17 VALUE ENGINEERING

(VALUE
ANAXYS gou

17.1. INTRODUCTION
as
value-analysis, is a systematic application
also known oi
Value Engineering.
techniques,which:
1. 1dentifes the function of aproduct or
service,
function,and
recogiget
establishes a value for that
2. total cost without degradation.
achieving that function atthe lowest
In other words, valueengineering is the conscious, systematic application of aset of techniquea
3.
that identify needed functions, establish values for them, and develop alternatives to periorn
are affected by value
cost. The other attributes which
these functions for
are reliability,
minimum
maintainability, reduction in weight, and
the saving, but the
logistics.
approach. Using the normal
engine ring
Here thewe try to reduce the cost of product. But by using the value engineeringcost reductian
is not Valu
techniques important point techriques, je.
we get an entirely different product. The value engineering approach aims to find the lowest
thWest
perform the desired functions rather than lowest cost way producing
cost way to the question of saving ost f
Value Engineering is a tool of management which attempts
aim is to study the relationshin bet
the point of view of Value' or in other words the main and cost through chane in
COSt
the design function and cost of a part, keeping in view to reduce part the source of supply and s upo
design, modification in specification of the material used by changing estee
On.
Value engineering identifies the areas of excessive or unnecessary expenses and attempts to Valu
improve the value of the product. It provides the base for better performance at a lower cost Inth
while reducing neither necessary quality reliability nor maintainability. an 1

Ingeneral terms value engineering is also called as value analysis. But theoreticaly, value ive
engineering is the application of the concepts of value analysis at the design or premanua Cust
stage of the components with a view to cut down the unnecessary costs, without imparng u mak
function or utility of the product.
Value analysis is atechnique of cost reduction based on systematic and organised examination
man

of every item of cost which goes intothe the value or proc

manufacture of the product in terms of prof
customer
Value satisfaction
it adds to the product.
analysis can aiso be defined as the systematic examination of allfactors whichcontribute CO8ts
tothe cost of a product, part or a material withthe object of uncovering those possibilitiesofcost

350
 EMONERING(VALUE ANAL YSIS) 351
dtnn
whcb
) will not in any way reduce the quality, performance or any other attribute of
whichis sUught by the customer'
Thusvalueanalysis means the organised and exhaustively critical gtudy of a product in
design, functions, and costs with the object of cost reduction.
Thevalueofa product can be increased either by increasing its utility with the same cost or
dreas1mgits cost for the same utility. Users have different
and avvailability of substitute itema.
conceptg of value depending
me. place
Value Bngineering can also be defined a8, congcious, gystematic application of a set of
mhnnques
thattidentify needed functions, establish values for them, and develop alternatives to
thesefunctions for minimum cost.
frm
Nenssityfor value engineering arises because, technology is changing rapidly and pre-
unavailable solutions can be developed.

0hiects ofValue Analysis

(Ö to simplify the product
i) to use cheaper and better material
) touse efñcient and economical process
in) to reduce the cost of the product
() to improve the product design
() to increase the utility of the product
(u) to increase-the profits.

I7.2. VALUE
Talue differs both from price and cost. It can be
Le.
defined as the cost proportionate to the utility,

Value = Utility
Cost
Thus the value of a product can be
CI8t or by decreasing its cost for the sameincreased either by increasing its utility with the same
utility. Users have different concepts of value
upon time, place and availability of
substitute depending
esteem value and exchange (re-sale) value. items. Value is adjudged by cost value, use value,
Value and Cost
0the manufacture of industrial products,cost is
o nput output relationship,. The scope to incurred to create value, costs and values have
optimise
Sen 8et of values is alwava there. Value is what the the input of costs in order to produce a
product is worth to the customer or user.
e price at which the product sells or can
sell on the market is a measure of its value to the
Customer or user. Cost comprises of the () money
make the product, (i) wages of the workers, and value represented by the material used to
(0) other indirect costs attributable to its
manufact
product
ure. The excess of value or market price over the costs incurred in producing the
blerepresents
the
margin of profit of the manufacturer. In order to make his product more
proitauuced
, the manufacturing
manufacturer should be making a constant search for reducing the manufacturing
costs means one or more of the following advantages:
9 Increase the margin of profit.
 352 INDUSTRIAL
ENGINEERING AND
(n) Reduce the loss.
( ) Enable a reduction in selling price nnd thus achieve a greater
ustomer or user paye the assigned price for the product because he demand for the
t
MANAGEMENT
derived from its use worth that price: he is generally unconcerned about Considerswhattheit produc,
manufacturer to produce the product.
Normally selling price depends upon the benefit which the customers
expect to
acosttiaiarothne
using the product. This benefit is translated by the customer in terms of
pay or in other words, this is the value which the customer places on the moneyfoor whichdrivhee tgy
article
This amount is entirely based on the wishes of the customer and has its
money spent on producing the article. In some products, we usually observe
nothing
to do with
the purchane
that, price paad
the customer is very high even if the cost of production is small. The reason behind
he is very anxious to purchase it and has rated its value very high. is thatby
this
such a
Thus it is necessary for the manufacturer to incur costs in way so as to
respomse fronm the customers and the product wil be appreciated by them. get good
So to ascertain the
businessman makes the systematic efforts. The
value of the product, the
svstematic efforts to evaluate the value of the product is known as value process of m
ano
making the
Types of Values
(a) Cost Value. It is the cost of mnanufactring a product or component.
(6) Use Value. It considers workdone, functions performed or service
efficiencyleffectiveness of product. rendered and
(c) Esteem Value. It involves the qualities and appearance of the product
persons and creates a desire in them to possess the product. which attracts
(d) Exchange Value. It considers the properties or qualities which will remain attss 1t
enough to other people to permit market resale in the future.
Maximum value is obtained when essential function is achieved for minimum cost a

This statement can be expressed mathematically as folows:

F
max

Gmin
where, max
= Maximum value
F= Function
C.
min = Minimum cost

Functions of a Product
Functions can be classified into following twocategories : which
1. Basic Functions (or Primary Functions). These are the functions without or
identity,
the product would virtually lose all of its yalue, and in some cases even its
would not onl
example, lead is removed from an ordinary wooden lead
if pencil, it
stick.
morethan a
eliminate the basicfunction of pencil but will leave us with not aithoughthey
2. Secondary Functions. These functions support the basic functions,
lead may
may or may not be essential functions. For example, pencil without
retain the esteem value by just being seen in the pocket.
 EMIMERNA(VALUE ANALYSIs)
353
Cost reduction
potential

Rs
Net saving
potential

Cost to change
he car
rcha Life cycle phase
pauc t Fig.19.7. Potential savings in money
Time

through Value Engineering.

Requirements of a Product,
Generallythere are two reqirements, i.e., functional or
an the tl snd should be pleasing in appearance. Thus Value aesthetic, i.e., a product should be
ing the Engineers look them in the following
1 Use. It is the function for
which the part is
supposed to do ? The answer is that it shouldmanufactured.
write and
For example, what a pen is
2, Esteem. Actually this is hold ink.
something wider
that a product is pleasing to look at, may than the aesthetic side of design. The fact
rei an factors. In short, the esteem aspect is induce people to buy but there are other
As example before, the pen having concerned with getting the customer to buy.
gold plated body or other features cause the customer to
atttack purchase more readily.
When value analysis is done, then it is clear
tsmain function. But it is not that the use' function cannot be
ttracuv: necessary the case of Esteem function. Any benefit
in avoided because
aproduct, over and above those reguired to meet the use function, added to
atigher price. must add to the cost causing
When analysing, it isessential to consider
esteem furnction cannot be how much be added in order to sale the
eliminated altogether, but it should not be part. The
Buppose the cost of gold plated pen is Rs. 1O00. This cost further be dividedover-emphasised.
as
Now
Use = Rs. 150
Esteemn =Rs. 850
Now the question is
leatures add to the value?whether Rs. 850 is justified for esteem
This matter is closely related with the purpose? Do the additional
The profit making.
reasonable
When this Comparisonprice ofa product can be obtained by
comparing
done, the possibility of substitution is with a
pen with a plastic body?isCan examined.comparative
the method of filling be simplified? Does
product.a
Such as whether
4pensive material and 80 on? the cap has to be
made of
ut
whit

ntity
Fr

notoal
17.3. STAGES IN VALUE ANALYSIS
stick Value analysis is carried out in the following stages:
u gthh e 1. What the customer wants, L.e., to recognise the
m as
yt 2. Finding out the best method of performing the
be made of modern knowledge relating to
customer'
work to be s
needs Or wants.
network production
work study, operation research,
uhe mogt economic method.
analysis and other done.Fullto use should
standarditechniques
sation, simplification,
determine
 INDUSTRIAL ENGINEEPING ANO
Th hare the appropriate cost' for the 'appropriate
the t rlatonsh1p between cost and performance.
4 Search for better ways ofperforming work and consider the
performance,
toeliminatfeuncthetional v,.
ach part of a product. The vital part of value analysis is
functn

17.4. APPROACH FOR VALUEANALYSIS

Table. Approach for Value analysis
Subect Bsic Question Analysis
Functaon What functions are performed 1. Is there any possibility of
elimination ?
2. What alternative methods
are available ?

Materal What is the material 1, Can alternative material

specification? be used?
2. Can the specification be
amended ?

What quality of material 1. Is the size or weight of

should be used? material excessive.
2. Can the quality be
reduced?
3. Will a cheaper material
serve the same purpose?
4. Is the cutting done econo
mically without waste ?
Labour Which are the direct 1. Are all the operations
labour costs? necessary?
2. Will alternative uperatin
be cheaper?
3. Can certain as8embly
operations be mod1fird
Process Are the best process being 1. Are all the operatuota
used? necessary?
2. Will alternat1ve vpetala ca
be cheaper?
3. Can certain ase biy gers
tuons be modifed
Stand Are the materials or
I Can the matrtals b
ardisation components standard? standardad
2 Can a numbet dyrk

3 Can etbs be ss