Module 1 Value Engineering a Conceptual Framework

Class Notes, Module-1

VALUE ENGINEERING: A CONCEPTUAL FRAMEWORK FR AMEWORK

1. INTRODUCTION

In today’s competitive environment, bringing value to customers is what propels companies to market leadership, giving them an edge over competitors. In order to do so one need to clearly understand the various aspects of value which add up to the satisfaction of a customer’s need and also motivates him/her to pay for it. The challenge therefore is to understand which aspect incorporate value in a product or service and at the same time whether these are perceived to be cost effective by customer. The major problem faced by the companies is to provide all needed functions to the products at lowest cost. This can be achieved by identifying and removing from the product, processes and services the unnecessary cost cost i.e. the cost that provides neither quality nor use nor life nor appearance nor customer features. Value analysis / value engineering is a problem solving system with the field of knowledge and supporting techniques techniques for the achievement achievement of lowest cost. It is an organized organized creative approach to obtain optimum value in a product, system or service by providing the necessary functions at lowest costs. When applied to products this approach assists in the orderly utilization of better approaches, alternative materials, newer processes, and abilities of specialized suppliers. It focuses engineering, manufacturing, and purchasing attention on one objective- equivalent performance for lower cost. When applied to services, this approach assists in the more precise determination of “What are we trying to do?” and provides viable alternatives alternatives from the creative mental mental process, with skillful sorting and development of better approaches from “judgmental” and “ development parts of problem solving solving system. system. Value analysis approaches may assist all branches of an enterprise- engineering, manufacturing, procurement, marketing, and management- by securing better answer to their specific problems in supplying what the customer wants at lower production cost.

Case study In a control device it is noted that costly non ferrous metals are used for certain parts which could be economically made with ferrous metals. In function evaluation it is discovered that there were, in general, two function involved: mechanical function and function of conducting electricity. Amount of current involve is less. Q. Ans:

Why not steel? It is poor practice to use steel for conducting electric current?

Q. Ans:

Why you believe it is not good practice to conduct electricity in steel? Steel is used in specific operation where temperature is so high that non ferrous metals would not hold its temper and shape.

Meaning: Meaning: We are using copper based materials for the easy conducting of jobs, but where such material will not perform, we use steel.

R.K.Singh, Dept of Production Engineering, Engineering, B.I.T. Mesra, Ranchi Ranchi, E-mail: [email protected]

Class Notes, Module-1 Result:

The suggested change to conduction of the current through steel was made, and the product was greatly simplified. Besides, costs were reduced, and reliability was increased.

EVOLUTION

Origin of VE/VA can be tracked back to the World War II efforts to maintain and increase production of all items against scarcity of inputs. It was survival period when some critical materials were difficult to obtain. To ensured availability of raw material great many substitution were adopted which results in satisfied requirements at reduced costs and in many cases improvement in the quality of product and their performances. Value engineering has come a long way since L.D. Miles first propounded the concepts and originated its methodology. The various milestones in evolution of VE Technology are given at [1](Table 1.1 page 4). 2. WHAT IS VALUE?

Value is a difficult term to define. The dictionary meaning of value is interaction between worth, utility, and price. Value is a relationship, established by comparison. It is about intent/target compared to performance; performance compared to needs; need compared to requirements; requirements compared to feature or attributes; features or attributes compared to price and price compared to satisfaction. In general, value increases with higher use, esteem and exchange values; but decreases with higher cost value. The concept of value is meaning less unless it is related to objectives. Value is not synonymous with cost. A product or service is generally considered to have good value if that product or service has appropriate performance and cost. Value can be increased by either increasing the performance or decreasing the cost. More precisely: 1. Value is always increased by decreasing cost (while, of course maintaining the performance). 2. Value is increased by increasing the performance if. customer needs, wants, and is willing to pay for more performance. To the customers a product has value if it is worth the money. Value is a relationship between cost and function. Value = function / cost = Worth to you / price you pay = (Service+ Quality + Reliability ) / (Cost + Profit) Cost is determined by what part is and value is represented by what the part does. For Examples: 1. If cost of ball pen is Rs.5 you may say that its value is Rs. 5. When you break the pen at least 50 paisa worth energy is expended. Now the cost of pen becomes Rs. 5.50 but its value becomes zero. Value is independent of cost it depends upon usefulness i.e. the functions achieved and on many factors other than cost. 2. Both a one and a five rupees postage stamp cost almost the same to make (provided size is same), yet ones value is five times the other. Value has a subjective aspect, for what has a good value for one person need not necessarily be so for another; it varies with place, environment, and time.

R.K.Singh, Dept of Production Engineering, B.I.T. Mesra, Ranchi, E-mail: [email protected]


Types of Value There are five types of values each having a relationship to function i.e use, esteem, cost, scrap and exchange values. The total satisfaction that comes from an item is a combination of its bundle of values. Depending upon the type of product the proportion of each value differs and total value (bundle of values) will provide satisfaction to user.

Figure 1. : Bundle of value (Total value)

The different values are: 1. Use value: The monetary measure of the properties, features or qualities of an item which contributes to its performance and by doing so may contribute to its salability. The use value is also called the function value. The use value can be improved either by eliminating/reduction of unnecessary functions or by the addition of new functions. e.g. A single-ended spanner can be used for only one size. Its use value is increased by development of double ended spanner. 2. Esteem value: The monetary sum that a user is willing to pay for the function- which provide prestige, appearance and/or other non-quantifiable benefits, or in other words, delight the users, is esteem value. It is also known as aesthetic value. It does not improves the performance but induces interest in the user to own it. This value will help to market the product, service or system. Esteem value is subjective and gives pride of ownership. For example, the extra chrome and styling used to sell automobile, gold watch band, master piece paintings which are associated with pride of possession and sentiment. 3. Cost value: The cost value is the monetary unit required to produce a product or service. It consists of three basic elements: material cost, labor costs, and overhead expenses incurred in-producing the item. It depends upon the cost involved in producing, and is always expressed in money. To improve cost value, all the three elements have to be studied. 4. Exchange value: The exchange value also known as the market value, is the monetary sum of the product, service or system at which it can be traded. The monetary measure of the properties or qualities of an item which enables it to be exchanged for something else. The cost value of old stamp may only be a few paisa, but because of their uniqueness they can be traded at a very higher cost. 5. Scrap value: The money that can be recovered when the item is no longer needed In general, for exchange process to be successful sum of use value, esteem value, cost value, and scrap value should be nearly equal to or greater than exchange value, i.e.



Use value + Cost value + Esteem value + Scrap value

≥ Exchange

value

.

Figure 2: Industry exchanging a product from customer money

3. FUNCTIONS

The creation of any object, whether it is a hardware, process, or a system, is for certain purpose. These purposes may be termed as functions. The function of a part, material or service is the job it does. It can be defined as something which makes an item work or sell. i.e knife – cuts materials, Paint protect surface; Pen- Write words. If the functions are achieved as desired by the customer, the item is useful, otherwise it is of no use. Types of Functions

There are two types of functions. Either or both may cause the buyer or user to buy the product. These are known as: Use Function: The purpose for which the customer needs the item is the use function. The purpose of a cup is to hold liquid. If the cup has a hole at the bottom, the liquid will flow out and it will not be able to perform its use function, and therefore it will be useless to the customers. The cost that is expended to cause the product to perform a use that the buyer wants and is willing to pay for is called the use function cost. Sell/Aesthetic function: The function that fulfills the want of a customer is termed as the sell function. It is those features of an item which provide aesthetic appeal to the item and help in selling the item. The cost is expended for the purpose of pleasing the buyer through color or shape or feature, causing him to buy, is known as the aesthetic function cost. Any cost other than those that provide the amount of each of these two functions that the users or buyers wants are unnecessary cost. Levels of Functions

The functions of an item may be categorized into two levels. Basic function: The basic function is defined as the specific purpose for which the item/process was designed. It is that function for which the user or buyer buys the product to full fill his needs. The basic function of a refrigerator is to preserve food, that of a lawn mover is to cut grass etc. Their can be one or more basic function depending upon the the particular individual or organization point of view.



Secondary Functions: Secondary functions are those which support the basic functions. These functions are generated because of the specific design or process that is adopted in order to achieve this function. For example the basic function of a tube-light assembly is to provide illumination ( frame, screw, holder etc perform secondary function). Customer is extremely interested in the basic function, but he does not care about the secondary function. Large amount of cost are contained in secondary function and becomes the immediate target for high-grade value engineering work. To identify a secondary function, eliminate this function from the product. If the component still exists, it is a secondary function. Function Identification

In order to identify functions they have to be defined. For value engineering purpose use function is defined in two words – an active verb and a measurable noun. In contrast, a passive verb and a non-measurable noun define the sell/aesthetic function of the product, service or system. The steps in defining a function are: Identify Clarify • Naming • To enumerate the various functions following steps have to be adhered to. •



The primary question about a product should be ‘What does it do?’ The answer is in form of products various functions.



Improve the clarity of the sentence until they say exactly what the function reall y is.



Describe what the function does and name it with a verb and a noun, for example: Some verb Contains Move Shorten Support Protect Prevent Actuate Time

Some nouns

Secure Locate Space Rotate Fasten Close Insulate Ignite

Piston Contacts Torque Volume Dust Paint Noise

Vibration Volume Switch Current Panel Rust

Quantify functions when practicable

To provide more benefits, functions are named whenever possible using a verb and noun that have measurable parameters. Some examples follows: Conduct current Transmit torque Enclose volume Insulate voltage

conduct heat Transmit flux Communicate intelligence Amplify voltage etc.

Analyze Aesthetic function: Value placed by customers for aesthetic function are purely subjective and difficult to spell. The realistic name is please the customer.

More specific function names in the aesthetic area often promote some better solution. Some typical names are:



Provide appearance Provide shape Provide color Provide features Provide convenience

Reduce noise Reduce size Reduce thickness Reduce time required Reduce skill required

Sometimes costs accepted in aesthetic area bring the best return. It depends entirely upon what the customer wants and is willing to pay for and what the product or service now lacks that is desired.

Classify Functions as either Basic or Secondary 



All the functions should then be identified as basic and secondary functions. Dismantle the product into subassemblies and subassemblies into components and repeat step 1 and 2.

Table 1: Function of a flashlight and components Item and component

Function

Basic

Secondary

Noun

Verb

Flashlight

Provide

Light

Lens

Protect

Bulb

*

Rear cap

Retain

Spring

*

Bulb

Provide

Light

Front cap

Hold

Lens

Battery

Provide

Energy

*

* * *

4. VALUE ENGINEERING / VALUE ANALYSIS

VE technique emerged during the years of World War II(1938-45) and was developed by Lawrence D Miles, a purchase engineer in GEC. In view of scarcity of vital defense materials, he came up with the basic theme: ”If I cannot get the product, I have got to get the Function.” Thus, “Function” grew in vitality and later matured into the development of the VE techniques. Value analysis or engineering is explained as a systematic and functional approach to identify the function of a given product or system, contemplating different methods of achieving that function and selecting the most rational method that gives lowest cost of production without prejudices to the requirements of quality and reliability. VE/VA is a complete system for identification and dealing with the factors that cause uncontributing cost or effort in products, processes, or services. This system uses all existing technologies, knowledge, and skills to efficiently identify costs or efforts that do not contribute to the customer’s needs and wants. The technique is known as VE when it is used at the design stage in order to make the design simpler and more rational from the point of view of producibility and cost without affecting its function or even aesthetic appeal. It means by building into the original design the



cheapest materials and a configuration which leads itself to most effective method of production and simplest method of assembly, the designer can ensure that costs will be reduced to a minimum. Similarly, VA is the term used when it relates to the application of cost reduction methods at the manufacturing stage. It may include material alteration, design changes, performance changes etc. in order to reduce cost. Value analysis does not mean merely cost improvement. To appreciate this, look at the value ratio. Value ratio, VR= Use + Esteem Cost

--- for the producer

Where, VR= Use + Esteem Price

--- for the customer

Use= the power of a thing to serve an end, Esteem = the power of a thing that makes us desire to its possession. When we talk about cost improvement we are talking about manipulating to our advantage the denominator of the VR. Thus if we can decrease cost we are pushing the VR further in excess of 1 which means the value of product or service is greater. But there are two more variables which could be tackled – use and esteem – which will achieve the same aim and is VA/VE. 5. HOW TO BUILD OR ADD VALUE

It can be done by: 1. Accomplishing equivalent or better performance at same or lower cost i.e. upgrading product performance. 2. Providing the shape, appearance, attractiveness and the features the customer wants-i.e. improving product esteem. 3. Holding (or raising) quality at reduced (or same) cost or both. 4. Identifying, isolating and removing unnecessary costs and non-essential elements from the products and services-i.e. cost prevention or cost avoidance. 5. Exploiting the technological development, the expanding knowledge and the creation of “new” items to advantage, i.e. innovation and creativity. 6. Preventing the unnecessary use of resources. 7. Controlling Value-to-Price Ratios. Finding the break even points for cost, quality, reliability, etc, and providing just right and nothing more.

Table 2 indicates different methods of improvement of value.



Table 2: How does value improves? Sl. No. 1

Function

Cost

Value

Same function with reduction in cost. Improve in function with cost remaining same. Improve in function with less than proportionate increase in cost. Improve in function with decrease in cost.

2 3

4

6. DETERMINING VALUE AND FACTORS TO BE CONSIDERED

One method is to analyze the product, breaking it down into a number of separate factors(each of which represents some aspect of value to the customer) and to put a numerical value upon each factor. This should be done not only for the new product but also for each of its competitors. A panel of judges should be appointed. To minimize individual bias, each judge should be asked to make his own individual assessment of value, under the various headings. The figures are then collated, discussed and finally reduced to a single figure for each product.

Table 3: Value Assessment of Washing Machine Value Factor

Importance rating

Models A B C D E Order of merit (1,2, . . 5)



Appearance

Very important

1 3

4

1

5



Capacity

Important

1

2

4

5

3



Case of loading

Fairly important

2

1

3

5

4



Case of maintenance

Fairly important

1

2

4

3

5



Lower consumption

Not important

-- - - -



Over all size

Fairly important

2

4

5

Total score

3

1

7 11 16 18 22

A cursory inspection (by adding the scores to get a total value for each model) shows that this judge rates model A as the worst and model E as the best. But this is only one man’s view. Similar assessment will be considered together and will be combined into a single assessment which will be used to compare the value of the several models.



Table 4: Value Assessment of Folding Perambulators Value Feature

       

Inside Size Appearance Safety Size When Folded Conform Durability Ease of Folding Easy of Cleaning

Total Score Rs.0.45X Total Score List Price in Rupees

Max. Score

15 8 7 7 5 4 3 3

Value

13 8 5 3 3 4 3 2 41 18.45 18.60

Points for Model

A 15 5 3 3 5 2 3 3 39 17.55 17.50

B 13 8 2 5 2 4 1 3 38 17.10 17.00

C 10 2 7 5 2 2 1 3 32 14.40 14.50

D 6 1 2 7 0 3 1 3 23 10.25 10.35

E 4 3 3 6 3 2 1 0 22 9.90 9.75

The factors which contribute value vary from product to product. The technical value of an aircraft has no application to a ladies sari. In general all factors are divided into four heads and are as follows: a) Aesthetic Factors: These factors relate to the emotional relationship between the person and the product. These factors are largely subjective. Some are affected by fashion, some by place. b) Ergonomic Factors: They relate to the main emotional relations between the person and the product. They include the dimension, form and texture of the product in relation to those parts of the human anatomy with which the product must co-operate. For example, seats, working levels etc. c) Technical Factors: They include those aspects of performance which the customer values, such as speed and pay load of a vehicle, accuracy of a machine tool etc. d) Economic Factors: Are those which together make up the total cost of the product to the customer. It depends on other aspects of value too.

Figure 3: Contribution of various factors



To illustrate how these factors may be selected and scored in assessing the value of a product, the scores are tabulated for each of the four categories of value for a consumable product, consumer product, and a an industrial product. The total score being 10 for each product. Table 5: Score factors Score Factors

Consumable Product Toothpaste

Consumer Product Dress

Industrial Product M/C tool

Aesthetic

5 Packaging, Taste, Texture

3 Style, Fashion, Cut, color, Texture

0 Form, color, Texture

Ergonomic

4 Safety & Hygiene

3 Fit, ease of movement

1 Disposition of work price, controls and indicators.

Technical

0 Choice of Materials

1 Strength of Materials seams & Attachments

5 Accuracy, speed & range of operations.

Economic

1 Cost per unit of use

3 Cost

4 Capital Cost, speed, power consumption, consumption of lubricant, economic life, maintenance cost.

Total Score

10

10

10

7. THE REASONS FOR UNNECESSARY COST AND POOR VALUE

In order to see how to remove unnecessary costs, it is important to understand how these costs occur: 







Lack of time Until a particular need arises no body thinks about improvement. When the need arises there is a rush to provide a proposal to satisfy the need quickly & efficiently. In design stage there is always lack of time to meet the dead line, which do not permit complete searching, testing, screening and utilization of available information. Same is true in manufacturing. Designers objective will be to get a solution within his allocated time and little effort will be given in optimizing the many possible solution. Human Factors - Lack of good communication, Misunderstanding normal friction between human being, ego problems between engineers & co-decision makers. - Faulty communication is not only expensive and time consuming but is major source of poor action and wrong decisions. New processes & materials The continuous flow of new ideas, new processes and new material can, when properly used helps in establishing customer value at lower costs. Timing of value analysis VA helps in making changes that will eliminate large amount of un-necessary costs which are included in the product due to various reasons. At the time of design VE R.K.Singh, Dept of Production Engineering, B.I.T. Mesra, Ranchi, E-mail: [email protected]


helps to develop close alternatives. During manufacturing it helps in selection of manufacturing methods and job routine. 

















Changed circumstances All features of the product may not always require. Certain machining operations and surface finish may have been specified in emergency. The emergency might have disappeared but operations still included. All functions, features specified must be questioned until associated cost is satisfied or eliminated. Temporary solutions tend to become permanent. Lack of information -When product designers are 1000 Km away and/or information is not available or is not communicated in proper form or information is not interpreted properly. - i.e special component designed while standard component is available because the designer is not aware of alternatives. - Design, costing, manufacturing planning, available equipments may be coordinated. Habits and attitudes Habit is rigid, unbending, unchanging, unyielding where knowledge is diametrically opposite is fluid, always changing and always growing. Habits supported by negative attitude become road block. VA is conducted with positive attitude of mind to ensure that each alternative is given sufficient thought to make it viable & then compared on cost and performance with the other Honest but wrong belief/prejudice If a person has an unfortunate experience with a particular material/process or fastener he may have prejudice against this from then onwards resulting in killing of potentially low cost ideas. Habitual thinking Thinking and doing things in the same way frequently is cause of poor value and unnecessary cost. People have tendency to reuse what worked last time or to copy what others have done successfully. Risk of personal loss Nothing is for sure. Failure of new approach could cause personal loss of face to the decision maker. Reluctance to seek advice Reluctance to seek advice from others, as well as to admit that, they don’t know the solution of particular problem under consideration. Unrealistic requirements People like to play safe. Requirements are often overstated with reference to performance, materials, safety etc. Resulting in over design and hence more cost. Desire to conform Non-conformity, both intellectually and personally appears to be central characterization of high creativity. In general, normal industry and day to day duties involve conformance to practice, procedure and policies.

8. WHAT VALUE ANALYSIS IS OR IS NOT A. VA/VE-What it is 

An organized study of function and cost



        

An objective appraisal of workable alternatives. A co-operative effort of all departments A continuing, dynamic programme A realistic method for increasing profits A result-oriented exploration of new technologies/ processes A rejection of complacency A refusal to accept outdated concepts A guaranteed hearing for far-out ideas A planned discipline for fostering individual creativity.

B VA/VE-What it isn’t        

A sacrifice of quality A crash cost reduction effort A one-time gimmick A solo performance by one department A criticism of existing designs or systems A dilution of line manger’s authority An excuse for price cutting Normal procurement/engineering routines

9. TEN COMMANDENTS OF VALUE ANALYSIS

i.

Do not use a component or part that does not contribute to value of the product.

ii.

Do not use a component or part whose cost is not proportionate to its usefulness.

iii.

Do not provide any features to the component or the finished product that are not absolutely necessary.

iv.

Accept the change if the part of required quality can be made out of superior or inferior quality material where the overall cost is less.

v.

If a part of required quality can be made by a method or process costing less, use the alternative.

vi.

Replace a non standard part with a standard part wherever possible. It will cost less.

vii. Use proper tooling and manufacturing methods considering the quantities required. viii. Cost of a component shall be proportional to the material used and the labour, overhead and profit allowed. ix.

Where possible, use some other material or part better suited for the purpose.

x.

If a dependable supplier can provide a part for less or a better part for the same, then do not make it yourself.

10. MAJOR PRINCIPLES UNDERLYING SUCCESSFUL ANALYSIS

a. Principle of functional utility– (function and utility) b. Principle of balanced combination – (composition of the team) c. Principle of direct motivation – (survival & growth)



d. Principle of effective communication e. Principle of responsibility f. Principle of adequate information g. Principle of objectivity – (look at the facts calmly and objectively) h. Principle of allocation – (resources available) i.

Principle of selectivity – (selection of the best alternative)

j.

Principle of simplification.

Functional utility, balanced combination, direct motivation, effective communication, responsibility, adequate information, allocation, objectivity, selectivity, simplification are the general principles that must be applied to the analysis of a product value to provide customer satisfaction at minimum cost. Each value analysis decision must be made on product, time, information and people.

11. VALUE ANALYSIS PROCEDURE

Blast

Identify the Product Collect relevant information Define different functions Create different alternatives

Create Critically evaluate the alternative Develop the best alternative Refine

Implement the alternative

13. BENEFITS OF USING VALUE ENGINEERING

The value methodology helps organizations compete more effectively in local, national and international markets by: • • • • • • •

Decreasing costs Increasing profits Improving quality Expanding market share Saving time Solving problems Using resources more effectively

Value methodology easily produces savings of 30 percent of the estimate cost for manufacturing a product, constructing a project or providing a service. The return on investment that public and private organizations derive from implanting VM programs averages 10 to 1. That is, for every rupees invested in a VM study – including participants’ time and implementation costs – Rs.10 in net savings results.



14. APPLICATION OF VE TECHNIQUE

Value engineering/value analysis can be applied universally, i.e. to everything-materials, components, spare parts, methods, processes, capital goods )plants, machinery etc.), services (power, water supply, maintenance etc.) etc., where it is intended to bring about economics. One should naturally start with items, where the maximum annual savings can be achieved. Similarly, scarce materials, imported materials or those difficult to obtain should also receive the attention of the value analyst. Therefore value analysis can be applied to : i) ii) iii) iv) v) vi) vii) viii) ix) x) xi)

Items of high annual consumption, say A-category items (of A B C analysis). Items complex in design. Items made from scarce materials. Items involving too many machining operations and difficult to make. Items where chances of standardization are bright. Items with high scrap rate or wastage and of repetitive use. Items with possibilities of modifications or incorporation into a related product or component. Items purchased in large quantities. Vital items where dependence on imports is too much. Critical items of single source supply. Items which are not competitive as a result of changed market conditions.

The application of VA/VE, however, need not be confined to individual items, it could be extended to groups or categories of items and products and projects. Specific Examples

A few cursory examples out of many routine exercises carried out in industries and business activities are : 1. The use of duplex board cartons in place of tine containers for milk powder and other similar items has reduced the cost of packaging. 2. Bottom view glasses of soaker cranes in a steel industry were originally of imported “stalinit” brand, were substituted by indigenously available toughened glass which gave more life. Hence better performance at lower cost. 3. A manufacturer of road rollers used a cast iron block weighing two tons and costing about Rs.9000 per unit. During the VA exercise the basic function of the cast iron block was identified as, “supply weight”. Among various ideas that emerged during the speculative session the idea of providing scrap and stones in a steel box was evaluated the best and was implemented. Thus the same function was achieved at a cost of Rs.5000¸ only effecting a reduction of Rs.4000 per unit of production. One can imagine the enormous impact of this single VA gain on a regular production of thousands of road rollers per year. 4. Instead of bush bearings, sintered bush bearings are used in a number of applications. They not only eliminate machining cost but also have the additional advantage of being self-lubricating.

15. QUALITY AS VALUE

Motto of quality- “Quality is when our customers come back and our products don’t.



Quality product is that which works exactly as designed. Quality is value to the extent it directly relates to performance. It may add to or detract from performance. A poor quality item may not meet performance requirement. Value increases by increasing quality – performance for same cost or less. Customer’s views quality as value when: 

Obtaining required levels of quality at least cost.



Highest level of quality for a given cost.



Optimum comparison between the two.

Quality superiority would not interest the customers if he or she cannot get value out of that quality level. The measure of value is what and how much one’s quality superiority confers on the customer’s competitive advantage, benefits and satisfaction. Quality enhancement programs will continue to result in some value like, reduction of direct labor, introduction of new technology, reduction of cost etc.

16. V.E. AND STANDARDISATION

Application of value engineering principles can help a great deal in the standardization of designs, types and varieties of components used, materials used for processing and also methods adopted for production. Once these factors are laid down after a thorough critical evaluation. Such standards will have better reliability and accuracy than those which are arbitrarily accepted on the basis of old judgment and experience of one or few persons. On the other hand, the degree of standardization which is already available today, thanks to B.I.S, it is possible to straightaway select the recommended value of tolerances, finishes, shapes, designs, properties etc. which can directly help in economical production. The task of VE or VA thus considerably gets simplified when these standards are available. For instance, Bureau of Indian Standards had done a great service by producing various standards which are of immense use if carefully adopted by the user industries. 17. PRODUCT LIFE CYCLE A product goes through for separable stages or phases between the time it is first introduced into the market and the time it becomes obsolete, decline in usefulness or loses customer appeal. Research and Development stage: In which knowledge is extended towards innovation to create new functions, to provide additional functions, and to accomplish existing functions more reliably or efficiently. In this stage ways and means are sought to fill new needs, to execute new functions, and to improve functions already being performed in one way or other. The resultant products are awaited with anticipation, and if successful, they are sold in sufficient numbers to support continued performance studies.



e m u l o V

R&D

Growth

Maturity

Decline

Time

Growth Stage: The product having proved that it fills a need, gains in customer demand, and competition enter the field. In this stage, it becomes evident that the product must be produced at lower costs in order to sell it competitively in sufficient quantity. Maturity stage: This stage is reached when the product has matured fully, volume rises and market becomes increasingly situated. Marketing becomes very important in this stage. In this phase all competitive products are generally reliable and there is very less difference between them. Profit margin also begins to slip during this phase. R&D is no longer making large contribution to efficiency with which functions are accomplished, to life of product, or to the addition of new function. The prime task of manufacturer becomes identification and elimination of unnecessary cost. Decline stage: The product begins to lose consumer appeal and sales. In this stage need for controlling the cost in each stage of the design, manufacturing and distribution becomes a matter of survival. Example: Kitchen waste is an unavoidable derivative of food preparation and consumption in normal house hold. In the early stages of civilized living, it was quite common to dispose of this waste by feeding it to pigs, by burring it to ground, etc. As the mode of living progressed towards city, the problem was solved by organized provision for garbage collection and removal. Half century ago, awareness developed that there was a need for a better and more sanitary way of handling kitchen waste. R&D was implemented. The goal becomes one of directly reducing the waste at the source to a form in which it could be directly disposed off. The R&D stage brought forth today’s household garbage disposer. Original product gained user’s acceptance, and in growth stage that followed, refinements were made to performance and the cost was brought down to level at which demand was sufficient for profitable production. Number of producers increases from one to dozen. The maturity stage was reached and profitable production of the appliance hinged largely on maintaining the performance effectiveness while eliminating unnecessary cost.


Module 1 Value Engineering a Conceptual Framework

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