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Understanding the Importance of Value Engineering

May 20, 2019

The increasing complexity of doing business and striving to create maximum value for our customers and employees has every organization on a continuous path to seek out “Value”.

We deploy a variety of methodologies and structure our organizations to create, extract and preserve value. This ongoing journey crosses our products and services, as well as they, strive for operational excellence where automation, AI, FMEA, Six Sigma, DMAIC, COPC, etc. are some of the tools to help us in that journey.

In our opinion, at the heart of a successful company is the continuous questioning of value across all aspects of the company; product development, service delivery, operational execution, sales, and marketing, etc.. That process can be simplified into a single focused principle of Value Engineering that we believe is a powerful tool to cultivate an organizational culture centered on value.

Value engineering is not a new concept, however, there is an opportunity for greater application to all parts of the business and in particular to the products and services that every organization is offering into the market.

What is Value Engineering?

Very simply, Value engineering (VE) is a systematic methodology to improve the “value” by an examination of function.

Value engineering was originally developed in the 1940s during World War II in response to a shortage of materials. The substitutes they managed to find usually lowered the total cost while increasing the potential for growth.

As value is the ratio of function to cost, VE focuses on improving the function and/or reducing the cost so that an increase to the value is achieved. During the “engineering” process, the “engineer” needs to ensure that the function is either preserved or improved and that there is never a reduction to the function as a consequence of pursuing value improvements.

Why Value Engineering?

Value engineering is the holistic structural and analytical process, irrespective of detailed principle used for a particular scenario or case, that seeks to maximize value for money.

How an operation, a product or service is structured from the inception will need to evolve over time to take advantage of technology developments, new techniques and/or general evolution of the organization and/or the needs of customers.

This continuous evolution is much easier to realize with a holistic approach as it will no doubt require more than one discipline to help you achieve the maximum potential value.

The Five Phases of Value Engineering

You can break value engineering down into five phases or steps. Following these steps can help to ensure that you have success and enable growth:

  1. Information Phase – Review, understand and analyze the processes/product/service and measure current value.
  2. Speculation Phase – Thinking in function to cost ratio, the engineer designs the improvements without impacting the quality or reducing the function.
  3. Development Phase – Test and expanded into workable solutions. Compare the new design to the old one to demonstrate the value improvement.
  4. Presentation Phase – Present the findings, recommendations, and strategy with measures and targets to deploy.
  5. Deploy Phase – Implement and monitor to ensure value objective achieved and return to phase 1 to improve further.

A Simple Structure to Engineer Value

Where can VE work for companies? It’s simple: value engineering can easily be deployed by creating value targets into three general platforms:

One – Run

  • There are always opportunities to increase the value of any running business. Keeping with the principle of never reducing the function, the primary focus in the “Run platform” is cost efficiency that is achieved by engineering that right balance between cost and productivity. VE is deployed to seek out and implement optimization opportunities.

Two – Innovate

  • VE puts in place a structured approach to foster, evaluate and test value innovations. Innovations are more than breakthrough “products”. They come in all shapes and sizes to feed your Grow or Run Platform. Some of the quickest value opportunities come from simple re-engineering of the quality system, techniques or existing technology.

Three – Grow

  • Planning and executing your growth strategy is one of the most exciting parts of your business. Whether you are pursuing a complex strategy like global blitz scaling or scaling within your existing markets, engineering the strategy, measures and monitoring systems with VE at the core will ensure you have the best opportunity to realize your growth.

Swivelt and Nityo Infotech call this focused value creation platform “RIG”, where the platform is an eco-system to help your business preserve, extract and create value.

Generally, RIG starts with VE being deployed to initially reduce the cost in your running business, without impacting your outcomes. Then these savings are deployed to develop and test an innovation which expands into a growth strategy that drives revenue growth for your business.

This cycle keeps the actual cost value-neutral and recycles savings into growth for the company.

Take the next steps… deploy your RIG and see your business grow!

Written by: Eric Suzor, Swivelt CEO


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