Value Engineering

The Value Engineering Approach (or simple VE) is a type of magic! The “magic” acts which we have seen performed on stage over the years are not achieved through sorcery or miracles. Instead, these acts are based on the application of a systematic, planned approach to obtain a desired effect. In the case of the magician, the desired effect is illusion, or the seeming accomplishment of the impossible, the results of which are amusing and non-productive.

The Value Engineering Approach is likewise neither sorcery nor miracle. It, like the magician’s approach, involves the application of a systematic, planned procedure to obtain a desired effect. It is their desired effects, however, that the two approaches differ. The desired effect of the Value Engineering Approach is positive: its result is “the same or better performance at lower total costs.”

Value Analysis to Value Management

The fundamentals of the Systematic Approach were conceived and brought together in 1947, in the General Electric Company (GE). The approach was then called value analysis and was applied within the purchasing area of the industry.

As more was learned about the Systematic Approach, it was realized that it had a broader application. This broader application was in the engineering and manufacturing, areas that also generated and influenced the costs of a physical product.

With growing use and continual refinement and development, it has evolved to the point where it has been found to be applicable to all business areas, to anything that affects a product’s total cost.

Objective of Value Engineering

The objective of Value Engineering is to provide a means of total cost control anywhere within a product’s life cycle. It stresses only the reduction or elimination of cost. This is done while maintaining the required quality and reliability of the product to which the systematic approach is applied.

An implied objective is not to cheapen or degrade the product.

Definition of Value Engineering

“Value Engineering is the systematic application of recognized techniques which identify the function of a product or service, establish a monetary value for that function, and provide the necessary function at the lowest overall cost.” – Society of American Value Engineers

Note: The terms value analysis, value control, value assurance, value management, and all other similar terms are considered to be synonymous. They are so considered because they apply the same basic methodology and techniques and have the same basic objective. Purpose of Value Engineering

The application of the technology of this systematic approach provides a means of isolating the necessary from the unnecessary. This is accomplished in the areas of both function and cost. The purpose of the Value Engineering Systematic Approach is well served when the user is able to define and segregate the necessary from the unnecessary and thereby develop alternate means of accomplishing the necessary at a lower total cost.

Cost

As can be determined from the discussions of the purpose and the objectives of this Systematic Approach, one of its major focal points is total cost.

Total Cost: The sum of all efforts and expenditures made in the development, production and application of the products.

Total cost as defined contains three basic areas of cost which must be analyzed and related to each other at all times; i.e., development cost, production cost, and application cost. Starting with the latter, the producer of the item must constantly evaluate effects on quality, reliability and maintainability, because any effect on any of these will have a distinct effect on the user’s total cost.

The efforts and expenditures made in the development cost’s area also have a telling effect on the item’s total cost. Because they must be spread over every item produced, they further affect the item’s production and application costs.

The final area of the total cost that is to be considered is the production cost. This area of the total cost must be given the greatest consideration because it normally contains the greatest amount of unnecessary cost.

The area of production cost can be broken down into three distinct areas of cost: material, labor and overhead. Most cost reduction or cost control efforts are directed at the reduction of the labor content of the production cost. On the other hand, the Value Engineering Systematic Approach directs its primary efforts at the material content of the product cost. It is important to note that this does not mean just the physical material but that it also considers the function or functions to be performed by the material and the effect that these functions have on all other cost factors.

Unnecessary Costs

Unnecessary costs are those costs which do not meaningfully contribute to the product to which they accrue. They, however, are best understood if their causes are established, interpreted, and analyzed. The reasons for unnecessary costs can be grouped into three basic categories: mental conditioning, mental roadblocks, and faulty communications.

Mental Conditioning – is a category of unnecessary cost that can be subdivided into five basic conditions: • Lack of Information – caused by the nonaccumulation of accurate and detailed facts regarding costs and specifications. It may also result from misinterpretation or misunderstanding of the requirements or from inaccurate definition of the problem. • Lack of Ideas – caused by insufficient use and application of background knowledge, industrial knowledge, the skills of company and industrial specialists, standards, specialty products, creative thinking, and time.

• Honest Wrong Beliefs – may result from the above conditions as well as from the ready acceptance of opinion, hearsay, half truths, speculation and theories for whole facts without justification or verification. These beliefs, although honest, are incorrect and not in accord with existing facts. • Temporary Circumstances – cause the continued applications of solutions which are applicable to a temporary condition or set of conditions after that condition has disappeared. This improper application of solutions is occasioned by the presence of one or more of the first three conditions.

• Habits and Attitudes – established as a result of the acceptance of the first four conditions, basically because the human individual is a creature of habit. The individual’s past experiences, beliefs and traditions cause him to establish a particular habit pattern in what he does and thinks, and habits cause him to solve similar problems in similar ways. Because of this, a new solution, being different from the normal pattern, causes the attitude of “resistance to change.” It has been said that “Habits take us where we were yesterday, and our attitudes tend to keep us there.”

Mental Roadblocks – also identified as the single-solution fixation. This is akin to the above habits-and-attitudes condition, but it is also quite different. What happens here is that a problem is presented; the mind assimilates that problem, finds a solution, and immediately shuts itself off. When this reaction is carried to its full extent, one reaches the state in which habits and attitudes play their part. It has been found that when a similar problem occurs, the mind goes back through its memory system and seeks out the original solution and applies it to the current problem without any modification or deviation. Hence, the single-solution fixation.

Faulty Communications – communications, or rather the lack thereof, make up the third category of causes of unnecessary costs. Furthermore, this category is not merely additive but is a multiplier of the effects of the previous two categories.

Each individual’s ability to communicate is undeniably and permanently linked to his background, education and training. These parts of each individual’s personality have the most telling effect on his ability to understand the spoken and written word as well as his ability to make himself understood.

This mental roadblock or single-solution fixation is best understood through example. What do you see in the drawing above? A pretty girl? An old lady? Actually an old lady and a young girl are in the picture. If you don’t see both, you, like most individuals, are subject to the single-solution fixation or to possible mental roadblocks. Look at the drawing again.

The pretty girl is facing away from you, toward the right background, and she wears a big hat and a decorative choker around her neck. Looking again, you will see another face. Instead of the pretty girl’s chin, see an old woman’s nose; instead of the girl’s ear, the old woman’s eye; a toothless mouth for the choker; and a jutting chin for the shoulder.

When this drawing is viewed by a group, there is a fairly even distribution of the individuals who see one or the other of the women in the picture. There are, however, very few who see both women, it has further been found that if the same group is shown the picture again after a period of time, each of its members sees the same woman he saw the first time.

This effect can most graphically be illustrated by the use of a simple and fundamental example. The magnitude of the multiple-meaning problem graphically takes shape when the following word is studied for its meaning. The word is cat. This is one of the first words that we learn to read, write and speak. What does it mean?

It is a simple yet complex word. It is one that has specific definitions as well as implied definitions, universal as well as local definitions. What does it mean? The following are some common dictionary definitions.

1. A carnivorous mammal long domesticated and kept by man as a pet (tomcat, alley cat)
2. A person, as a spiteful woman, likened to a cat
3. Short for catfish or cat-o’-nine-tails
4. A name for numerous games
5. A strong tackle used to hoist a ship’s anchor
6. A hepcat

In addition to these six definitions, both specific and slang, there are at least two more uses of the word in business and industry. The word is used in the oil-drilling industry to specify a part of the drilling equipment. In the construction field, it is used as another name for a bulldozer. Here then is a simple, three-letter word that, when spoken or written, can be used to mean any one of eight different things to the user and can be understood to mean the same thing or any one of seven other things by the listener or the reader.