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Module-I of PDPT

Lecture Notes of Chinmay Das

11

1.4 VALUE ENGINEERING

Definition: Value Engineering (VE) is a systematic, step by step approach, intended to

achieve the desired function of a product, process, system or service at an over all

minimum cost without in anyway affecting quality, reliability, performance, delivery,

safety or the environment.

We may classify economic value into four types.

• USE Value : The properties, features and qualities which accomplish

the use, the work or the service- causing the item to perform or serve an end.

• ESTEEM Value : The properties, features or attractiveness which cause us

to yearn to posses it- causing the item to sell.

• EXCAHANGE Value : The properties or qualities which enable us to exchange

an item for something else we want.

• COST Value : The total of material, labour and other costs that have to

be incurred to produce an item.

The objective of a firm is to supply a product or service of economic value to the

customer in order to make a profit. A user purchases an item or service because it will

accomplish certain functions at a cost he or she is willing to pay. He or she interprets its

value to be good, if it satisfies the needed function for low cost; poor, if it costs too much,

if it does not perform the required function, or if it creates problems while performing.

That is a product or service is generally considered to have good value, if that product or

service has the appropriate PERFORMANCE and COST.

VALUE = MONEY

ITEM

= PRICE

ESTEEMUSE +

= {USE FUNCTION + ESTEEM FUNCTION } ⁄ COST

= {BASIC FUNCTION + SECONDARY FUNCTION } ⁄ COST

= {NECESSARY FUNCTION + UNNECESSARY FUNCTION } ⁄ COST

ITEM

Use

Performance

Quality

Timeliness

Benefits

Facility

Serviceability

Satisfaction

VALUE

Module-I of PDPT


12

Another way to express value mathematically is like

VALUE (V) = COST

EPERFORMANC =

C

P

Needed performance is obviously decided by the customer and it would be the job of

every concerned executive to determine this as accurately as possible. The more clearly it

is spelt out the better it is. More than half the battle is won if we can find out what the

customer wants. Computing the over all cost would include cost of design, development,

manufacture (including labour, power, material, machines, etc), installation, maintenance,

any consultation fees or royalty paid for that particular equipment, custom duty, taxes

paid, & so on. In short, it would include all cost incurred during the entire life of the

product or service required to fulfill the needed functions. This is also called the life cycle

cost of the product. From the mathematical formula it is obvious that values can be

increased by several means, like

i) Decreasing costs, while ensuring same level of performance:

V ↑ = C

↓

→P

ii) Enhancing performance at same cost:

V ↑ = C

→

↑P

iii) Decreasing costs and increasing performance:

V ↑ = C

↓

↑P

iv) Increasing performance and increasing costs also in such a way that performance

increases faster than costs:

V ↑ = C

↑

↑P

MEHODOLOGY

There are various approaches available for VE. Some of the important ones are

• MISS: Modify, substitute or subdivide or exchange/eliminate to help change.

od

fy

ubstitute

ubdivide

• PROFIT : Product Return Opportunities by Function Investigation Techniques

• FIRST : Functional Ideas Regarding System Techniques

M

I

S

S

Module-I of PDPT


13

• FACTS : Functional Analysis of Components of Total System

• FAST : Functional Analysis System Technique

• DARSIRI

ata Collection

nalysis

ecord Ideas

peculate

nnovate

eview

mplement

• Blast, Create and Refine.

Out of above mentioned approaches, FAST is most popular among Value engineering

Specialists.

Fig: 1.4.1 Value Engineering Job Plan (VEJP)

Information Phase

Function Phase

Creation Phase

Evaluation Phase

Investigation and

Evaluation Phase

Implementation

Phase

Audit Phase

D

A

R

S

I

R

I

General Phase or

Orientation Phase

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