Value Analysis and

Value Engineering

Definition
Value Analysis (VA) and Value
Engineering can be defined as an
organized and systematic approach
to provide the required function at
the lowest cost consistent with
specific performance, quality, and
reliability.

Features of Value
Analysis
Value analysis pertains to the existing
product and services whereas value
engineering is concerned to the design of
new products.
The main objective of value analysis is to
increase profit by critical examination of
the areas of high cost in the manufacturing
of a product or a service and finding out
the ways and means of reducing or
elimination of unnecessary costs.

Contd..
The value can be increased in three
ways:
Retain the value but reduce the cost.
Retain the cost but increase the
value
Increase the cost if necessary, but
increase the value much more than
the cost.
The value analysis is a group activity
consisting of cross functional team.

Concept of value
Types of value :
Use value primary or basic value
Esteem value enhanced value
associated with a brand or a product
created by smart marketers. This is a
notional or snob value for which the
customer is ready to pay higher. This
is also known as the secondary value
associated with the product.

Steps in value Analysis.

Collect data about cost function, customer
needs, history and likely future
developments related to the product and
its use. Determine the function of the
product.
Develop alternative designs to fulfill the
functional requirement of the product.
Ascertain the cost of the alternatives.
Evaluate the alternatives to fulfill primary
and secondary values with minimum cost.

Contd
Recommend and implement the best
solution. Control and periodic
measurement of performance with
corrective action is advisable.

Factors influencing Product

Design or Redesign
As per customers perspectives
Functions musts and wants
needs.
Aesthetics marketing requirement
User friendliness ease of use,
market leadership.
Esteem associated with possession
additional distinguishing features,
possession of Rolls-Royce car.

Contd
Organizational perspective optimum
utilization of internal resources.
Intrinsic cost of material elimination of
wastages, reduction in material
consumption and elimination/substitution of
non value adding components in the
product or service. Use of cheaper and
better substitute parts.
Intrinsic cost of labor work measurement,
time study, motion study and method study.

Contd
Replacement, exchange and
disposal- of personnel, machines or
material due to product design or
redesign.

Methods of value
analysis
Eliminate parts in operation non value
adding parts e. g. replace car audio system
by FM.
Simplify parts in operation multi-functional
switches in a four wheeler or two wheeler.
Substitute alternative materials e.g.
substitution of heavy rigid steel car bumpers
with lightweight collapsible fibre glass
reinforced ABS plastic bumpers.

Contd..
Use standard parts in materials
modular manufacturing to obtain
flexibility and reduction in cost. E. g.
construction, furniture and
automobile industry.
Relax manufacturing tolerances e.
g. note on drawing that all sharp
corners to be rounded off instead of
specifying radius of sharp corners.

Contd..
Use standard manufactured parts reduce
inventory, reduce cost.
Eliminate unnecessary design features
specify only required dimensions to reduce
cost of production.
Change design to suit manufacturing
process in house for close monitoring and
reduce cost.
Buy if cheap than make outsource if cost
of manufacturing in house is more.

Contd
Use pre-finished materials:- prefinished parts and components
reduce inventory, reduce cycle time
and speed up the manufacturing and
assembly process.
Use pre-fabricated parts :- prefabricated parts and components
reduce inventory, reduce cycle time
and speed up the manufacturing and
assembly process.

Contd
Rationalize product range in terms of customer
satisfaction, return on investment and future
expansion
Substitute labor cost manufacturing processeliminate human error, lower cost of production
and better quality of the end product.
Rationalize and standardize low cost purchased
parts no shortage, no inventory and low cost.
Eliminate material waste optimum utilization of
material to avoid use of excess material.

Value Analysis Area of

Improvement

Functions
Details of the basic functions.
Details of secondary functions.
Are all the functions necessary?
Substitute the factors.
Combination of the factors.

Contd

Materials
What materials are used?
Look for alternative materials.
Reduction in waste materials.
Standardization of materials.
Use of cheaper and better substitute
materials.
Price of materials.
Make or buy decision.

Contd

Manufacturing
Define operations.
Can it be eliminated?
Can it be substituted?
Can it be simplified?
Can it be standardized?
Can standard tools be used?
Can pre-fabricated parts be used?
Make or buy the parts.

Contd

Specifications
Define specifications.
Can dimensions be reduced?
Are the parts oversized?
Are tolerances very close?
Are tolerances very critical?
Can tolerances be increased?
What type of finish is required?
Are finish standards essential?

Phases of value
engineering
Orientation phase training , selection
of subject of study and form a team.
Information phase information
regarding key questions of cost and
collect data about spercial waste and
work procedures. Sources of information
can be government publications,
government reports, suppliers,
competitors, project data, historical data,
experimental data, etc.

Contd..
Functional phase answer
following questions
What does it do?
What must it do?
How much does it cost?
What is its function/work?
Speculation/creation phase
brainstorm and find feasible
alternative substitutes.

Contd
Evaluation/Analysis phase evaluation on
the basis of value addition or cost reduction.
Recommendation phase - make prototype,
take trials, get customers feedback, access
managements need for profitability and ROI.
Make presentation to the customers,
organizational people, and the dealers for the
acceptance of the idea. If everything goes well
and chances of idea becoming successful are
high, recommend the same for implementation
as a validated idea.

Contd
Implementation phase value engineering
team to work out action plan with required
resources and time bound schedule. Remove
bottlenecks, monitor for smooth
implementation to obtain desired results.
Audit follow up prepare periodic reports of
results obtained under normal working
condition. After successful implementation
value engineering team looks for spin-off
projects in other similar areas and initiates
new projects.

Darsiri method
Darsh in Sanskrit means to
reconsider. The darsiri method of value
engineering is the systematic approach
to improve the value of product and its
components by reconsideration of the
cost & quality. Focus in the process of
reconsideration is on the quality of the
product based on its functions, esteem
and cost.

Steps of Darsiri method

Data collection based on function and cost .
Data analysis focused on saving in cost
with improvements in the product features
without compromising on performance and
reliability of product and related service.
Recording of ideas through brainstorming
exercise.
Speculation and selection based on earlier
trial and failure, technological viability,
availability of material etc.

Contd..
Investigation prototype testing for
performance. Select the best
alternative to satisfy all basic
functions and maximum no. of
secondary functions.
Recommendation value
engineering team recommends the
best alternative for implementation
and arranges for required resources.

Contd
Implementation responsibility of
implementation is shifted to most
affected department. If the exercise is
for better market share, the department
will be marketing department. On the
other hand if the objective of the value
engineering is cost reduction, the
implementing department will be
manufacturing department.

Contd..
A periodic review is always required
after implementation to find out the
scope for further improvement as
well as for implementing in the other
relevant areas.