Value engineering is an intelligent cost reduction strategy that uses a systematic process to increase the value of products for end-users and profitability for manufacturers. Here are seven tips to ensure your project pays dividends.
OEMs developing Value Engineering programmes can quickly get overwhelmed by the complexity of the job ahead. With so much going on in your business, managing a multi-disciplined VE process internally can easily get sidelined. After all, everyone’s still got their day job to do and new priorities arise every day.
You definitely need a plan and the business should factor in all the time and resource you’re going to need to conduct the analysis, run the workshops and implement recommendations if it's going to yield results.
You might think you know what the problem is with your product. You might have a very clear idea about the cost burdens you should address to change its fortunes in the marketplace. But do you have the evidence to back it up? Be determined and systematic in your evidence gathering. Don’t take anything for granted or you may miss your most dramatic and unnecessary cost centres.
The whole business needs to understand that this is not a job for a single person or even a single team. It may be several years since the way your product is delivered was last analysed and explored (if at all). There may be subtle ways in which your product is failing to deliver against expectation, or cutting edge opportunities to introduce more efficient materials and processes that require cross-discipline expertise to uncover. Just giving one team the task to deliver on VE objectives is a mistake.
Value Engineering is a powerful tool because it’s an objective, cross-disciplinary tool. It uses the insight around every part of the product cycle from material procurement, product build, and logistics - to make suggestions for intelligent cost reductions and substitutions that will improve value for your customers’ long term. You need to conduct proper VA/VE with an expert internal team to facilitate this.
Some businesses say they’re implementing Value Engineering but are simply on a slash and burn cost-cutting exercise. In searching for savings they pounce on every opportunity to cut spending, beat up suppliers on cost and substitute materials for cheaper alternatives regardless of the impact on quality. That strategy won’t work long term because it’s not interested in preserving the value of the product for the customer. It is more likely to damage ongoing sales and, ultimately, your reputation as a supplier.
The VE engineering team should know precisely what’s driving the push towards VE so they can keep that in mind as they discuss and ideate. There are different reasons why a VE project might be required, after all. It might be driven by external forces, a client who is pushing for prices to be reduced, or the optimisation of functionality to better suit their specific needs.
Equally, it could be driven by internal forces - the need to avoid component obsolescence or offset the effect of new and disruptive competition. The duration, focus, and scope of the project will be a function of these factors - from the short-term need to suggest smart component or material substitution, to supporting a fully-fledged platform redesign project. Too often, a VE project loses sight of specific objectives and suggested solutions don’t fit the brief.
The injunction of VE is to be imaginative -now! But the reality is it’s quite difficult to be creative on demand. Don’t forget, that when the technology is complex it can be difficult for non-specialists to understand and contribute to the conversation around potential alternative solutions.
The techniques that Value Engineering uses for creativity - such as Functional Analysis - helps a mixed team look past the technical complexity to quickly grasp the primary function of a product. In other words, what a particular component actually does for a customer. The primary function of the element in a kettle, for example, might be to ‘heat water’. You don’t need to understand exactly how the element achieves this to grasp its function and the value it brings the customer. But equipped with that basic knowledge, a whole team of different disciplines can begin to suggest new ways the function might be fulfilled at a lower cost, in ways possibly never imagined before.
The right kind of tools and leadership can help mixed discipline teams extract vital information about the project and ideate more effectively. Without that support, though, you can miss out on valuable new ideas coming from unexpected places.
But none of this will count unless VE proposals are actually properly costed, planned, agreed to internally and of course, followed through. While you can spend a lot of time creatively examining the re-engineering options, if that doesn’t result in formal plans, or the figures just don’t add up you can end up abandoning the idea for another initiative altogether and all your hard work will have gone to waste.