective Tool in

Process Re-engineering
Roch Prud'homme, ing.
Administrative Processes Re-engineering
Process re-engineering is a novel approach aiming at satisfying the need to achieve significant improvements in the
administrative processes of the organization. The approach is
one of critical analysis of the fundamental management concepts and the complete redesign of the processes. It is based
on the implementation of performance measurements as
applied to costs, quality and customer service.
The reasons for such needs come from the new environment
in which we now have to do our daily business:
change except, maybe, to substitute the term "industrial

process" for administrative processes so that the same steps
will apply as is.
The Re-engineering of administrative processes is therefore
a new name for an activity that is not all that new. The creators of that new "buzzword" must however be congratulated, because in the United States and in parts of Canada, reengineering has resulted in concerted efforts, essential to
maintain a competitive position in the aggressive world
markets.
Value Analysis in Process Re-engineering
explosion of all means of communications, with the advent

of computer networks, communications satellites, telecopy
machines, cellular telephones and other means that allow
us to decentralize the information and place expert knowledge in the hands of non-specialists.
spreading the decision making process through the whole
organization at a higher pace than ever seen before.
universal use of computers that are becoming smaller,
more powerful and more intelligent.
a majority of the people working in "services" are becoming information processors.
These factors, and others, are changing the environment in
which enterprises are evolving. But the management processes have not always followed that rapid evolution.
Some of the inventors of re-engineering believe that action on
administrative processes, should be taken in the same way
and using basically similar tools as the ones previously experienced on industrial processes.
Some others describe the philosophy, the reasons and the
objectives of process re-engineering, but tell us very little about
the details of the methodology they would use to make it work.
That was the reason for a comment recently made by the
manager of quality of a large multinational company based in
Canada, and who is managing a process re-engineering team:
"We do re-engineering, but we have no methodology".
The methodology for process re-engineering is to be
found in that of Value Analysis.
The value engineering methodology is so fundamental that it
fits the need in process re-engineering. It requires almost no
22
The details on "What to do" are well defined in process reengineering literature. It is also agreed that task teams are
essential in "Who is to do the work". But for, the "How to
do", the techniques and the methodology of Value Analysis
are much more explicit and precise. As an effective tool in
process re-engineering, we therefore recommend the scheme
used in the value analysis ot a process, set out in the nine
steps proposed in the following diagram:
Step 1:
Work Planning
The client, the scope and objectives, the work team
Step 2:
The process output market
Needs of the user, market for the process output
Step 3:
Function Analysis and costs
Needs fullfilled, constraints established, justification and
specifications, cause-effect diagrams, output costs
Step 4:
The Output as a result of the Process
What the input must become to be a rightful output of the
process
Step 5:
Detailed Analysis of the Process
Breakdown of the process and its parts, analysis of the operations, identification of unnecessary costs, cost reduction
objectives while maintaining essential functions of the output
Step 6:
Creativity-Improvements design
Identification of possible improvements, brainstorming,
design of improvements
Value Analysis in Support of Process Re-Engineering

PROCESS RE-ENGINEERING
VALUE ANALYSIS
Approach and application, global
Specific approach and application. Repeatable to cover the

whole organization
Methodology in development
Developed, precise and proven methodology. Dating back

to 1940
New terminology
Established terminology
Does not systematically go back to the analysis of

the fundamental elements of a process, i.e. the needs
of user/client
As a principle, always goes back to the analysis of the

fundamental elements of the process
Uses industrial engineering tools (process

diagrams, etc.)
Uses identical industrial process techniques, transposed to

the administrative processes
Measurement not fully developed
Precise measurement in terms of need fulfilled/price paid

or output/input
Addresses the What? When? and by Whom?
Addresses the What? When? By Whom? but also the Why?

and How?
Uses work teams. Must be organized before starting
Based essentially on stable work teams and organized

work sessions
New identity in evolution
Well identified. Many national associations operating for

many years
Positive results adding-up
Many well documented successful results
Used solely in administrative processes
Started with applications in production, then in administrative processes
Clean slate approach affecting the whole organization
Applied more frequently on smaller sections of an organization, gradually spreading. Clean slate approach quite
applicable
Does not necessarily address the return on investment
Always concerned with the improvement of the return on

investment ratio (ROI)
Some training is required before start
Can be started rapidly after a short instruction session
23
Step 7:
Analysis of proposed improvements
Study and analysis of proposed improvements, return on
investment, selection
Step 8:
Improvement implementation
Follow-up on implementation and effects of solutions adopted
Step 9:
Final Review and Conclusions
Review of original objectives, evaluation and final report
In this case of administrative processes, the product is often
intangible, the input being transformed into a useful output,
mostly as an information carried by an information medium.
The input may be a verbal interview, a telephone communication, a note, a completed form, a floppy disk or any other
medium. The output will be carried by similar media. A
typical example is an insurance policy. Another obvious
example: Preparation of an order, an invoice, a purchase
order or any similar document.
The same value analysis methodology used for re-engineering, could be applied to high level management activities
such as the preparation of strategic planning, budgets and
other activities. Finally the methodology can be quite applicable to data processing activities and other management
information services.
In conclusion:
Process Re-enginnering ?
How ?
Throughout the value analysis methodology!
References:
1. Michael Hammer & James Champy,
Re-engineering the Corporation, Manifesto for Business
Revolution Harper Collins Publishers, New York, 1993
2. H. James Harrington
La reingenierie des processus administratifs
Les editions Transcontinentales Inc., Montreal, 1994
Roch Prud'homme, B.A., B.a.Sc, P.E., is president ofValsys

inc., a firm specializing in Value Analysis and systems. A long
time practitioner of value analysis in industry and services,
he has been an active contributor in the development of modern VA methodologies. He is also a member of the board of
Directors of the Canadian Value Analysis Society (CVAS).
24
Meeting the Requirement for future competiveness through Value Analysis

Dr. Anwar Mustafa
T h e competitiveness of a product is indicative of efficiency
and depends on the satisfaction of the demands of a particular
market segment, the level of satisfaction of anticipated
demand and its costs. A product will establish a connection
with its spectators from its presentation onwards. Actually,
this connection is the combination of the effectiveness of
functions and the visual effect of the product (e.g. the colour,
form, harmony and ergonomy of the product catching peoples' attention, influences their mood and emotional state).
People's taste and demand for such functions changes dynamically from time to time, but remains at a certain demand level.
Levd of produaim i ethnology

Technical level of machine Ines
Preparedness for fiaMkn design

* Crcaovity level of Amnion design
SdectKn Bd quality of material rcquind
' Conceptual and wfoodotogK*] baas of wort
Management ad cartel of wort:
Wtxtof offfwaratrnn. service
Market policy, market research
' Employment pottcy
Financial policy (material mtennvw)
Figure 1: The essence and set of conditions of value analysis

This study introduces an interesting method with which we
can assess the level of demand for our products (services) in
various market segments. This method is called MRP
(Microcomputer-based Ranking Procedure). It is argued in the
study that this method would be of considerable use in industry inasmuch as it woud help to determine whether or not production should be increased, for investments and a company's
diversification policy.
Meeting the requirement for future competitiveness
through Value Analysis
In the process of restructuring the country's economic control
and management system, more and more attention is being
paid to the microeconomic sphere, i.e. companies. The main
issues that are brought into focus include organization,
strengthening, development and operational efficiency of
business enterprises. The intensive economic development
and the more stringent restrictive economic conditions call for
a more careful examination of reserves and the use of suitable
procedures for this purpose.
"The less money we have, the more often we count it."
(Mor Jokai)
In these circumstances, the application of advanced technicaleconomic methods that help organize, establish and operate
business enterprises successfully assumes increased importance. Value analysis represents such a complex, high efficiency method, consisting of a series of efficiency improving
steps and covering the creative analysis and development of
the functions of product, technology, production facilities and
organization and their cost implications .
product, i.e. its appearance, size, operation, lifetime, dependence, reliability, durability, maintainability, taste, odour,
feeling, sound, each that relate to its suitability for use.
For the purpose of value analysis, improvement of use value
and quality is determined by the fulfilment and performance
of demand-satisfying functions. The competitiveness of a
product is indicative of efficiency and depends on the satisfaction of the demands of a particular market segment, the
level of satisfaction of anticipated demand and its costs.
Satisfaction of demand takes place through functions performed by a product. Functions may be use and satisfaction
functions which constitute, in fact, the quality characteristics.
In this paper we examine the background of satisfaction functions from a producer's viewpoint, namely the physical characteristics of a product which induce users to buy the product.
Such characteristics include taste, aroma, sound, colour,
shape, style, handling, appearance, reliability, repairability,
etc. The values such characteristics convey create social
acceptance for a product and are recognized as real economic
value that is reflected in the improved market competetiveness
of the product. These functions fulfill their role effectively
only i f they are tied to a clearly defined and operational organizational-development concept.
As a rule, product functions are perceived during acquisition
and use. During my research work I have noticed that there is
a function group that is perceived without acquisition of a
product. I call them visual and emotional functions (Figure 2).
The artistic design of goods and products in the world market
are changing continuously. Here we have to take into
Function
The elements of efficiency improvement, representing the

objective to be achieved, are shown in Figure 1. Efficiency
improvement is viewed from two aspects. One aspect includes
increasing the use value, i.e. enhancing characteristics and
quality features that meet all requirements for a particular
application, and the other includes cost reduction. Quality is
defined as all distinguishable features (properties) of a
Llisc functions
ll.Satbfaction functions
x
Functions perceived exclusively
Functions perceived without use
during use (performances neces-
(visual and emotional functions)
sary for proper use)
Figure 2: Grouping of functions

25
consideration not only environment shaping factors, but also

the fact that the change in artistic design and fashion now starts
to reach markets which were not previously influenced by
designs, colours and aesthetic appeal. Thus, deceptive appearance is used as a means of selling a product. Great emphasis is
placed on appearance even for non-industrial products, e.g. on
the malachite green colour of green bean or the shiny red
colour of strawberry, on glossy polish in general and particularly on chrome-like shine. Accordingly, visual and emotional
functions play an important role in the perception of values in
the market, especially i f the use functionare comparable to
those of the competitive product. These functions constitute the
use value of a product, i.e. the link between the product and the
human being as user. The more perfectly this link is designed,
the more it induces people to buy the product. It is a crucial step
in entering a new market and gaining a brand reputation. The
taste and demand of people for such functions change from
time to time, but remains at a certain demand level.
effective demand takes places during weighting. However,

prior to weighting, the assessing team members have to obtain
information about the economic situation of various countries
in the world. According to our practical example, the components of weighting vector are obtained by converting the elements in the final aggregate column into a distribution coefficient. If the number of criteria is n, then the weighting vector
is an n-element column vector. The jth element of vectors
represents the relative importance of the j t h criterion.
Accordingly, the scalar product s 1 is true, i.e. the sum of the
components of weighting vector is 1 .
S/n=Sl,S2...Sn=.23,.ll,.22,.07,.17,.13,.07.=l
Then, rating of the Kft.'s indicated market segments takes
place on the basis of a set of criteria thus compiled and
weighted. Such rating can be carried out by completing the
so-called rating matrix.
The rating matrix = p/m,n
The demand level in various market segments varies depending on the following seven factors:
living standard (real income is determinant),
traditions and habits,
cultural level,
level of productive forces,
state of social development and democracy,
social status of individual,
psychological background of individual.
These factors may be used as evaluation criteria on the basis
of which we can assess the level of demand for our products
(services) in various market segments using a method called
MRP (Microcomputer-based Ranking Procedure). It is, in
fact, a market segmentation calculation aimed at assessing the
level of demand for a particular product. Although relying
upon a quasi-objective scoring procedure, this method may be
useful in practice for solving the complex task in question.
Now take a practical example from 1994 that is concerned
with the business line and activities of Butoripari es
Kereskedelmi Kft. (Furniture Manufacturing and Trading
Ltd.). The above-mentioned calculation was done by a 5-7member team. The evaluation criteria are written in both the
lines and columns of the matrix for weighting. Each member
of the team compares every criterion by pair and line. 1 is
written in the lines containing more important criteria and 0 in
the lines containing less important criteria. Each element of
the principle diagonal is given the value 1 because it means
comparison of criteria with themselves. Individual weights are
given by the sum of lines in the matrix, appearing in the
"aggregate" column. The individual voting matrixes of team .
members (in this case, for example, the votes of 5 members)
are used to form the so-called aggregate table the columns of
which constitute the aggregate columns of individual voting
matrixes.
Subjectivity can be reduced by giving all well-informed team
members the opportunity of weighting. Ultimately, designing
the optimum quality, visual and emotional functions of industrial products that meet the needs of market segments with
26
The lines in matrix "p" contain market segments of number m

for comparison, whereas columns in this matrix contain criteria of number n. The universal element of the rating matrix:
[pij]
{i=l,2,...m
{j=l,2,...n
means the rating of the ith market segment according to the jth
criterion. Rating can be carried out within limits such as for
example:
1<= Pi j <= 10 subject to agreement.
The aggregate rating matrix contains the average of individual
assessments made by team members. The product of the
aggregate rating matrix and the weighting vector gives the inclement rating column vector "q" consisting of the following
countries:
p/m,n*s/n=q/m
7 5
9 10
8 10
10 10
7 9
8 9
8 8
8 8
8
8
7
4
6
5
6
6
6
4
6
6
5
5
6
7
6
9 10
11
0.23
0 11
0.22
0,07
0.17
0 13
0.07
563
8.70
8.10
9.11
7.80
8.22
7.72
7.72
8.15
7.81
5.81
5.04
3.57
5.09
4.59
5.83
6.06
6.06
5 05
6 14
7.51
5.92
5.45
5.80
8.13
5.95
9.07
Hungary
Germany
Switzerland
England
Austria
, France
Sweden
Norway
Netherlands
Belgium
Czech Republic
Russia
Romania
Poland
Bulgaria
Yugoslavia
ilong Kong
Taiwan
India
Iran
Kuwait
Iraq
Algeria
Egypt
Japan
South Africa
USA
Table 1
The values in column matrix q indicate the levels of demand

for a particular product on the basis of which these (market)
countries can be divided into six market segments:
no longer accessible for any reason, then the products made on

order can be transferred to another country within the same
market segment.
* Countries at demand level 1 (8.70-9.11) - England - USA

- Germany
The quality level of a competitive product can be maintained

only by improving and adjusting the use value, including the
required visual and emotional function performances. For this
purpose, two practical analytical approaches can be adopted:
* Countries at demand level IT (7.72-8.22)

- France
- Switzerland
- Netherlands
- Belgium
- Japan
- Austria
- Sweden
- Norway
* Countries at demand level I I I (6.10-7.51) - Kuwait
* Countries at demand level I V (5.63-6.14) - Iran
- Hong
Kong - Taiwan - South Africa - Czech Republic - Iraq
- Yugoslavia - Egypt - Hungary
* Countries at demand level V (4.59-5.50) - China - Algeria
- Poland - India - Russia - Bulgaria
Countries at demand level Vl(3.57-4.50) - Romania
Now let's examine how these data can be used in practice.
The current markets of Butoripari es Kereskedelmi Kft. are:
Romania, Germany, Switzerland, Russia, and the domestic
market. According to the results of calculation, these markets
can be grouped into four different market segments which
demand different product qualities. Therefore, it is not effective to make a product for all the four market segments. A
product that is suitable for a market with high demand level,
such as Germany, will be expensive for a market with lower
demand level, e.g. Russia, since the product has redundant
functions for this market. In this case Russia can be considered
as a market with no effective demand. Sales and profits will
decrease due to the high product price or in other words, the
product is not competitive in this market.
Now let's examine a reverse situation, i.e. putting a product
suitable for a market with low demand level on a market with
high demand level. Obviously, there will be problems relating
to unsatisfaction of demands and the low price will not induce
consumers to purchase the product. Keep in mind that living
standard, the very first criterion, has played a major role in the
development of demand level. Reverting to the example, the
Kft. should produce four variants of each product or a fourunit product range. Unfortunately, it was a false decision to
enter four different markets at a time. Firstly, because the conditions of the recently formed Kft. do not allow it (limited
resources). Secondly, because such diversification product
design reduces the production volume and increases the prime
cost of the product. The organization should make efforts to
extend foreign trade relations with countries that can be
grouped into a particular market segment. I f a market becomes
function completion,
function correction.
Function completion
As a method it is used when a missing function is discovered
during comparing the actual and planned function schemes of
a product. It means that if the product is targeted to a new market with high demand level, then the function performances of
the old product must be brought to completion.
However, consideration must be given to the need for major
or minor product development. By filling in the gap in functions, i.e. completing the scale of functions, the functional
quality of the product will be enhanced. One of the main reasons for the lack of a function performance may be that a
progress or change has occured in the structure of consumption needs since the creation of the product and new components have emerged which the previous demand analysis
could not explore.
Function correction
A product quality improvement can be achieved if the performance of a function falls within the range considered ideal for
that function, but its value can be increased further with minimum or without any additional expenditure. In all cases it is
the function performance rating function and the character of
change in function cost which show how realistic the possibility of improving quality is. Therefore, we examine the fulfilment of the following condition.
F'/K'j>Fj/K
where the new function efficiency ( F ' ) is compared with the
old one (F). As can be seen from Figure 3, quality improvement is possible at the upper limit of the progressive, monotonously increasing function rating functions (Fmax), whereas
Function rating maximum
Figure 3: Function efficiency improvement
27
it is vain to make such attempts for degressive functions since

quality rating is barely responsive in this range to further
improvement of function performance. Using adequate evaluation methods, competitive product can be designed also in
dynamic terms at the time of entering the market. Thus, function correction may have, of course, a favourable effect on any
core or complementary function of the product, including its
satisfaction function.
A competitive or high quality product may have the potential
to generate new, effective demand even in a saturated market.
The additional features, such as higher use value and adaptation to changing taste, fashion, environment and expectations,
may be sufficiendy attractive to potential customers to incline
them to replace the already owned goods with new, more
advanced ones that are designed for similar purposes and seem
to be superior in aesthetic terms. Other market effects must
also be considered.
Exploration of anticipated demand to develop a potentially competitive product
Figure 4 shows a general design model for the product under
consideration where the relationship between Lx office furniture and human being is linked to design elements fulfilling
satisfaction (quality) functions. Its components represent the
elements of satisfaction (quality) function design. The demand
level of market segments - the result of calculation - is
assumed as the third dimension. Each discrete value in the
model represents a satisfaction function design-rating element
which indicates the importance of the required satisfaction
function in a particular market. It determines, of course, the
future direction of design, too.
S
X.
Lx product-man
User
Customer
^sêlationship
Lx product
^ \
Maintcnnacc
slafr
Miaociivironmcnt
Maccocnvirornncnl
2.
3.
4.
5.
1. Scat cushion
2. Back cushion
2-1
3. Supporting part"B"
4. Shelved part "A"
5 Connection stnic ture
5-2
6. Handle fittings
design tasks
^s.
7. Bead
8. Connecting sides
8-3
9. Rolling drawer
lO.Stationery holder"C
Figure 4: Product element - man relationship
Figure 5: Survey of market demand (for satisfactions) general model

system. On the other hand, differentiation between people
having relations with Lx allows the relationships in the
satisfaction function of the product to be included in the
matrix scheme.
Completion of the model in substance consists of identification of the design-marketing elements. Here take into
consideration that solving satisfaction function problems (aesthetic, ergonomic, etc.) is an activity that is closely related to
the complex product development process and in practice cannot be separated from it.
It means that both the purpose and usability of the product are
realized through material and technical solutions. In all cases
it is possible only within the framework of complex development in the knowledge of constraints to solutions, technical
opportunities and proportion of development. The model
scheme of the general satisfaction function can be extended
for each rating level with 6 quality functions the incorporation
of which into a product is examined here for a particular
market. Such functions are: 1. handling; 2. durabihty, 3. safety; 4. practicality, 5. design features, 6. maintainability.
The practical measure of these factors is percentage (%). For
a particular product or, in the case of a complex product, for
part of it, it is possible to specify the percentage of each
technical factor in two different ways:
This arrangement of model components reflects the opinion demand - of groups of people who have different relations
with the Lx office furniture, and the emphasis is placed on the
principle of satisfaction function (Figure 5).
Thus, it can only be considered as a set of satisfaction function

aspects (in the initial approach). It is a prerequisite for that
stage of satisfaction function design activity in which a concrete final design is made. The level of demand of the world
market for such functions has to be considered on the basis of
specific criteria. The contents of design tasks for Lx office
furniture can quite clearly be separated and grouped through
the manufacturer's established operational and organizational
Representing it in the extended general model (Figure 6), a

distorted hexagon is obtained for the particular product or part
of it. The marketing interval is between 0 and 100%. The
hexagon may be further distorted depending on what aspects
are dominating at the marketing (market) level in question in
the case of the product or part of it under consideration. Thus,
it is possible to make a decision on whether it is practical to
modify the typical satisfaction parameters of the product in
28
The relative importance of the six factors for a particular

product
- the extent to which a particular product meets expectations
represented by these factors.
txKi (0-8.7)
in the air at a speed of about 80 miles/h after leaving the

ground. The vehicle was invented by Fred Baker, a Flight
Innovations Inc.'s engineer with the assistance of
Development Group.
a: Handling
b: Durability
c: Safety
d: Practicality
e: Design features
F: Maintainability
1 x- man relationship
(1-5)
Figure 6: Extended model

order to achieve an improvement in quality. Completing the
model in this way, the extended design-marketing elements
are obtained according to the market demands. The rating of
the quality characteristics and functions of the product outlined above can be related not only to the Lx product, but it
represents a general scheme that is applicable to any product.
The quality function design activity may be efficient only i f a
system approach is used. It is an inadequate approach to handle a problem separately and group tasks accordingly. Instead,
tasks must be defined concretely first at various levels in the
hierarchy of the organization, adequately incorporating them
into the corporate policy and then into the corporate strategy
defining the tasks for the subsystems.
Figure 7: Anticipated demand and the competitive product

H:
Aj:
A2:
A3:
B:
set of properties suitable for consideration

manufactuer's expectations for the products
direct usr's expectations
investor's (customer's) expectations
minimum range of competitive product
In addition, the model provides opportunity to produce and

represent an ideal competitive product. Look at Figure 7
where H = set of functions fulfilling the demand, A l = manufacturer's expectations for the products, A2 = direct user's
expectations, A3 = indirect user's expectations, B = minimum
range for the competitive product; and D = maximum range
for the competitive product. The Figure shows that part of the
competitive product is missing, thus BI and B2 do not meet.
The meeting of B I and B2, in fact, completes the product and
contributes to extend its lifetime, i.e. increases its profitability
and strengthens its market position. This replacement is a
demand that, as shown in the Figure, is not among the expectations of the manufacturer, customer or direct user.
References/Literature
It is only a future or anticipated demand that can be explored

by a research and development team. For example, the use
functions of a passenger car as a complex product are wellknown and incorporated into almost all cars, whereas its satisfaction functions, as a result of progress in society, productive
forces and technology, extend dynamically to the point where
demands cannot be explored using traditional methods (interview, questionnaire, etc.).
5. Mrs. Istvn
Hoffman-Laszlo
Tankonyvkiado, Budapest, 1985.
1. A. F. Loszev - V.P. Zestakov: Az esztetikai kategoriak tortenete

(The history of aesthetic categories), Budapest, 1982, pp.103-107
2. Dreyfuss, H.: The profile of industrial design, Machine Design,
1987.
3. Josef Hegedus:. Ertekelemzes es rendszerelmelet az ipari formatervezesben (Value analysis and system theory in industrial
design), Budapest, 1982
4. Hegyi-Torszok-Gulyas: A kulkereskedelem technikaja es
szervezese (The technique and organization of foreign trade),
Kozgazdasagi es Jogi Konyvkiado, Budapest, 1981
Molnar:
Marketing,
Dr. Anwar Mustafa is the Professor for the Department of the

Business Venture at the College for Foreign Trade located at
1102 Liget u. 21 Budapest, HUNGARY
August 1989 saw the emergence of the prototype of a flying

car in the USA (Washington) which is capable of flying over
traffic jams. This four-wheel, two-seat vehicle is able to travel
29
The Value Management Model

Donald Godfrey, CVS
Value management is a total corporate and organizational

concept leading toward continuous improvement. A successful value management program must have vision, long
term commitment, discipline, training and employee
empowerment. It is the responsibility of management to create a flexible organizational culture that will allow and
encourage both teamwork and change. This article illustrates the differences between a standard management philosophy and a value management philosophy.
Introduction
To remain ahead of global competition, companies must not
rest on the accomplishments of past achievements. With the
advancements in communication and ease of travel, market
territories once protected by distances and ignorance of cultural customs, now are accessible to nearly anyone. These
new market conditions dictate global competition and new
managerial philosophies.
Industrial managers have always sought ways to improve
profitability. Mass production and the Industrial Revolution
brought about more products, at improved economies of
scale. Computer technology and factory automation
improved manufacturability and reduced costs; however, the
actual design of a product must still be developed in the
mind of a designer. The seed that will grow into the next
invention or technology to improve the quality of life, must
still sprout and take root in the imagination of men and
women who dream of possibilities.
Corporate Culture
When authors or speakers address the issue of changing corporate culture, they are not advocating the abrogating of
national beliefs or changing corporate loyalties. Changing
the corporate culture has become a euphemism for altering
the methodologies of business practices.
Implementing value analysis in most organizations is actually
taking the corporation through a cultural change. Value analysis is a management philosophy for providing leadership and
motivation for continuously improving organizations; a philosophy characteristic with continuous improvement and reducing
costs. A true value philosophy focuses on prevention of
defects, not the ability of a manufacturing organization to
rework rejected components. A value management organization is about cross-functional teamwork and supplier partnerships working on improving the overall quality of a product.
This type of management style forces concurrent engineering practices; it forces supplier management, manufacturing
engineering and customer service organizations to interact.
30
The Value Management Model

Value analysis is not a process based on new technology;
rather, it is a process based on design methodologies. It is a
process companies can utilize in an attempt to maximize
value to both the customer and the shareholders. This is
accomplished by reviewing options and alternatives that can
possibly solve design problems or improve cost efficiencies.
Value analysis is unique to other management philosophies
because it uses the concept of "function" and it evaluates the
costs associated with a function. The premise of value analysis
is not to simply reduce costs, but to understand what functions
a product is intended to perform, what functions it actually performs, and what costs are associated with those functions.
To be the most effective with the least cost, is one of the
goals of a value analysis effort. This means designing a
product at the lowest cost, taking into consideration customer satisfaction, safety, life cycle costs and other design
criteria. Managers could view the cost of a value analysis
program as a burden and unnecessary expense. These managers and designers advocate the premise they are always
performing cost analysis when designing or producing a
product; however, i f they are not analyzing functions and the
cost associated with those functions, then they are not performing value analysis.
As with any corporate policy, there is cost associated with
value analysis; but when observed over a series of annual
performances it can be proven value analysis practices can
utilize a company's resources in a most efficient manner.
Value analysis utilizes the best resources of a company to
improve long term profitability and customer satisfaction. I f
bottom line financial results are the objectives of a company,
then a fair question to ask is, "What is the cost of not having
a value analysis program?"
Value analysis is not cost reduction; a short term program
designed to remove cost from a product or overhead. Rather,
value analysis is cost control, a long term program designed
to analyze designs, procedures and methodologies to create
an acceptable financial return for the shareholder.
Identifying functions and their associated costs and then
removing selected non-essential functions is the logical
method for achieving permanent cost control.
A value management philosophy is an organizational
approach with the goal of continuous improvement. In order
to accomplish this goal, managers must accept responsibility for the program and realize it will take time to harvest the
fruits of its effort. Management must be willing to accept
change, and that means empowering people to work together without continual oversight.
Value management is a total corporate and organizational

concept leading toward continuous improvement. It is the
responsibility of management to create a flexible work culture that will allow and encourage both teamwork and
change.
The structure of a standard management model is widely
known; however, the methodology of value management is
not. Table 1 illustrates the basic differences between the two
managerial philosophies.
STANDARD MANAGEMENT
MODEL
VALUE MANAGEMENT
MODEL
VALUE MANAGEMENT MODEL
Mission
STANDARD MANAGEMENT
MODEL
Maximize return oo investment
Customer
Requirements
Read contracts and assume

companv understands.
Sit down with customer and review

req lurements together.
Suppliers
Lowest price relationship.
Create a partnership.
Objectives
Work on short term objectives.
Establish balance between long term and

short term goals.
improvement
Accept process as was established.
Continually improving the process.
Problem Solving
Individual problem solving

techniques.
Team problem solving techniques.
People
Management control of frictions.
Teams and integrated functions.
Management
Style
Management style instills fear of

failing.
Open style and encourages group

improvement.
Maximize customer value and create an

environmentforcontinuous improvement
while earning an acceptable returnfortbe
share bolder.
Organizational Structure Hierarchical
Customerfocusedand use of work

teams
Rewards
Pay.
Individual and group recognition.
Improvement Efforts
Suggestions
Work measurement
Continual analysis tnd

readjustment of processes
Roles of
Managers
Plan and assign.
Communicate, mentor, and delegate.
Decision Power
Top down
Team input into decisions
Type of Recognition
Approve or disapprove suggestions Team Recognition

Individual performance review
Management Focus
Supervision
Coaching and creating etrvircmnent

for teamwork
Table 1
Long term commitment is necessary for a value program to

work. Management needs to demonstrate a commitment to
improve programs even though there is a perceived front end
cost. In many organizations, value programs have become
expendable or exist only to fulfill governmental contracts,
the reason being, managers of such organizations fail to recognize the long term benefits of value analysis. Successful
managers will maintain long term and global perspectives
regardless of short term goals. Successful organizations
have come to understand value programs can take years to
implement before the value philosophy has transcended
across departmental lines.
Discipline and support for any value program must come not
just from upper management, but from each employee in an
organization. Regardless of a team's intent or motivation to
accomplish a goal, their efforts will attain marginal success
if their efforts are not guided in a disciplined manner. That
is why it is important to know the tools of value analysis that
allow for the removal of ambiguity and will streamline the
efforts of all participants.
A value analysis program needs management support.
Senior level managers should understand the goals of the
program and be involved in the training. Management
should steer the effort for success, but allow employees the
power to make the day-to-day decisions in order to meet corporate goals.
Table 2 illustrates a comparison of responsibilities between
a standard management philosophy versus a value management philosophy emphasizing employee empowerment.
Table 2
Bench marking is an integral part of the value management
philosophy. Managers are taught (and rewarded) to measure
success from a numerical perspective. A numerical value
can tell a manager how performance ranks in comparison to
pre-determined goals. Bench marking is a measuring of
position based against a recognized position. The bench
marking process allows the establishment of priorities and
targets for improvement. When an organization knows
where it stands with respect to the marketplace, it can establish meaningful targets. When an organization performs
function cost modeling, they are in effect conducting a bench
marking exercise.
There are two types of goals an organization will strive to
achieve - short term and long term. A successful organization incorporating value analysis will provide encouragement to its employees and allow them to meet goals in an
attempt to create an atmosphere of accomplishment. Short
term goals provide the avenue for individuals to feel such
accomplishment.
Long term goals provide direction for an organization to
improve its position in the marketplace and its value to
investors. Long term goals established by upper management reflect strategic decisions. Eventual success or failure
in the market place is determined by long term goals. Those
two goals are filtered down through the company to team
members with the intention of being incorporated.
When value management philosophies are incorporated into
corporate goals, the entire organization is inter-linked to
value improving performance goals.
The Financial Rewards For Creating A Value
Management Philosophy
Inter-linking departments is a fundamental advantage of a
value management philosophy. This inter-connection of
31
skills and collective knowledge serves as a synergetic effort

to increase both performance (quality) and value to the customer. This synergy is referred to as concurrent engineering.
When a designer works as a team member, verses as an individual, improvements in design will result. This design
improvement is the result of plural insights working together to improve customer value (Chart 1). This insight and the
subsequent improvements will continue when designs incorporate the knowledge and expertise of other departments,
including the customer.
BEST PRACTICES OF DESIGN

Collective
Knowledge
Customon
Customer
Service
Fin neill
Supplier!
ProcuraDetit
Design T e m
Chart 1 - Customer Perception of Quality & Value
For a manufacturer, the short term advantage for instilling a

value analysis philosophy will be seen in reduced costs
associated with design and manufacturability. Multi perspectives will provide unique insights a single designer is
unable to incorporate into a product. These multiple insights
will assist in avoiding costly design changes as the design
concept matures, or before the product is introduced in the
marketplace (Chart 2).
COST OF ENGINEERING CHANGES ON PRODUCT DESIGNS
Chart 2 - Product Life Cycle
32
Incorporating a value management philosophy takes time.

Altering how an organization operates will take the cooperation of every team member. An organization's management must not forget the importance of communicating to
employees and communicating often. Value management
philosophies need to be incorporated into strategic business
plans. Creating a FAST diagram of products or departments
is a good start in re-engineering a product or an organization.
Before components are re-designed, it is necessary to understand design features, the functions associated with those
features, and their respective cost.
In the 21st century, manufacturing organizations that design
products of value for the customer must possess a declared
commitment to the value analysis philosophy. These
organizations must recognize that traditional systems and
procedures that once helped the company grow; now are the
same systems and procedures that prevent it from growing
further and creating maximum return on the shareholder's
investment. This will be difficult for some manufacturing
leaders to admit.
Global competition dictates manufacturing organizations
adhere to the philosophy of team work and team empowerment. As a team, organizations must work together to
redesign a company philosophy. Management for most
organizations is inclusive; therefore, the design process is
inclusive. In some manufacturing organizations, heterogeneous teams w i l l initially have difficulty existing and
becoming successful.
When changing any corporate culture, there will be adversity and a propensity to resist change. The effort of creating a
new methodology for businesses to perform by will be a
slow process but one based on continuous improvement.
Integrating new philosophies is a slow step by step process
that will take time. For some, this is a philosophy that will
be hard to embrace.
Conclusion
Without question, incorporating a value analysis philosophy
is a management responsibility. Incorporating a value strategy involves changing the culture of almost any organization. Many people may see this culture altering exercise as
re-engineering. Whatever it may be called, it involves transforming an organization.
A value analysis program can be incorporated into an existing culture. To do so requires management constantly communicating to team members the importance of value, the
strength of global competition and the need for performing
as a team to achieve customer satisfaction. Management
must also create a vision and communicate that vision to the
team members. Team members must be given training, support and the authority to question status quo and the expectation to resolve problems. Companies need to capitalize on
improvements and use them as a catalyst to incorporate new
improvements. Finally, companies should formalize a value
analysis program that incorporates vision, long term

commitment, training and employee empowerment.
Most importantly, value management philosophy forces
inter-departmental cooperation within an organization, and
transcends a concurrent engineering environment for
improved product values.
Bibliography
1) ASTME, American Society of Tool and Manufacturing
Engineers, Value Engineering In Manufacturing, Prentice-Hall,
1967
2) Hickel, James, The Cost Effective Organization, Glenbridge
Publishing Ltd., 1993
Donald Godfrey, CVS is a consultant residing in Indianapolis,
IN, and is a frequent contributing author for Value World.
Thunder: Ghost Surveys that Backfire

Thomas R. King, CVS, FSAVE
I must express some ambivalence in the use of surveys to
enhance team effectiveness by ultimately seeking to modify
team behavior. Wrongly handled, the process may well
achieve the opposite effect; less cohesiveness and trust than
might have existed prior to the survey.
At the very least, a caution flag should be hoisted when
undertaking peer evaluations of team members performance.
Let me illustrate.
I recall one team building session where a large group of
employees in a classroom setting were being guided by an
external consultant. She circulated a survey in which we
were asked to anonymously evaluate each person on a series
of sensitive points. The feedback was to be tabulated,
totaled, and hung on the wall for all to see. The thought was
that, in frankness, all could publicly see the scores, and ultimately address areas of weakness.
Included in the group was the executive staff who, incidentally, did not fare badly in this process. It may have had
something to do with a subordinate's fear of having his
handwriting recognized.
You might anticipate the disaster which occurred. Sheltering
their fear of being low in relative ranking, in front of superiors, many of the charmed group rated all others about as low
as possible. Others, it appeared, mistook the number one to
be a high rating, (1-10), while it actually represented the
lowest possible rating.
The result was an abbreviated team building session, hard
feelings among the members, and, believe it or not, the wellmeaning consultant in tears.
And yet, in another Work Improvement Seminar I attended,

the instructor advocated a similar concept for building
teams.
The instructor had just completed a lengthy discourse on the
need for absolute trust, candor, and openness among team
members; then followed it up with feedback survey examples that omitted the names of those providing critical feedback to a team member. Openness and Trust? I ' m thinking
that an individual receiving some severe criticism from an
anonymous source might spend a lot of time fretting over
which trusted team member broadsided him in print, but was
reluctant to do it faceside.
As a routine means of evaluating team interaction, surveys
might well be a waste of time. What is really important is
whether or not the task is being achieved within the parameters established. Is progress being made? Surveys have their
place in the process of evaluating attitudes in the workplace.
Normally, these fare better when used in a broader context
and designed and interpreted by those professionals knowing
what they are doing.
In the next issue I will be happy to give you some of my best
tips on how not to deliver constructive criticism.
Note: Reprinted from Tom King's works - Teams and
Techniques.
Thomas R. King, CVS, FSAVE, is SAVE Past President and

with Joy Technologies, Inc. located in Franklin, Pennsylvania.
Value World is published three times a year by the Society of American

Value Engineers normally in the months of February. June and October, and
is distributed internationally.
Editorial
Policy
Value World welcomes original articles on value engineering and related

disciplines. Reprints or abstracts from other journals or periodicals are
acceptable provided that prior permission is obtained from the original
publishers. Value World's policy is to provide the medium for contributors to
express themselves professionally on advances in the state of the art. The
views expressed in Valm H arid are neithei approved [101 disapproved b) the
Society of American Value Engineers.
Editorial
Staff
Editor-in-chief: Del L. Younker, CCE. CVS

Editor Emeritus: Jack V. Michaels. Ph.D. PE. CVS
Managing Editors: Jim Heinrich. VMP. and Dr. Kwaku Tenah. P.E.
Associate Editors: Harold J. Heydt, CVS
Production Editors: Lawton Printers
Contributing Editors:
Construction: Rex G. Wood. CVS
Education: Theodore C. Fowler, CVS
Finance: Russ Brzezinski. CVS
Industry: Thomas W. Warwick. CVS
Marketing: Stephen J. Kirk. Ph.D, AIA, CVS
Membership: Eugene A. Degenhardt. PE. CVS
Service: Alfred J. Paley, CVS
At Large: Joseph V. Lambert, CVS; Ginger R. Adams, CVS; and
Larry W. Zimmerman. PE. CVS. FSAVE
Society of American Value Engineers

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diskette (3.5") in Word Perfect or Microsoft Word. Artwork should be
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three months. Forward papers to the editor-in-chief at the production office
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Editorial changes and publication of an article or other contribution in any
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I Number 2 I June 1996

4. Value Analysis Techniques applied to

6. Value Analysis: A n Effective Tool in

7. Meeting the Requirements for Future

8. The Value Management Model

9. Thunder: Ghost Surveys that Backfire

Value Engineering: Paradigm Pliancy in Action

1 n reading Future Edge by Joel Barker, the futurist who has

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

change which is good, but also gives them no credibility in

Paradigm Pliancy, V E , Managers, and Leaders

V A L U E W O R L D , Volume No. 19, Number 2. June 19%

Scot A McClintock, PE, CVS is President, Mid -New York

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

Taking VA/VE into the 21st Century

tomers, management everywhere seeks to promote major

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

disciplinary team which analyzed existing conditions and

While the V M D system is flexible, it does demand that a

Lack of top management support/goals/objectives

The transition from V A / V E to Value Management

In order to survive the company had to change. The team,

Increased profits/improved growth potential

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

Environmental Value Engineering of the Design

JLhe design and selection of materials in buildings have

Kibert (2) defines EVE as "the re-orientation or adaptation of

Factors Considered in E V E Process

EVE takes the approach that building materials can be valued

natural resource formation (a)

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

An environmental value engineer considers these phases

and comparative analyses allow all steps to be examined and

Additional wall choices includes the use of wood or plasterboard

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

Lessons Learned in E V E vs. V E

The first scenario assumes that the industry continues to

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

all material production, development and use as a process to

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

from an environmental and energy conservation standpoint

1. Edwards et al., (1994), "Evaluating Embodied Energy Impacts

Dr. Kwaku A. Tenah is an Associate Professor at the M.E. Rinker,

Value Analysis Techniques applied to Project

Parker and Dell'Isola have built a FAST diagram that

We can also reference Howard Ellegant who states, from

The author will illustrate the importance of project scope

Better User's Requirements Definition cannot guarantee

A value techniques integration plan will be outlined from the

It must be understood that a project w i l l evolve as more

STATE THE PROBLEM

V A A / E will specifically be used to reinforce steps 1 and 2 of

A report by the US General Accounting Office (GAO, 1978 in

Figure 1-1 Net Savings Potential of VA/VE Study Adapted from

These studies, along with new techniques developed by

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

being defined as the capacity to fulfill the needs and cost,

To ascertain that the project definition will accurately state the

What Value Analysis brings to Project Management is this

In short, the Project Definition qualifies the project and

V A L U E W O R L D , Volume No. 19, Number 2, June 1996

these activities will occur." In order to do this, we build a