Production and Operations Management

Session 26 Æ VA/VE
 POM_GMP – Syllabus

Forecasting (14-15)

Long-term Medium-term Short-term

Capacity Planning/ Layout/ Aggregate Production Material Requirements

Location (16-18) Planning (19-20) Planning (21)

Production Process

Quality (23-25)

QFD FMEA VA/VE

(22) (22) (26)
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What is Value?

„ According to Aristotle (350 BC)

„ Political/ Social/ Economic/ Religious/ Ethical/
Aesthetic/ Judicial

„ Types of Economic Values

„ Cost value
„ Use value
„ Esteem value
„ Exchange value

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Economic Value – Examples

„ For a particular raw material used in your production

process, on an average it takes 20 days to receive raw
material after an order is placed (procurement lead time).
„ A new supplier has promised that they will reduce this
lead time to 15 days so that you can reduce your raw
material inventory.
„ In a peak season, when you outsource some of your
production, the manufacturer charges you 15% above his
production cost.
„ One real estate company said in their advertisement, “If
you buy a flat from us, you may find some famous people
as your neighbor.”
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Economic Value – Examples –
Continued

„ When a construction company was bidding for highway

project, during proposal submission they also mentioned,
“We are ISO 9001:2008 certified”, as relevant
information.

„ The “Benjamin Franklin Z Grill", is a 1-cent postage stamp

issued by the United States Postal Service in February 1868
depicting Benjamin Franklin. One of these rarest stamps
was sold for $935,000 in 1998.

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What is Value Analysis?

„ Value analysis is an organized creative approach which

has for its purpose the efficient identification of
unnecessary cost i.e., cost which provides neither quality,
nor use, nor life, nor appearance, nor customer features.
„ L. D. Miles

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VE Job Plan – Mudge (1971) – Phases

„ Covered
„ General phase
„ Information phase
„ Function phase
„ Not covered
„ Creation phase
„ Evaluation phase
„ Investigation phase
„ Recommendation phase
„ Implementation phase

Next

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Job Plan – General Phase

„ Inspire team work

„ Work on specifics
„ Overcome mental roadblocks
„ Apply good business judgment

Back

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Job Plan – Information Phase

„ Specifications and Requirements

„ Difference?
„ Imposed by customer or producer
„ Real or Imaginary?

„ Secure facts on specifications and requirements

„ Determine costs related to product
„ Fix costs on specifications and requirements

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 Generalized Cost Structure

Profit
Selling Cost
General Administrative Costs
Field Service and
Miscellaneous
Selling Price Costs Overhead Cost of
Costs Conversion Goods Sold
Indirect Labor Costs Cost of Goods
Manufacturing
Indirect Material
Direct Labor
Prime Costs
Direct Material

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Job Plan – Function Phase

„ Define the functions that a product actually performs

„ Evaluate functional relationships
„ Subjective evaluation
„ Function Analysis System Technique (FAST)
„ Technical oriented FAST Diagram
„ Customer oriented FAST Diagram
„ Numerical evaluation

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Rules of Function Definition

„ Rule 1: Expression of functions must be

„ A verb and a noun

„ Rule 2: Types of Functions

„ Work function/ Sell function/ Constraint

„ Rule 3: Divide into two levels of importance

„ Basic function/ Secondary function

Back

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Example – Screwdriver Technical FAST
Customer FAST

Functions
Components
Verb Noun
Facilitate Grip
Handle Receive Torque
Prevent Rotation
Protect Wood
Varnish
Improve Appearance
Name Plate Identify Manufacturer
Suit Slot
Deliver Torque
Transmit Torque
Shank
Provide Approach
Facilitate Application
Prevent Rotation
Sleeve Prevent Cracking
Join Components
Pin
Withstand Force
Back
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Function Analysis System Technique
(FAST)

„ How to differentiate between “Basic Function” and

“Secondary Function”?

„ Proposed by Mudge – A Trial-and-error method

„ Divide the product into components
„ For each component
„ Find basic function
„ Using numerical evaluation
„ Find weights of all basic functions
„ The basic function with highest weight
„ Becomes basic function of the product

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FAST

„ Developed by Charles V. Bytheway

„ Incorporating dimension “When” – Richard J. Park
„ Technical oriented FAST – Wayne Ruggles
„ Customer oriented FAST – Thomas Snodgrass & Theodore
Fowler

„ Work Function Æ An active verb + A measurable noun

„ Sell Function Æ A passive verb + A non-measurable noun

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Technical oriented FAST – Some Terms

„ Scope line
„ Higher order function
„ Basic function
„ Required secondary function
„ Causative function or Lower order function
„ Functions “At the same time” and/or “Are caused by”
some other functions
„ “All the time” functions
„ One time function
„ Design objectives
„ Critical path

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Technical Oriented FAST

Screwdriver

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Customer Oriented FAST – Some
Terms

„ Task
„ Basic function
„ Supporting functions
„ Assure convenience
„ Assure dependability
„ Satisfy user
„ Attract user
„ Scope line

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Steps to Identify Basic Function

„ Identify Basic Function – Answer the questions

„ Is this function what users are looking for?
„ If this function is eliminated, will the item continue to
do the job?
„ Will the function disappear, if the design approach is
changed?

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Customer Oriented FAST

Screwdriver Back

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 POM_GMP – Syllabus – At a Glance

Forecasting (14-15)

Long-term Medium-term Short-term

Capacity Planning/ Layout/ Aggregate Production Material Requirements

Location (16-18) Planning (19-20) Planning (21)

Production Process

Quality (23-25)

QFD FMEA VA/VE

(22) (22) (26)
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 VA/VE – Continued

(Out of End-term Syllabus)

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Numerical Evaluation Techniques

„ Weighted evaluation method

„ Equal importance method
„ Descending order of importance method
„ Paired comparison method
„ Forced decision technique
„ Quantitative method
„ Predetermined minimum method
„ Breakeven analysis
„ Life cycle costing (Not covered)

Back

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Job Plan – Creation Phase

„ Deal with predominantly creative mind and set aside

judgment
„ First steps to try answering question “What else will do?”

„ Steps
„ Establish positive thinking
„ Develop creative ideas

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Job Plan – Evaluation Phase

„ Select the promising ideas of the creative phase for further

analysis
„ Will it work?
„ Is it less costly than the present design?
„ Is it feasible to implement?

„ Refine and combine ideas

„ Establish cost on all ideas
„ An estimated cost should be calculated
„ Other questions
„ What are the potential costs of implementing the idea?
„ What are the resultant savings implied?
„ Develop function alternatives
„ Evaluate by comparison
„ Function-Cost-Worth analysis

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Function-Cost-Worth Analysis
(FCWA)

„ Value Gap = Difference between Worth and Cost

„ Indicates scope of possible value improvement
„ Value Index = Cost per unit worth
„ More than 1 Æ Potential for value improvement

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Cost Allocation Procedure

1. Split the product into components and service/system into

activities
2. Define functions of components/activities
3. Divide the total cost of product/service/system into
components/activities cost
4. Processes performed to achieve particular function
ÆCost allocated to that function
5. Component provided to achieve particular function
ÆCost allocated to that function
6. Component accomplishes more than one function
ÆAllocate based on weight/volume/surface area/length
7. Hold each function in isolation of the others to do this
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Worth Allocation Procedure

„ First list all functions and costs in descending order.

„ Then ask the following questions:
„ Will you pay if it is your money?
„ If not, what do you consider reasonable?
„ By whom or where a similar function is available at
lower cost?
„ What should you do to obtain the function within that
cost?

Back

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Job Plan – Investigation Phase

„ Three techniques are used to

„ Further refine the selected ideas into workable and
acceptable solutions
„ Providing lower cost methods for performing the
desired function

„ Techniques
„ Use company and industrial standards
„ Consult vendors and specialists
„ Use specialty products, processes and procedures

Back

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Job Plan – Recommendation Phase

„ Finally selected value alternative is recommended for

acceptance and implementation

„ Techniques
„ Present facts
„ Motivate positive action
„ Team recommendation

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Job Plan – Implementation Phase

„ Addresses following issues

„ Factors governing acceptance
„ Requirements for acceptance
„ Mechanism for implementation: who will monitor the
implementation, who will do it, who provides the fund,
who reports the progress, etc.?
„ Determine the areas that are affected
„ Determine time and sequence of effort and quantity at
break-even point
„ Follow up
„ Measure results of gain in money and time. Compare
net gains with the full cost of the value effort
Back

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Benefits of Value Engineering

„ Helps to pinpoint areas that need attention and

improvement
„ Helps in generating ideas and alternatives for possible
solution to a problem
„ Provides a method to evaluate alternatives
„ Provides a platform for dialogue
„ Records the logic behind the decisions
„ Improves the value of goods and services significantly

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Case – Isuzu Motors – Development
Stages and VE Aspects

Concept Planning Development Development and Production-

proposal and Product Production-sales sales
preparation preparation preparation

Target value
Zeroth look VE Manufacturing VE
Second look VE
Wave method
First look VE
Mini VE
VE reliability program
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Relationship – Job Plan and Isuzu Case

„ General phase
„ Prepare – Cost Deployment Flowchart/Strategy Map
„ Information phase
„ Tear-down programs
„ Function phase
„ Creation phase
„ Developing functional alternatives
„ Zeroth look VE
„ First look VE

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Relationship – Job Plan and Isuzu Case
– Continued

„ Evaluation phase
„ Second look VE
„ Manufacturing VE
„ Mini VE
„ Investigation phase
„ Value target
„ Recommendation phase
„ Implementation phase

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