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Understanding the meaning of value engineering

October 8, 2020

The increasing complexity of business operations and the pursuit of maximum value creation for our customers and employees makes every company continuously look for “value.”

We use various methods and structure our organizations to create, extract and preserve value. This continuous path crosses our products and services, striving for operational excellence, with automation, AI, FMEA, Six Sigma, DMAIC, COPC, etc. being some of the tools that help us along this path.

In our opinion, the core of a successful company lies in the continuous questioning of the value in all areas of the company: product development, service delivery, operational execution, sales, marketing, etc. This process can be simplified into a single focused principle of value engineering, which we consider a powerful tool for cultivating a value-oriented organizational culture.

Value engineering is not a new concept, but there is the possibility of applying it more widely in all areas of the business, and in particular in the products and services that each organisation brings to 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.

Value Engineering helps your organization in

  • Lowering O & M costs
  • Improving quality management
  • Improving resource efficiency
  • Simplifying procedures
  • Minimizing paperwork
  • Lowering staff costs
  • Increasing procedural efficiency
  • Optimizing construction expenditures
  • Developing value attitudes in staff
  • Competing more successfully in the marketplace 

A simple value-added structure

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 ways to increase the value of an ongoing business. In keeping with the principle of never reducing function, the primary focus of the “run platform” is cost efficiency, achieved through engineering that strikes the right balance between cost and productivity. VE is used to search for 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.

In general, RIG starts using VE to initially reduce costs in your ongoing business without affecting your results. These savings are then used to develop and test an innovation that translates into a growth strategy that drives your company’s revenue growth.

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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