ASHUTOSH SHARMA

1RV04IM054
Overview
Brief history
Introduction
Definitions
Objectives
Value Job Plan
Examples
Framework of Value Analysis in Management
Practices
FAST
Case Study
Benefits
Weakness
BRIEF HISTORY OF VALUE
ENGINEERING
 It was during the World War II that the concept of value
engineering emerged by chance. Due to the scarcity of critical
materials to be obtained, many manufacturers were forced to find
out substitute materials and designs for the applications desired.
The General Electric Company found that many of the materials
that were substituted worked out cheaper and gave much better
performance than the original ones.

 In 1947, Lawrence D. Miles an engineer in General Electric

developed a number of ideas and techniques to substitute and
enable the change intentionally rather than by chance. Mr. Miles
worked with an odd attitude to develop new ideas and search for
value in the products and developed a successful methodology.
The concept quickly spread up due to the large savings with
relatively modest investments.

 In 1954, the U. S. Navy Bureau of Ships applied the Value Analysis

process to cost improvement during design. They called it Value
Engineering. Value Engineering, Value analysis, Value Management
is the same concept, and these terms are used depending upon
INTRODUCTION
In today’s market, Value Engineering has
proven to be sound enough in saving or
reducing 10 to 15% of the investment
costs

The concept of Value in Value Engineering

is to describe the best value or the
optimum value. Mr. Miles had different
kinds of values that use esteem, exchange
and cost. Today’s Value Management has
two concepts – function and value for
money.
Contd…
90% of the engineers think of value
engineering as a cost cutting tool. It is true
that reducing initial project cost is the
prime objective of value engineering, but
value can take other forms too. The
Society of American Value Engineers
(SAVE) recognizes many other objectives
of value engineering. Such objectives
include broadening a project's function or
usefulness, creating a higher quality end
project, reducing schedule requirements,
Value Engineering and
Value Analysis
Value Engineering: Value Engineering is a
technique applied to identify optimum value solutions
during new product development.

Value Analysis: Value analysis is a technique

applied to improve existing products, processes or
services. The objective is usually to reduce cost, but
may equally or simultaneously be to improve
performance or quality.

Value Methodology (also called Value Engineering,

Value Analysis or Value Management)
 How Does the Value
Methodology Work?
The value methodology works through a
VE/ VA/ VM study that brings together a
multidisciplinary team of people who own
the problem and have the expertise to
identify and solve it. A VM study team
works under the direction of a facilitator
who follows an established set of
procedures - the VM job plan - to review
the project, making sure the team
understands customer requirements and
develops a cost-effective solution.
When Do You Need Value
Engineering ?
1. When price competition has reduced profits.
2. At the beginning of each new product, project or
service life cycle.
3. When it appears that a new project or program may
exceed
budget expectations.
4. When there is a need to reduce process cycle times.
5. When there is a need to maintain the same
programs at reduced costs.
6. When there is a need to produce new ideas for
marketing and
procuring goods and services.
7. When there is a need for productivity improvement
8.Value Engineering is used to improve quality,
What is 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 = Performance = FUNCTION

Cost Cost COST

Value = The most cost-effective way to reliably

accomplish a function that will meet the
CONTD..
VALUE = FUNCTION
COST

To Increase Value:-
F F F F
C C C C

REDUCE INCREASE MAINTAIN

Analysis in Management
Practice
Value Analysis Job Plan
(for all Management Practices)

I -- INFORMATION PHASE - Project (Continues)

Familiarization
II-- SPECULATION PHASE - Creative
Brainstorming
III -- ANALYSIS PHASE - Critical Judgment

IV -- DEVELOPMENT PHASE - Develop

Alternatives
V -- PRESENTATION PHASE - Present
Alternatives
VI– IMPLEMENTATION PHASE – Follow Up
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/ ☛ Brainstorm ideas on how to improve the high
Speculation Phase cost, broken, or inadequately performed key
functions.
Analysis/ ☛ Screen ideas for acceptance, score remaining
ideas on a scale and group ideas into
Evaluation
categories. Develop design scenarios, and
Phase
selection criteria. Rate and rank ideas.
Planning/
☛ Plan how to sell ideas to management,
Development identify key recommendations, plan
Phase management presentation.

Presentation ☛ Give oral presentation to management, or

Phase develop written report.

Implementatio ☛ Get management approval for go-ahead, make

n Phase management plan, make assignments,
implement, follow-up.
FEW EXAMPLES..
Value methodologies can be applied during
any stage of a project’s development cycle,
although the greatest benefit and resource
savings are typically achieved early in
development during the conceptual stages.

 Construction projects: Could benefit by

identifying improvements for various project
phases: concept development, preliminary
design, final design, procurement and
construction.
CONTD..
Manufactured products: Whether consumer,
industrial, or defense, may be studied with a focus
on either the design or manufacturing process of
that product. A product may be the subject of a
value study at any time during the product’s life.
A value study can be applied at the onset of the
product development to better understand the
customer’s needs, identify the functions
necessary to satisfy those needs, and develop the
initial concept. Throughout the design
development, value methodology can be used to
refine and enhance the concept, based on the
latest facts. Even after a product has been
introduced and is in production, a Value Study can
Value Analysis, Hollis
CONTD..
Business systems and processes: May
also be the subject of Value Studies. Many
elements of a business or an organization. It
may be improved through the application of a
value methodology. This may be from the
development of business plans and
organizational studies to improving existing
business processes.

Service organizations : Can benefit from

the use of value methodologies. In the past
value methodologies have been used to
improve processes and procedures in the
Analysis of Management
Practice
Pre-Workshop Activities
 Plan and organize the Value Study

 What has to be done to prepare for a Value

Study?

 The desired outcome is a clear

understanding of what senior management
have addressed, what the strategic priorities
are, and how improvement will increase
organizational value.
Workshop (Job Plan)
Activities
Information Phase : Understand the current state of
the project and constraints that influenced project
decisions.

Function Analysis Phase : Understand the project

from a functional perspective; what must the project do,
rather than how the project is currently
conceived(imagined).

Creative Phase : Generate a quantity of ideas related

to other ways to perform functions .

Evaluation Phase : Reduce the quantity of ideas that

have been identified to a short list of ideas with the
Contd…

Development Phase : Further analyze and

develop the short list of ideas and develop those
with merit into value alternatives.

Presentation Phase : Present value alternatives

to management team and other project
stakeholders or decision makers.
Post-Workshop Activities
Implementation Activities : Ensure accepted
value alternatives are implemented and that the
benefits projected by the Value Study have been
realized.

Value Study Follow-Up Activities : Follow up

on implementation of the Value Study results and
improve the application of a value methodology
for future studies.
FAST
Function Analysis System Technique(FAST).
 It comes under Functional Analysis Phase.
It is a powerful Analysis process that helps people
with various technical background to effectively
communicate interact & resolve issues that
requires multi-disciplinary considerations.
The system links two words a noun object and a
verb to describe the functions of each component
of a complex project.
Participants with various level of training &
experience can understand complex subjects when
the functions are described in two simple words.
 Generating a Function Picture

Function Analysis System Technique: A logic diagram

to describe how a system works.

Verb-Noun Verb-Noun Verb-Noun Verb-Noun

Function Function Function Function

“F.A.S.T. Diagram”
Examples of Verbs and
Nouns
ACTIVE VERBS NOUNS

Transmit Signal

Irradiate Information

Project Data

Dissipate Heat

Generate Radiation

Convert Current

Receive Light
Reflect etc… Image etc..
Example Of FAST

In a FAST diagram , HOW might something be done? And WHY should something be
done? Are used to develop relations between various functions.

The word HOW is always written on the LEFT and answered by reading to RIGHT.

The word WHY is always written on the RIGHT and answered by reading to LEFT.

To the LEFT is always HOW and it is known as High Order Function or an OBJECTIVE
whereas to the RIGHT is always WHY and is known as Lowest Order Function or the
Beginning of the study.
CASE STUDY

Value Engineering for Municipal

Projects.

Greater Vancouver Regional

District(GVRD)
The GVRD is undertaking a $650 million program to
upgrade the ANNACIS & LULU island wastewater
treatment plants from primary to secondary
treatment. The main reason to do this project was to
show that the new biosolids and effluents quality
objectives can be met by controlling the projected
costs.

According to Mr.Don Little Ford,

M.B.A,P.Eng,Administrator of the GVRD’s wastewater
treatment plants, Value Engineering (VE) helps to
meet the objective.

In this program 80% of the cost is in Construction

hence it was imperative that decisions & assumptions
are based on Construction which needed to be
Optimized. VE provides a method (FAST) which helps
Contd…
Function Analysis System Technique (FAST) was
used in this program to get better results.

Mr. Don stated that VE has been worthwhile. By

1994 they conducted 3 formal VE sessions for
secondary treatment . The total present value
savings came out to be $17000000 of which 90%
was of capital costs(construction costs).

GVRD’s payback ratio came to be 24:1

payback ratio= SAVINGS
VALUE
Contd…

After the VE was done Mr. Don stated that:

“To work properly, the process must be a

collaborative effort among the designer,
owner and the VE consultant . Through this
effort the interpersonal contacts has
generated the exchange of ideas and
synergy necessary to ensure that all good
ideas were put on table for evaluation.”
Benefits Of USING Value Analysis IN
MANAGEMENT PRACTICE
Decreasing costs
Increasing profits
Improving quality
Expanding market share
Saving time
Solving problems
Using resources more effectively
Increasing Customer’s Satisfaction
Making Your Job Easier
Weaknesses
Lack of information
Lack of ideas(Brainstorming done to get
proper ideas)
Misbelieves
VE is not time oriented, but, product oriented.
Thus, improvements in production activities
are not readily recognized.
There are many misunderstandings and
biases against VE that have been built up over
time due to misuse of the methodology.
VE is only used for cost reduction.
Lack of communication and coordination.
Some key Points
Value Analysis is a Continuous Process .

Value Analysis Begins & Ends With the

Customer.

Keep A Positive Attitude to Change!!!

THE BOTTOM LINE : Make it

Work!!!
Conclusion
Value Analysis is a better method of
management because it integrates cost,
schedule and scope and can be used to
forecast future performance and project
completion dates. It is an “early warning”
management tool that enables managers
to identify and control problems before
they become insurmountable(difficult to
overcome). It allows projects to be
managed better – on time, on budget