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16 Jun, 2021 / BY Garry Ness

Value Engineering for OEMs: 7 myths debunked!

Value EngineeringValue Analysis and Value Engineering (VA/VE) is a practice that’s often misunderstood and maligned by those who’ve seen projects bungled in the past.  In this blog post, we bust some enduring myths about the Value Engineering process and what it can mean for an OEM business.

The hostility Value Engineering can provoke is legendary. A quick search of the blogosphere shows some robust criticisms of the practice from teams who have seen their products ‘value engineered’ before:

“Value engineering means cheapening the job… there is no regard for value… it really should be called 'no value' engineering” 

Engineers, protective of their products and reputation too often feel like VE is just an excuse to cut back on quality by blindly slashing materials and production costs.  

Done right, though, VE is a hugely valuable tool that can bring every department of a business together as they find new ways of working to reinvigorate products and increase a company’s profitability.

Here’s the truth behind 7 common VE myths

Myth 1: VE is just about cost cutting

It’s true that when Value Engineering is an activity led only by procurement, it can be nothing short of a glorified and cavalier cost cutting exercise.

But if a business takes that approach to VE it’s almost bound to fail. The quality and satisfaction a product brings to your customers is integral to the fortunes of your company, after all.  It’s the reason why they buy your product in the first place. Tinker with that at your peril.  With this in mind, Value Engineering seeks to maintain and even increase the value of a product through uncovering and eliminating unnecessary costs arising in its design process and subsequent lifecycle.

The VE investigation process should ‘follow the money’ because it indicates where the potential for intelligent cost reductions lies - not because it shows up opportunities to ‘slash and burn’.

Myth 2: VE is just peer design review

Value engineering is not there to ‘pick holes’ or criticise work that has gone before. But it does acknowledge that design engineers don’t always have the time or remit to commercially optimise a product before it’s launched in the market place. 

In some companies where engineers are both designing new products and working on existing product fixes and updates, there’s simply no time to spend refining designs for manufacture. The pressure of tight time-lines often prevent busy teams from making the most competitive choices around materials and manufacturing processes before their products are launched.

In other companies with dedicated new product design teams, engineers are often deliberately focused on innovation and the next big thing - rather than the nitty-gritty of sourcing best value materials or the most efficient way to assemble parts once they’re on the production line. 

Whatever the circumstances Value Engineering does not seek to criticise past decisions - only to enhance the value of a product for the business and the consumer in the future.

Myth 3: VE is about adding new product features

VE is not intended to increase the feature set of a product.  

The objective of the process is not to work out what features products are missing. The tools and techniques that are used in the VE process focus on functions (what a product or component does for a customer) and then works out how those functions can be delivered most efficiently and effectively.   

But VE can use tools like Function Analysis to separate features from functions - defining what a product or component does for a customer rather than 'how it does it'.  This liberates engineers to think more imaginatively about the same functions can be served in more cost-effective ways. 

Some Value Engineers deploy other creative thinking techniques such as SCAMPER checklists (working what could be Substituted, Combined, Adapted, Modified, Put to another use, Eliminated, or Reversed in a design) to completely reimagine how a product answers market needs and provides value to a  consumer.  

This kind of process may conclude that new features could answer the same customer needs in a more cost-effective way, but any recommendations will be assessed and analysed as part of the formal VE process.  If the recommendations reduce costs while increasing value to customers they may well be taken up as part of the formal VE plan going forward.

Myth 4: VE is a glorified LEAN project

VE is not LEAN by another name.  Although LEAN thinking and 6 Sigma are tools which can and should be applied in a VE project, those disciplines are just focused on delivering efficiencies in the design and production phases of manufacture.  VE needs to be much more holistic in its approach to achieve its objectives.

Myth 5: Value Engineering is a job for a single department

The VE process is not about a single department or consultant looking at spreadsheets and deciding what changes should be made to a product. It’s about a whole team of individuals with different experience and expertise in the product, working together.  These multi-skilled VE teams work in a highly disciplined and ordered way to deliver insight, recommendations and a plan to re-engineer a product to improve its value.

By involving everyone from procurement and design, to manufacture, delivery and logistics the team can first isolate ALL of the costs involved in every stage of a products’ realisation and distribution.  Then they can use their expertise to rethink the way each part of this process could be delivered to eliminate unnecessary costs and keep a product competitive.  VE is about joining the dots and losing the silos, pin-pointing the changes that will make the most impact on your bottom line in the long term.

Myth 6: Value Engineering is only interested in changing the physical product

Once VA/VE was centred around eliminating unnecessary costs contained in the physical product itself.  Now we're in a globalised economy driven by digital innovation and JIT economics the challenges are different.  We're highly sensitive to turbulence and dependent on trends in international markets. Waste and unnecessary costs can be hidden deep in complex supply chains or the design and procurement decisions taken years ago.

It may be a long time since your product was designed and examined for profitability and efficiency of production.  Market conditions could have changed and thrown costs way out of kilter.  Maybe Covid has exposed vulnerabilities and introduced new financial burdens within your supply chain.  Maybe Brexit has made importing and moving goods between factories in the UK and Europe prohibitively expensive.  Maybe there are new manufacturing processes the latest AI tech has made available that could be delivering new cost savings to your business.

That’s why the initial VE investigation isolating costs across the entire product lifecycle is so important.

Value Engineering ‘follows the money’  throughout every part of your design, manufacturing and delivery process to uncover new possibilities for intelligent cost reduction where ever they may lie.

Myth 7: Value Engineering can only happen at the end of project

Can you only Value Engineer a product after it’s been launched and is in production?  Retrospective Value Engineering may be vital when a product is floundering under new commercial pressures and you need to urgently increase its value and relevance to customers.  But VE can and should be applied as early as possible in the product lifecycle to analyse and optimise your design and manufacturing decision making.  As 80% of a product's costs are fixed in the design phase this is a critical time to concentrate on making the smart substitutions of materials, components and processes that will maximise profitability and give you a competitive edge from the start.

Conclusion

Done right, Value Engineering is a systematic process of investigation, analysis and recommendation for intelligent cost reduction that will drive value for your customers and increase your profitability.  But it's easy to be daunted by the challenge or put off by negative experiences of poorly executed projects in the past. 

For the VE process to be successful it's got to be disciplined and focused, with clear objectives and an agreed way of implementing the recommendations you come up with.

If VE is going to bring enduring benefits to your whole business it needs to become a routine part of the 'way you work'; a defined methodology that you can repeat over again to drive efficiencies and quality at the same time.

Value Engineering guide for manufacturing

 

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