Value Engineering

Publication Date :

02 Sep, 2023

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Table Of Contents

What Is Value Engineering?

Value engineering (VE) refers to a systematic and structured way of enhancing the value of a project, process, or product while minimizing costs. The primary objective of this approach is to achieve the desired performance, functionality, and quality at the lowest possible price.

These are commonly applied in various industries, including construction, manufacturing, and software development. It involves substituting the existing methods and materials with more efficient or cheaper alternatives while maintaining the product's functionality. It is particularly valuable in situations where cost constraints are present or where there's a need to optimize resources without compromising quality.

What Is Value Engineering?

Value Engineering (VE) is a systematic and preventive approach to interpret and improve the value of a product. It aims to maximize the value for the least cost while maintaining or improving functionality and quality.
The process of this approach involves six stages such as information gathering, function analysis, idea generation, evaluation, development and analysis, and presentation phase.
However, this differs from Value Analysis (VA) and Value Management. Since value analysis focuses on the value enhancement of the existing project, or process. Whereas, value management emphasizes overall value creation by efficiently managing the project or product life cycle.

Value Engineering Explained

Value engineering refers to achieving the desired functionality, and performance of a product or project while minimizing unnecessary expenses. It is commonly employed in engineering, construction, manufacturing, and project management. Value Engineering (VE) has a history that dates back several decades. The concept was first discovered in 1945 by Lawrence Miles in General Electric Co.

The evaluation of this approach is based on the formula,

Value Engineering = Function ÷ Cost

Thus, it establishes a relationship between the value of the function for customers and the life cycle cost of a project.

Therefore, the core principles of this approach involve

Breaking down the functions of a product or project
Generating alternative solutions
Evaluating those alternatives based on criteria such as cost and performance, making informed decisions about implementation.

However, it is not a one-time activity. Value engineering analysis promotes a culture of continuous improvement by periodically reviewing projects and products to identify further opportunities for optimization. It's essential to involve a diverse team with different perspectives and expertise during the process to generate various ideas and solutions. Furthermore, organizations can balance functionality, quality, and affordability by focusing on value rather than merely reducing costs.

Additionally, it's worth noting that value engineering should be conducted with careful consideration of all relevant stakeholders. Since changes to a project's design can have far-reaching impacts on various aspects such as functionality, safety, and user experience. Besides, business value engineering focuses on maximizing the benefits a business provides to its stakeholders while minimizing unnecessary expenses.

Process Steps

The value engineering analysis process involves innovation and continually incorporating new ideas to enhance value. It comprises the following basic steps:

Information Gathering Phase: The initial step in this process involves thoroughly understanding the project, product, or process under review. Therefore, this includes gathering relevant information such as specifications, design drawings, cost data, performance requirements, and stakeholder expectations.
Function Analysis Phase: The team identifies and defines the primary functions of the subject under review. These functions represent the core purposes or actions the project, product, or process intends to perform.
Idea Generation Phase: Encouraging the team to brainstorm and suggest various ideas is crucial. These ideas can encompass alternative materials, design modifications, process improvements, or innovative approaches to achieve the required functions.
Evaluation Phase: Each idea is rigorously evaluated based on its potential impact on value, feasibility, practicality, and cost implications. The team then selects the most promising ideas that can be practically implemented.
Development and Analysis Phase: The selected ideas are further developed into detailed proposals, including sketches, models, cost estimates, and performance predictions. Thus, the team thoroughly analyzes these proposals to understand their potential impact.
Presentation Phase: One of the most crucial steps is when the project manager prepares a presentation to represent and communicate the plan to the top-level management or board of directors. Also, they must be ready with alternative ideas to allow comparison and informed decision-making.

Effective communication and cooperation among team members and stakeholders throughout the process are pivotal in achieving successful outcomes. However, the company can approach an external third party to execute value engineering if the executives need more expertise.

Examples

Let us now understand the value engineering concept through the examples below.

Example #1

Imagine Kiewit Corporation, a US-based construction project for a residential complex aiming to enhance its value through value engineering. During the process, the project team identified that the original roofing material was expensive and had a shorter lifespan. Thereby, leading to potential maintenance costs in the future. Hence, through creative idea generation and cost analysis. The team explored alternative roofing materials that were more cost-effective and offered better durability and energy efficiency.

After evaluating different options and considering long-term savings in maintenance and energy bills, they switched to a high-quality, longer-lasting roofing material. Therefore, this decision lowered immediate construction costs and provided significant long-term benefits for both the residents and the building's operational costs, resulting in an improved overall value proposition for the complex.

Example #2

The AI-powered go-to-market platform XFactor.io unveiled MIKEY on June 27, 2023, a ground-breaking AI platform for scaling revenue-based growth decisions. To have the maximum impact, MIKEY integrates AI for value engineering and revenue development management with the methods and techniques used by the finest CLOs (Collateralized Loan Obligations) in the world.

Budgets and people are two elements that organizations frequently need to improve to support efficient go-to-market plans. By continuously calculating static and dynamic data at the micro and macroeconomic planes, MIKEY overcomes these difficulties and establishes market trajectories and fluctuations that lead to suggested executive actions.

The platform includes an AI model specially created and trained using market data from XFactor.io and the collective wisdom of the organization's leadership team.

Advantages And Disadvantages

The benefits of this approach often outweigh the disadvantages when implemented with proper planning, expertise, and collaboration among all stakeholders. Here are some of these pros and cons:

Advantages	Disadvantages
Analyzing different components, materials, and processes, this approach can lead to more cost-effective solutions without compromising quality or functionality.	The Value Engineering process requires time, effort, and resources to analyze and evaluate various options. This can be a challenge, especially in time-sensitive projects.
It encourages the examination of alternatives and the exploration of new ideas.	Some team members may resist the idea of this approach, especially if they feel their work is being questioned or if they are attached to a particular design or approach.
Value engineering often results in developing new ideas and approaches that add value to the project, process, or product, initiating innovative thinking.	In pursuit of cost savings, there is a risk of deteriorating the quality if not carefully managed.
Focusing on the essential functions of a product or project helps identify potential weaknesses and areas for improvement, leading to advanced overall quality.	These demand diverse skills and knowledge, but the outcomes might only be apt if the team has experience or expertise.
Moreover, it considers potential risks and proposes alternative solutions to mitigate the issues, thus reducing the likelihood of costly failures or rework.	While cost reduction is a significant goal of this process, focusing solely on cost can lead to neglecting other important factors like safety, durability, and user experience.
They are a collaborative approach whereby shareholders' opinion matters, increasing stakeholder satisfaction.	If the process team fails to consider all relevant factors or overlooks crucial details, the solutions may not effectively address the project's needs.

Value Engineering vs Value Analysis vs Value Management

Value engineering, value analysis, and value management are related concepts that aim to improve the value of products, services, or projects by optimizing their functions and costs. While they share some similarities, they have distinct approaches and applications:

Basis	Value Engineering	Value Analysis	Value Management
Definition	It is an organized approach used to identify opportunities for improving the value of a product, system, or project by increasing its functionality at a lower cost.	Value analysis emphasizes interpreting the value of existing products, processes, or services to find opportunities for improvement.	Value management involves managing the entire life cycle of a project or product to ensure its value is maximized.
Primary Purpose	Cost optimization and function analysis during the design phase to enhance the value of a project, product, or process	Identifying unnecessary costs, inefficiencies, or redundant features and eliminating them while maintaining or enhancing the product's overall value	Encompassing the entire project or product life cycle and emphasizing strategic value optimization
Approach	Preventive	Remedial	A holistic approach comprising both value engineering and value analysis
Performed During	Design stage	Post-introduction stage	Throughout the project life cycle
Examples	Changing the product packaging to curtail cost while ensuring safety, easy handling, transportation, and preservation of the product	Reducing the unnecessary steps in the production process to accelerate production and decrease cost	Replacing the manual process with digital methods to increase productivity and continuously upgrading the system for new developments and efficiency

Frequently Asked Questions (FAQs)

1. What is value engineering in construction?

In construction, value engineering is used for improving the system, material selection, equipment, and designed building attributes to ensure better functionality at a lower cost. The process starts during the design phase while the contractor undertakes the process in the construction phase.

2. What is value engineering in project management?

The project managers employ this to bring down the life cycle cost of a project, including its systems, equipment, facilities, materials, products, and services, without hampering its functionality. A product or service is, thus, analyzed for its lifetime cost right from its inception to its disposal for brainstorming various cost-saving ways.

3. Is value engineering a one-time process?

Value engineering can be applied at different stages of a project's lifecycle and is not limited to a single event. It can be a continuous process, fostering ongoing improvement and adaptation to changing conditions and goals.