Value engineering is a systematic examination of factors affecting the cost of a product or a service in order to devise means of achieving the specified purpose at the required standard of quality and reliability of the target cost. The main aim of value engineering is to achieve a product’s target cost:
- Identifying improved product designs that reduce the product’s cost without sacrificing its functionality.
- Eliminating unnecessary functions that increase the cost of product
Value engineering requires the use of functional analysis. This process involves segregating a product into its many elements. For example, in the case of automobiles, the function might consist of style, comfort, performance, reliability, quality, attractiveness and other aspects. A price or a value for each element is determined, which reflects the amount the customer is willing to pay for the product. To obtain this information, companies normally conduct surveys and interviews with customers. The total of the values for each function gives the estimated selling price from which the target profit is deducted to derive the target cost. The cost of each function of a product is compared with the benefits perceived by the customers. If the cost of the function exceeds the benefits to the customer, then the function should be eliminated, modified to reduce its cost, or enhanced in terms of its perceived value so that its value exceeds the cost.
Therefore, value engineering is the technique applied to analyze all the aspects of an existing product or component to determine the minimum cost necessary for specific functional requirements.
Process of Value Engineering
- Functional Analysis
- Standardization of Components and Parts
- Alternatives of Functions
- Value-cost Analysis
- Re-engineering Areas of Value Engineering
- Improvements in product designs
- Changes in materials’ specifications
- Modification in process methods
- Decision to make or buy a component
Value = Function/Cost