Reviewed by Oct 05, 2020| Updated on
Value Engineering (VE) is also known as value analysis. It is a structured, coordinated approach to delivering the required functions at the lowest cost in a project.
Value engineering promotes the substitution of less expensive alternatives for materials and methods without sacrificing functionality. It focuses primarily on the roles of various components and materials, and not their physical attributes.
Cost reduction should not impact the quality of the product being developed or analysed with the value engineering in place.
Value engineering is evaluating new or current products during the design process to minimise costs and increase quality to improve product value. An item's value is defined as the most cost-effective way to produce an item without depriving it of its function. Saving costs at the detriment of quality is also merely a cost-cutting tactic.
It involves searching for opportunities to modify the design of each component or part of a product to reduce the cost, but without deducting functionality or quality of the product. It helps reduce the direct material cost of a product.
At General Electric, amid World War II, the concept of value engineering evolved in the 1940s. Because of the war, buying engineer, Lawrence Miles and others, sought substitutes for materials and components since they were chronically scarce. These replacements have also been found to reduce costs and offer equal or better performance.
Miles has specified the value of the commodity as the ratio of two elements: cost and function. An item's purpose is the particular work it was designed to do, and the cost refers to the item's expense over its life cycle. The benefit-to-cost ratio means that a product's value can be improved by either enhancing its benefit or reducing its cost.
The cost relating to production, design, maintenance, and replacement is included in the analysis in value engineering. Consider, for example, the production of a new software device, and it is supposed to have a life cycle of only two years. The product will, therefore, be built with the least costly materials and services that can work until the end of the life cycle of the product.
Accordingly, it saves the manufacturer from the cost involved and also the money spent by the consumers. It is an example of value enhancement by cutting cost.