Dr.

Nitin Kubde

Agenda
Introduction
The Origin
Value & Functions
VA Job Plan
Examples
Case Study

Value
Engineering/Analysis
Value Engineering is a systematic method
to improve the "Value" of goods and services
by using an examination of function.
Value, as defined, is the ratio of Function to
Cost.
Value can therefore be increased by either
improving the Function or reducing the cost.

Value
Engineering/Analysis
Value Engineering is an attempt to assure
highest value by delivering all required
functions at the lowest overall cost.
This practice identifies and removes
unnecessary expenditures.
Value Engineering is also referred to as "Value
Methodology".

Value
Engineering/Analysis
Value analysis is the organized and
systematic study of every element of cost in a
part, material or service to make certain it
fulfils its functions at the lowest possible cost.
It is one of the most effective ways of cost
reduction.

The Origin
During the Second World War, one of the most

serious problem faced by companies engaged

in the war effort was the shortage of
materials.
This led to experimenting with substitutes,

quite often in a very orthodox ways.

The Origin
In many cases, the experiments clicked and

surprisingly there were a large number of

instances where the substitutes were much
cheaper and functioned more efficiently than
the original material.
This is where the idea was born.

The Origin
Harry Erlicher, Vice President of Purchasing,

General Electric Co. (U.S.A.) felt that this

problem of finding out substitute could be
done in more scientific way.
Lawrence Miles along with a team of

engineers was entrusted with the job of

working on this idea.

The Origin
It was Miles who coined the term Value

Analysis and its synonym, Value Engineering.

This team under his stewardship pioneered

this technique and perfected it and, it is said,

saved their company $200 million over a
period of 17 years.

The Origin
Navy Bureau of ships was the first

organization to use VA in 1954.

L.D. Miles, father of this concept, wrote in

1961, a book, Techniques of Value Analysis

and Engineering.

The Origin
In India, the technique is catching on, but

slowly.
The basic difference between us and
Americans is that when they see something
that is useful to them, they grab it. We are
less enthusiastic in accepting change.
In India, now we have Indian Value
Engineering Society to create awareness of
this approach and to propagate this concept.

Value & Function

Value is a measure of Cost Effectiveness.
It is usually difficult to specify value mainly

because values changes from person to

person.

Types of Values
1. Economic
2. Moral
3. Aesthetic
4. Social
5. Political
6. Religious
7. Judicial

Divisions of Economic
value
Use Value
Esteem Value
Cost Value
Exchange Value

Value & Function

In almost everything we buy, we relate what

we get to what we have paid for in terms of

performance, reliability, appearance etc.
If we can collectively term these as function
then we can express value in a mathematical
way, i.e.
Value = Function
Cost

Value & Function

Value = Function

Cost
By cost, we mean the total cost (e.g. of
material, labour, overheads etc.) required to
produce the article.
If we keep the function constant, we see that

we get greater value when our costs come

down.

Undesirable but Passable

(cheapening the
product)

Value =

Function
Cost

Function
Cost

Ideal

Value =

Good

Function
Cost

Acceptable

Function
Cost

Passable

Value & Function

Value can be increased :
1. When we reduce costs.
2. When we improve function.
3. By (1) and (2) together.
4. When we increase function by a
disproportionately low increase in costs.

Value & Functions

Usually most of us lack the ability to measure

value.
In industry most of us are performance or
delivery oriented and we hardly search for or
get cost information.
Practice of value analysis sharpens this latent
ability to determine worth and measure value
and more than all to eliminate unnecessary
costs.

Value & Functions

Types of Functions:
1. Basic Function: Primary purpose of a
product.
2. Secondary Function: Other purposes not
directly contributing to the primary purpose
but supporting it or resulting from a specific
design approach.
Poor value may result from lack of

understanding of functions, or an imposition

of unnecessary functions.

Value Tests & Value Areas

The following is a check-list of ten tests for

value compiled by the purchasing department

of general Co. U.S.A.
Does it contribute use value?
Is its cost proportionate to its usefulness?
Does it need all of its features?
Is there anything better for the intended use?
Can a usable part be made by a low-cost method?
Can a standard product be found which will be

usable?

Contd
Is it made on proper tooling considering

quantities used?
Do material, reasonable, labour overhead, and
profit, total its cost?
Will another dependable suppler provide it for
less?
Is anyone buying it for less?

Contd
VA seeks answers to the following questions

which may be asked about a complete product,

component or process:
What must this item or process do? What is its

function? (This can usually be expressed in two

words, e.g., a bulb provides light or a paint
provides protection, or enhances appearance.
What else does the item do? (If the item performs
functions that are not needed, then it may be a
symptom worth investigating to find out if there is
a waste)

Contd
What does it cost?
What else could perform the same function?
What will be a possible substitutes cost?

It is usually said that one of the most

important reasons for the success of Japanese

business is the word WHY? Having a
constructive discontent of everything around
them, it is said, is a part of the Japanese
character. The result is that they want change.
This is exactly the philosophy of VA.

Value Analysis Job Plan

VA process is called VA job plan.
It is divided into phases.
Each phase has a set of techniques, carried

out in the worksheets.

VA is to be applied for those products where
cost reduction potential is substantially high.
The Value Index has to be more than 1.

Steps in VA
Information Stage
Functional Stage
Brain Storming Stage
Evaluation Stage
Implementation Stage

Information Stage
This stage is an attempt to assess the

potential of value improvement.

Detailed study of project is conducted.
Important facts are gathered and considered.
The cost data and work specification are
secured.
A relationship is to be established between
costs and specifications or requirements.

Functional Analysis
The product is defined in terms of its

functions, in terms of its performance

expectations.
These functions are co-related with cost and
their worth.
The functions that the material/service
performs are listed in terms of basic
functions & secondary functions.

Contd
These functions are listed and given the value

points or the weightage in terms of their

importance or priorities.
The value is expressed in terms of different

points from 0 to 100 then the total of all the

functions of materials should be added.

Brainstorming Stage
This is the stage where creative ideas come

up.
A heterogeneous group is preferred for the

stage.
Different alternatives for material or service

or design are discussed and worked upon.

Contd
All ideas may not be feasible.
The idea is to break away from rigid thinking.
The group approach has gained popularity.
The volume and variety of ideas is more from

a group as compared to when an individual

works upon it.

Evaluation Stage
The ideas generated in the brain storming

stage are evaluated for feasibility.

This analysis helps to find certain alternatives
which might offer similar functional values as
the earlier material but at a reduced cost.
Cost of all ideas and savings resulting from
their implementation are studied.

Implementation Stage
The ideas and alternatives discussed in the

previous stages are put forward to the

concerned departments.
The resistance to change has to be overcome.
Typical rigid beliefs, habits & attitudes exists.

Contd
Some types of resistances:
We tried this a couple of years ago but it was
not successful. (Conditions change. Why not
try again now?)
It cant be done. (If it has not been tried, how
does one know?)
The customer is satisfied with the price, as it
is (If this is so, he will be more satisfied and so
will many other if the price is reduced.)

Contd
Sampling is not as accurate as 100%

inspection (This is not always true but in any

case, does it need to be that accurate?)
This way processing would produce too many
rejects to the specifications (Then, are the
design limits too tight?)
There is no other technique. (Have you looked
for one?)

Contd
Some ideas get eliminated and only a few are

accepted.
This systematic value analysis will help the

purchase executive in finding the alternate

material or service or design or any other
facility of equal functional value or better
value while reducing the procurement cost.

Case:1
Battery cable was used in quantities of 50,000

for connecting battery to the starter. The

cable was made of 90 mm2 X 1.5 metre.
Copper, with brass lugs on both ends. The
cost was 52 units each.

VA Analysis
Data Collected
Function
Cost
Worth
Value Index
Creative Phase
Evaluation

Recommendation
Saving

Function, cost, current (450amps) C/Section, other

conductors and their costs, etc.
Conduct Electricity
52 Units per cable
17 Units (steel cable with increased cross section could
also conduct at cheaper cost).
52/17=3 (More than 1, hence good potential for V.E.)
Ideas to use cast iron, steel aluminium, Nicro-alloys,
silver, etc generated.
After analysing different ideas, aluminium was
considered best and investigated regarding its
feasibility, economy and related problems like bimetallic corrosion between aluminium and brass lugs
etc.
Aluminium cable of 120mm2 X 1.5 metres with zinc
alloy sleeves and brass lugs recommended.
30 units per cable (57% cost difference between copper
and aluminium + cost increase due to addition of zinc
alloy sleeves).
= 30X50,000
=15 Lakh Units per year

Case:2
PIPE COUPLING of a 5 component design was

used in quantities 12, 00,000 per year. The

cost was 8 units per coupling.

VA Analysis
Data Collected

Function of each part, material, cost, other coupling

designs, etc.

Function

Connect Pipe

Cost

8 Units

Worth

2 Units (cheapest way is to weld/braze).

Value Index

8/2 = 4

Creative Phase

To weld, use clips, use threaded pipes, combine

functions of parts, etc.

Evaluation

After necessary analysis of function of each component

of the coupling the functions of three parts were
combined into one part.

Recommendation

Use of pipe coupling with 3 parts eliminating two parts

and also reducing length of cap nut.

Saving

1 unit per coupling (12%)

12 Lakh units per year.

Case:3
Thin castle nut M36 X 1.5 (with across flat 55)

used in quantities 40,000 per year was

imported at a cost of 3 Units per nut.

VA Analysis
Data Collected

Function, cost, source of supply etc. Parts were

procured as per drawing since material specified
was C 35 K. Cold drawn bar of 55 Across flat,
which was not made in India.

Function

Fasten Steering Gear Box Accommodate Split-Pin

Cost

33 Units

Worth

12 Units (similar nuts procured as per standard

indigenously cost 12 units)

Value Index

33/12=2.7

Creative Phase

Ideas to change material to alloy steels, hot rolled bar

with heat treatment, to use a standard Thin Castle Nut
with ISO property class etc. were generated.

Evaluation

After analysis, use of standard nut with ISO property

class 8 was investigated.

Recommendation

To use standard thin castle nut to IS 5368 with ISO

property class 8.

Saving

17 Units per nut (52%)

6.8 Lakh units per year ( An import substitution)

Example 4
Castle nut with collar was used in quantities

of 1, 60,000 per year. The cost was 4.4 units

each.

VA Analysis
Data Collected

Function, cost, consumption, material, other similar

items used etc.

Function

1.

Fasten Screw

2.

Provide More Area

3.

Accommodate Split Pin

Cost

4.4 Units.

Worth

Fasten + Accommodate Split Pin (Cost of Castle Nut)

+ Provide more area (cost of a washer) = 1.4

Value Index

4.4/1.4=3.1 (more than 1)

Creative Phase

Use of castle nut and washer, round nut with flats and
slots, hex nut with large across flat & slot etc.

Evaluation

Use of hex nut with large across flat and slots was
analysed for cost and feasibility discarding others due
to certain limitations.

Recommendation

Hexagon slotted nut with increased across flat (equal o

the collar dia to previous nut) and without collar was
recommended. This simplified manufacturing.

Saving

1.6 Units per nut (36%) 2.5 Lakh units per year.