Value Analysis and Value Engineering

What is VA/VE?

VA/VE is a process. VA stands for Value Analysis, and VE stands for Value Engineering. Together, they’re great tools for delivering exactly what your customers want at a great price excluding the unnecessary. The VA part is normally more applied to existing products or prototypes (quantify the value that exists), while VE is in the design phase for new or revised products (create the value that doesn’t yet exist). The truth is that as time goes on, we learn more about our product, our customer preferences change, our suppliers change, new technologies come available, and so on. Even with the very best Value Engineering done before a product is launched, it can benefit from a refresher down the road – and so can your bottom line.

VA “Value Analysis” ↔ existing products

VE “Value Engineering” ↔ new products

VA/VE has long been a favorite tool in the hands of operations professionals in pursuit of lowering costs; however, this process benefits everyone involved as it optimizes the product for the customer, the manufacturer, the sales & distribution channel, and aftermarket channel alike.

Let’s face it, there are little things you may already be aware of with your product that you’d like to change. Maybe it’s an unnecessary feature …or a missing feature? Maybe it’s a problematic supply chain issue? Maybe there are product roadblocks to increasing sales volume? Perhaps there’s a nagging warranty issue that seems it should be easy to resolve but has been dragging on for a while?

Value = Benefit/Cost

The key here is that value and cost are being reevaluated at the present time and in the present conditions. While there may be specific changes in mind for individual issues, the power in this process comes when the product is considered in totality with input from stakeholders at all angles. Elegant solutions that resolve many issues and lower costs are common.

How is it done?

The VA/VE process is a team exercise that starts with a focus on understanding the value provided.

For any given product, whether existing or just in concept, there is a definition of what the product does and how it does it. If you have a product in mind, think of the 10-second elevator pitch that describes it.

“It’s a ___(widget)_____ that does ____(stuff)_____ for ___(specific customers)___ who ____(have this problem)___, and as a result they ________(get this benefit)______”

That’s the basic starting point. For example:

“It’s a coffee maker that brews coffee for busy adults who are barely conscious partly-humans in the mornings and as a result, they are perked up, well-adjusted and productive members of society for the rest of the day!”

That’s the whole picture, but it doesn’t tell you everything about that coffee maker. The fact that it results in brewed coffee is valuable, but elements of what it does to reach that end are pieces of that overall value provided to the “barely conscious partly-humans”.

We need to break the coffee maker up into individual functions that provide bits of the value. This coffee maker:

· Starts by Voice Command

· Filters the Water

· Grinds the Beans

· Brews 12 cups

· Keeps it Warm

· Turns off Automatically

· Displays the Time

· Looks Good on the Counter

These are all individual features that sum up to the overall value of the product that a customer is willing to pay for. The value of each feature isn’t equally weighted. For instance, it is far more important that the coffee maker actually brews coffee, than the fact that it can be started by voice command. Nobody will buy a coffee maker that doesn’t make coffee, but plenty of us have machines that don’t respond to our morning utterings.

Next, with the functions identified, they now need to be mapped to every single last component of the product that contributes to that function in any way. Some parts may only contribute to one function, while others will share support to multiple.

Things can look a bit confusing at this point, but it’s important to get it all recorded. This is the setup for the real valuable work to which the VA/VE team will contribute.

The VA/VE team is a multidisciplinary group consisting of knowledgeable people in the business of the product from all areas including operations representative (engineers, purchasing, manufacturing, quality), sales representatives (including distributors, outside reps), aftermarket representatives (parts, service, helpdesk), and even some customers where possible. This diverse group will scrutinize the matrix of functions (value) and parts (cost) to make sure things are in balance. If 50% of the cost comes from something that is only 3% of the value – remove that feature. If a valuable feature is missing – add it, but do so in harmony with the rest of the product. Is a single-source supplier limiting production capability? Change the design to remove this restriction. Are 90% of the helpdesk calls coming in due to a confusing set of buttons? Fix it to provide a more intuitive user interface. And in all things, consider the costs and opportunities to optimize.

The results will be an exhaustive list of changes to make with a clearly associated benefit in increased value, reduced cost, or both for each one of the items in the list. In a perfect world, you could address each and every one of those items, but it’s not required. Most people force-rank the list and go after the items of greatest impact. Since you know the projected return on investment, it makes the decision-making process clear and objective.

Remember, the assessment is done by a room full of intelligent people representing every area of the creation and consumption of the product. The odds of success are heavily weighted in your favor and the team that will implement the changes feels real ownership in the work ahead because of their participation in the exercise. The commitment is an engaged 1-2 day exercise for the team in a room together. The reward is up to you, but typically very many multiples in return.

VA/VE is a simple process at the surface. In practice, it takes some experience and discipline to get it right. That shouldn’t be a barrier to making use of this in your products. At CDN, we’ve seen this bring great results in both new and existing products. If you’re interested in running a VA/VE exercise with one of your products for the first time, we can help by facilitating your first project and giving you the resources to continue with others in the future. It’s a great way to learn it and get tremendous value for your business. It’s like getting paid to go to school.