VALUE CONCEPT

The value process is a function-oriented system. It makes use of team action and creative problem solving to achieve results and is specifically designed to simultaneously consider all of the factors involved in decision making ” performance, schedule, and cost.

In order to obtain an experienced , balanced, broad-scope look at all facets of the project, a carefully selected team is organized to satisfy the specific requirements needed.

Selection of the team must consider personality as well as technical competence of the candidates. The team must not only have the technical know-how required, but the members must be compatible and know how to work together. The value manager acts as a coach to guide the team members through the system to obtain maximum benefit from their activities.

DEFINITION

The Society of American Value Engineers defines the term "value engineering" as follows :

Value engineering is the systematic application of recognized techniques which identify the functions of a product or service, establish a monetary value for that function and provide the necessary function at the lowest overall cost.

The program described by this definition is not a cost reduction program ” it is a profit improvement program in that it recognizes all of the factors contributing to product cost. It recognizes that the lowest cost product may induce high warranty problems that may adversely affect profit. In order to increase profit it may, therefore, be necessary to increase product cost in some cases. Overall cost is the prime concern.

A value program is implemented by applying all of the known techniques of problem solving and cost reduction plus a large body of special skills. The primary objective is to identify and remove unnecessary cost.

Unnecessary cost is cost that can be removed without affecting product function. It has been estimated that the average consumer product may include over 30 percent unnecessary cost. This unintentional cost is the result of habits, attitudes, and all other human factors, and everyone in an organization contributes to it.

PLANNED APPROACH

Value control achieves results by following a well-organized planned approach. It identifies unnecessary cost and applies creative problem-solving techniques to remove it. The three basic steps brought to bear are:

1. Identify the function (what does it do?)

2. Evaluate the function (what is it worth?)

3. Develop alternatives (what else will do the job?)

FUNCTION

Function is the very foundation of value control. The concern is not with the part or act itself but with what it does; what is its function? It may be said that a function is the objective of the action being performed by the hardware or system. It is the result to be accomplished, and it can be defined in some unit term of weight, quantity, time, money, space, etc.

Function is the property that makes something work or sell. We pay for a function, not hardware. Hardware has no value; only function has value. For example, a drill is purchased for the hole it can produce, not for the hardware. We pay to retrieve information, not to file papers.

Defining functions is not always easy. It takes practice and experience to properly define a function. It must be defined in the broadest possible manner so that the greatest number of potential alternatives can be developed to satisfy the function. A function must also be defined in two words, a verb and a noun. If the function has not been defined in this way, the problem has probably not been clearly defined.

Function definition is a forcing technique that tends to break down barriers to visualization by concentrating on what must be accomplished rather than the present way a task is being done. Concentrating on function opens the way to new innovative approaches through creativity.

Some examples of simple functions are as follows: produce torque, convert energy, conduct current, create design, evaluate information, determine needs, restrict flow, enclose space, etc.

There are two types of functions, basic and secondary. The basic function describes the most important action performed. A secondary function supports the basic function and almost always adds cost.

VALUE

After the functions have been defined and identified as basic or secondary, we must evaluate them to determine if they are worth their cost. This step is usually done by comparison with something that is known to be a good value. This means the term value must be understood .

Aristotle described seven classes of value: economic, political, social, aesthetic , ethical, religious, and judicial. In value control, we are primarily concerned with economic value. Webster defines value in terms of worth as follows:

• Value: (1) A fair return or equivalent in goods, services, or money for something exchanged; (2) the monetary worth of something; marketable price; monetary value.

Webster in turn defines worth in terms of value:

• Worth: The value of something measured by its qualities or by the esteem in which it is held.

If we set a value, we determine its worth. If we determine the worth of something, we set a value on it. The two terms can be used interchangeably, and value is defined for our purpose as follows: Value is the lowest overall cost to reliably provide a function. By overall we mean all costs that affect the function such as design and development expenses as well as manufacturing, warranty, service, and other costs.

Value (V-E) is broken down into three kinds, each with a specific meaning:

1. Use Value (V-U): A measure of the properties that make something satisfy a use or service.

2. Esteem Value (V-e): A measure of the properties that make something desirable.

3. Exchange Value (V-x): A measure of the properties of an item that make it possible for us to exchange it for something else.

These measures may be in dollars, time, or any other measurable quantity. However, on occasion it is necessary to rank a series of functions by their relative value, one to another.

Value is not constant; it changes to satisfy circumstances at a given time. As circumstances change, values may change. This is usually true of monetary, moral, and social values. Value can therefore be expressed as the relationship of three kinds of value:

VE = Vu + Ve + Vx

Do not confuse cost with value. Cost is a fact; it is a measure of the time, labor, and material that go into producing a product. We can increase cost by adding material or labor to a product, but this will not necessarily increase its value. Value is an opinion based on the desirability or necessity of the required qualities or functions at a specific time.

The relationship of cost (C) to value provides an index of performance (P).

P = (VE)/C = (Vu + Ve + Vx)/C

It can be seen that maximum performance of our resources can be obtained when cost is low and value is high or when P is greater than one. However, it is usually found that P is less than one, and this is an indication that we are not getting good value for our expenditure of funds. It is a direct indication of unnecessary cost.

DEVELOP ALTERNATIVES

Function has been defined as the property that makes something work or sell and value as the lowest cost to reliably provide a function. The performance index (P) has identified the problem. Now, what else will do the job? We need to develop alternative ways to perform the function.

In order to develop alternatives, we make maximum use of imagination and creativity. This is where team action makes a major contribution. The basic tool is brainstorming. In brainstorming, we follow a rigid procedure in which alternatives are developed and tabulated with no attempt to evaluate them. Evaluation comes later. At this stage, the important thing is to develop the revolutionary solution to the problem.

Free use of imagination means being free from the constraints of past habits and attitudes. A seemingly wild idea may trigger the best solution to the problem in someone else. Without a free exchange of ideas, the best solution may never be developed. A skilled leader can produce outstanding results by brainstorming and by providing simple thought stimulations at the proper time.

EVALUATION, PLANNING, REPORTING, AND IMPLEMENTATION

The creative phase does not usually result in concrete ideas that can be directly developed into outstanding products. The creative phase is an attempt to develop the maximum number of possible alternatives to satisfy a function. These ideas or concepts must be screened, evaluated, combined, and developed to finally produce a practical recommendation. This requires flexibility, tenacity, and visualization and frequently the application of special methods designed to aid in the selection process. The process is carried out during the evaluation and planning phases of the job plan and is covered in detail in those sections.

The recommendation must be accepted as part of a design or plan to be successful. In short, it must be sold. It must show the benefits to be gained , how these benefits will be obtained, and finally proof that the ideas will work. This takes time, persistence, and enthusiasm . Details of a recommended procedure are covered in later sections of the text.

THE JOB PLAN

These are the basic features that make value control an effective tool. All are applied in a stepwise approach to a value study. The approach, called the job plan, demands specific answers to the following questions:

• What is it?

• What does it do?

• What does it cost?

• What is it worth?

• Where is the problem?

• What can we do?

• What else will do the job?

• How much does that cost?

The plan is broken down into six steps:

1. Information phase

2. Creative phases

3. Evaluation phase

4. Planning phase

5. Reporting phase

6. Follow-up phase

Each step is designed to lead to a systematic solution to the problem after consideration of all of the factors involved.