Transcript Value Engineering

Value Engineering (VE)
By
Sa’Ed M. Salhieh, Ph.D.
What is Value?
 That amount of some commodity,
medium of exchange, etc. that is
considered to be equivalent to something
else (Oxford English Dictionary)
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Value Theories
 The Utility theory :
 The value of something is related to its utility - in
the sense that the more uses an item has the
greater is its value
 Iron and Gold
 The Labor theory
 This theory suggests that the value and labor are
proportional - the more labor work done on an
item the higher its value will be
 One can increase the value of some product by
simply selecting the mode of production with
the highest labor costs
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Value Theories
 The Cost theory,
 The value of some item is equated by its cost - the
more it costs the more value it gain
 The value of a Christmas tree would be the
same in June is as it in December
 The Price theory,
 The price paid in exchange for an item is a
measurement of its value
 The inconsistency here is that if the value of the
item to be traded were the same to the buyer
and the seller, neither would be motivated and
the exchange would never be executed
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Value IS
 relative and is not an inherent feature of
anything
 can be measured only by comparison
 is the relationship between what someone
wants and what he/she is willing to give up in
order to get it
 The value of an item can be measured only
by the individual desirous of attaining or
retaining it
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Measuring Value
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Can be measured by what a customer exchanges,
intends to exchange, or should be willing to exchange
for various options that can satisfy a want or need
Is a function of the (perceived or expected) benefits
relative to the price (to be) paid
Value = f (benefit, price)
Where,
Benefits: functional, Psychological, economic
Price: Monetary, Perceived risk, Inconvenience
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Types of Value in VE
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Value Engineers are most concerned with Economic Value,
which itself can be subdivided into four types,
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Use value:
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Esteem Value:
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Describes the feature or attractiveness of an item that causes
it to be desired
Cost value:
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The work or service it can perform or help it can accomplish
Which can be defined as the total cost of producing a
particular item and it represents the effort that must be
expended to acquire an item. (The sum of labor, material and
overhead costs)
Exchange value:
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Is the quality of an item that allows trading the item for
something else
It is a measure of all the properties or qualities of an item that
could make someone give something else up for it
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Value
 value increases with higher
exchange, esteem and use value
but decreases with higher cost
value
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Value
VALUE = What we get out of something
What we put into it
VALUE = Quality, reliability, appeal, etc = Benefits
Cost, time, mass, energy, etc. Resources
VALUE = Worth =
Cost
Performance
Cost
= Function
Cost
Delivery of necessary project functions while
achieving best balance between project performance
and project costs.
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FUNCTION
VALUE =
COST
To Increase Value
F
F
F
F
C
C
C
C
REDUCE
INCREASE
MAINTAIN
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Competitive Advantage
Quality is defined as “conformance to
specification.”
Value is defined as:
Function
Cost
You can’t have one without the other!
Competitive Advantage = Quality + Value
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Reasons for Unnecessary Costs
 Lack of information
 Lack of ideas
 Temporary circumstances
 Honest wrong beliefs
 Habits and attitudes
 Changes in owner requirements
 Lack of communication and
coordination
 Outdated standards and specifications
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Definition of Value Engineering
Value Engineering is the systematic
application of recognized techniques by
multi-disciplined team(s) that identifies
the function of a product or service;
establishes a worth for that function;
generates alternatives through the use
of creative thinking; and provides the
needed functions, reliably, at the lowest
overall cost.
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Value Engineering
 Value Engineering may be defined in other ways,
as long as the definition contains the following
three basic precepts:
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An Organized review to improve value by using multidisciplined teams of specialists knowing various aspects
of the problem being studied
A function oriented approach to identify the essential
functions of the system, product, or service being
studied, and the cost associated with those functions
Creative thinking uses recognized techniques to explore
alternative ways of performing the functions at a lower
cost, or to otherwise improve the design
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Value Engineering IS
 Systematic problem solving process
 Multi-discipline team approach
 Life-cycle cost oriented
 Value oriented (measurement of scope
performance/project costs)
 Function-based analysis
 Free of normal design restrictions
 A proven management technique
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What Can Value Engineering Do?
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Focus on the “big picture”
Improve decision-making
Develop realistic budgets
Ensure required functions are addressed
Enhance understanding of the total project
Challenge paradigms
Identify and remove unnecessary costs
Accelerate the design process
Encourage cross-discipline communication
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Value Engineering IS NOT
 Design Review
 It is not intended to correct omissions made in design
nor to review calculations made by the designer
 A Cheapening Process
 It does not cut cost by sacrificing needed reliability and
performance
 A Requirement Done On All Designs
 It is not a part of every designer scheduled review, but
a formal cost and function analysis
 Quality Control
 It does more than review fail-safe reliability status of
plant or product design
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When is VE used
 Value Engineering is used to determine the best design
alternatives for Projects, Processes, Products, or
Services
 Value Engineering is used to reduce cost on existing
Projects, Processes, Products, or Services.
 Value Engineering is used to improve quality, increase
reliability and availability, and customer satisfaction .
 Value Engineering is also used to improve
organizational performance.
 Value Engineering is a powerful tool used to identify
problems and develop recommended solutions.
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Potential Savings from VE
Cost
Or
Savings
Varies
with
Project
Saving from VE
Cost of
Implementation
Resistance
Line
Acceptance
Line
Planning
and
Analysis
Schematic
Design
Design
Development
Working
Construction
Drawings
Documents
Operation
Construction
And
Maintenance
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Conventional Approach VS.
Value Engineering
PM
Designer
Owner
User
Engineers
VE Team
Approach
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When to Perform a VE Study
 Concept stage (scoping)
 Schematic design stage
 20-30 percent development stage
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Value Engineering Techniques –
The Functional Approach
 Cost is related to function not to production
 The production engineer asks
 How a part can be produced more cheaply
 The value engineer asks
 How the function performed by the part can be
provided by the least cost
 For example
 If it was required to make an ashtray, a production
engineer might conduct a study which results in
changing the base material or changing the production
method, while a value engineer study could result in
making an ashless cigarettes
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Value Engineering Techniques –
The Functional Approach
 A value engineer must ask and answer the following
series of questions,
 Q1: What is it ?

The answer will establish the parameter of the study
 Q2: What does it do ?
 The answer will provide the definition of the function
 Q3: What does is cost ?
 The cost here refers to the total cost of the item
 Q4: What is the function worth ?
 The evaluation phase starts with the answer of this
question
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Value Engineering Techniques –
The Functional Approach
 Q5: What else will accomplish the function ?
 The creative phase is entered. All the possible
alternatives are listed, and the ideas that best perform
the function and have the highest degree of
acceptance and possibility for implementation are
selected
 Q6: What will that cost ?
 Costs are estimated and assigned to the best ideas,
this will refine the possibilities to a few ideas and will
establish priorities for these few. The best of these
ideas are selected for further development
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Value Engineering Techniques –
Job Plan
 Job Plan
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Value Engineering can be thought of as the
use of specific techniques in an organized
manner
This organization is provided by the job plan
which can be defined as “thought processes
and activities needed to properly perform a
value engineering study” (Mansour, 1994)
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Six Step Value Engineering Job Plan
Information
Phase
Clearly identify the problem(s) to be solved, and
gather information on the background, functions and
requirements of the product, process, or system.
Creativity
Phase
Brainstorm ideas on how to improve the high cost,
broken, or inadequately performed key functions.
Evaluation
Phase
Screen ideas for acceptance, score remaining ideas
on a scale and group ideas into categories. Develop
design scenarios, and selection criteria. Rate and
rank ideas.
Planning
Phase
Plan how to sell ideas to management, identify key
recommendations, plan management presentation.
Reporting
Phase
Give oral presentation to management, or develop
written report.
Implementation
Phase
Get management approval for go-ahead, make
management plan, make assignments, implement,26
follow-up.