Value engineering is a systematic and organized approach to providing the functions needed in a project at the lowest cost. Value engineering promotes the substitution of materials and methods with less expensive alternatives, without sacrificing functionality. It focuses only on the functions of the various components and materials, rather than their physical attributes. Value engineering is also called value analysis.

Value engineering is the examination of new or existing products during the design phase to reduce cost and increase functionality in order to increase product value. The value of an item is defined as the most cost-effective way to produce an item without harming its purpose. Therefore, cutting costs at the expense of quality is simply a cost-cutting strategy.

Function/cost ratio

Miles defined product value as the ratio of two elements: function to cost. The function of an item is the specific job for which it was designed, and cost refers to the cost of the item during its life cycle. The function/cost ratio implies that the value of a product can be increased by improving its function or by decreasing its cost. In value engineering, costs related to production, design, maintenance and replacement are included in the analysis.

Value engineering often involves the following six steps, beginning with the information gathering phase and ending with implementing change.

Step 1: Gather Information

Value engineering starts with analyzing what a product's life cycle will look like. This includes a forecast of all expenses and processes related to the manufacture, sale and distribution of a product.

Value engineers often break these considerations down into more manageable data sets. In addition to assigned financial values, value engineers can prioritize processes or items along a product's manufacturing plan. Value engineering can also involve expectations about time, labor, or other resources for different stages of manufacturing.

Step 2: Think creatively

With the key baseline expectations for the product documented, now is the time for the value engineering team to consider new and different ways to develop the product. This includes trying new approaches, taking risks on things never done before, or creatively applying existing processes in new ways.

Leveraging these creative ideas, value engineers will reimagine how product will be created and distributed from state to finish. This phase is the “idea generation” stage where team members should be encouraged to think freely without fear of criticism.

Examples of creative thinking may include changing the materials used, changing the product design, removing redundant features, balancing reliability and flexibility, or changing the steps/order of the manufacturing process.

Step 3: Evaluate Ideas

With a bunch of ideas now on the table, it's time to decide which are reasonable and which aren't. Each idea is often evaluated for its pros and cons. Instead of focusing on the quantity of each count, the value engineering team should consider which pros and cons outweigh their counterparts.

For example, a single change can result in five new benefits. However, this would prohibit distribution to a country to which the company exports the most goods. In this case, the five advantages may not outweigh the single disadvantage.

Step 4: Develop and analyze

Once the ideas are ranked, the best ideas are taken and analyzed in more detail. This includes drafting model plans, detailing changes and their impacts, producing revised financial projections, redesigning physical renderings, and assessing the overall viability of the change.

Take into account schedule constraints and considerations when analyzing changes, especially if other departments will be negatively impacted by extended schedules or deadline changes. Also consider how a product's break-even point may change as a result of the fit to ensure the strategy aligns with the organization's philosophy and financial capability.

Step 5: Document and share opportunities

Once the plans have been developed and the presentations put together, it's time to submit the best ideas to senior management or the board for consideration. Often more than one idea will be presented at a time so that the deciding group can consider and compare the alternatives. Each alternative must be presented in a consistent manner with fair representation for each choice.

Value engineering calls for increasing the value of each product; therefore, presentations should begin and end with how the change will benefit the business. Presentations should also include revised timelines, financial projections, drawings and risks. Often, management may be looking for specific answers about the changes or want to see a different analysis than the one presented.

Step 6: Implement the most relevant opportunities

As management gives confirmation to move forward with the changes, the management of

The objective of this questionnaire is to optimize the development costs of the vehicle whose code name is X230A.

The studies that we have carried out so far make it possible to estimate the production cost of each vehicle at 10,000 Euros for a basic configuration and for a production volume of 1,000 vehicles per month.

You will find attached the complete description of the cost structure estimated by the team (note: no PJ here but in a real case, participants can download documents with cost estimates by systems and equipment)

The objective of this challenge is to collect all the ideas allowing to optimize the production cost without reducing the safety, the functionalities and the pleasure of the future vehicle.