If you’re adopting a value engineering strategy, you’ll need to follow its systematic methodology to bring real, long-term benefits to your business. Done correctly, it involves function analysis that aims to reduce lifecycle cost while improving or maintaining performance and quality.
But what are the six classic steps that make up a successful value engineering process? And how would OEMs know when's the right time to kick-start a value engineering strategy?
Have you identified a product in your portfolio that is in danger of becoming nothing but a cost centre for your company? It may be a product that has historically been vital to your business but whose profitability and/or market share is waning.
Some common value engineering process triggers include:
You might be facing all of the above. In which case, how can you rebalance these elements of cost, customer value, performance, and price to bring your product back into the black?
This is where Value Engineering may be able to help.
Value engineering is a systematic, organised approach to providing necessary functions in a project at the lowest cost. Value engineering promotes the substitution of materials and methods with less expensive alternatives, without sacrificing functionality. It is focused solely on the functions of various components and materials, rather than their physical attributes.
A value engineering process promises to find sustainable cost-saving opportunities for you across the product lifecycle, while retaining and even adding value for your customers.
But it’s hard to get right. You need a mixture of analytical skill, multi-team collaboration, product expertise, creativity, and good old-fashioned discipline to get your teams working together to deliver.
If you don’t adhere to a planned and disciplined methodology, you stand in danger of simply following your hunches, restricting your thinking unnecessarily and, in the end, not transforming your insight into solid and practicable plans.
And as Katherine Bethany from the SAVE International (the international institute for Value Engineering) reminds us:
Performing value engineering correctly requires an analysis of the functions of the project or product or system being studied. The outcome solves problems and reduces life-cycle costs while improving performance and quality. If a process does not include the function analysis, or the recommendations and solutions from the study, or the improvements to quality and performance, then it is not a true value engineering study.
So, the purpose of the Value Engineering 6-part methodology is to make your process as systematic, objective, and results-driven as possible.
Value engineering starts with determining where the true value of your product lies for your customers, to reveal how you can reduce your costs without compromising the functions and quality that fundamentally drive your sales.
It then moves on to defining, costing, proposing, and implementing these solutions in the most efficient and practical way possible.
You'll need to create a plan for your process based on these 6 classic steps and stick to it. It will keep you focused on the objectives of your project and show you exactly what should come next.
The Value Engineering process starts by examining every part of your product’s lifecycle to identify its cost elements. That is, everything you currently spend on manufacturing, maintaining, and distributing the product.
To do this, start by breaking down costs into cost buckets, including Bills of Material and Process costs. Process costs include everything from production build and test to delivery logistics.
In value engineering, nothing is off the table for consideration - from the way you source materials to the way you dispatch your products. In this way, opportunities for intelligent cost reductions can be identified and exploited wherever they may lie.
Use the Pareto analysis to identify the different elements that make up your entire product cost or COGs (Cost of Goods).
As an OEM your Pareto Analysis may look something like this:
Assign a monetary value to the cost elements (based on figures located in your systems) and calculate the percentage they contribute to your COGs.
When you’ve analysed the costs of your product, certain facts will become obvious. It will be clear where your largest cost centres are and what the principal focus for your value engineering project should be.
For example, looking at the table above, the main cost drivers for this product are cable assemblies and sheet metal parts. This implies the VE process should involve production and electrical engineering, looking closely at cable assemblies to identify new efficiencies and reduce the labour content involved.
This is the fun part. VE teams then conduct a series of workshops to brainstorm creative ideas and new approaches to building and delivering the product. It may have been so long since a product was last analysed that much of your current process and materials are outdated, inefficient, and becoming obsolete. Leave no stone unturned in your search for an optimal way of doing things.
With a cross-disciplinary team, you should explore the ‘functions’ of each of the identified cost elements of the product. ‘Function analysis’ should be used to think clearly about what each of these elements or components actually does for a customer (the value it brings to them) rather than ‘how it works' right now.
In manufacturing terms, this is where DfX/DFM thinking pays off by standardising parts, simplifying assemblies, improving testability, and reducing process variation without weakening required performance.
From this starting point, the team are free to completely re-imagine how the product is manufactured or even the entire way it works, if its value to your customers can be maintained or improved in doing so.
A value engineering process can recommend making the following kinds of changes:
There are no ‘wrong ideas’ at this point - every perspective and possibility is explored and added to a list of potential ideas.
In the evaluation phase, the advantages and disadvantages of each idea you have explored are listed. When the disadvantages exceed the advantages, the alternative should be dropped in favour of other, more solid alternatives. The team typically performs a weighted matrix analysis to group and rank alternatives, selecting the best alternatives for consideration in the next phase.
For OEMs, this evaluation should include supply risk, compliance impact, qualification effort, and quality/traceability implications—not just piece price.
This is where you take a deeper dive into the highest-ranking ideas coming out of the creative workshops. This phase of the process entails:
Ensuring you build a strong case around the potential for savings is essential. Ensure your redesign ideas are sound, and your savings calculations are robust.
For example, how long will it take to recoup the non-recurring engineering costs involved in your ideas? Spending £10K for an annual saving of £1K across the remaining five years of a product’s lifecycle may not make great business sense!
Your VE lead now needs to bring your ideas to the board for approval.
At this stage, the board should have all the details they need to approve your recommendations. They may want to add in or tweak suggestions of their own, but as soon as this has been done, you should be in a position to roll out the suggested changes. Don’t enter this meeting unprepared, or the entire process risks stalling.
Now it's time to execute the project plan by:
The value engineering implementation is now in place. Processes will change, and new materials will start to be sourced and used. Implementation should run through formal engineering change control, verification/validation where required, and supplier re-qualification where materials/processes change.
But your job doesn’t end there. The VE team leader needs to monitor and track the progress of the VE changes to ensure they are having the intended effect.
Looking at the impact on costs, sales, and profit margins following the implementation of a project is vital to proving ROI and the success of your process. It will also help you see how the value engineering process can be improved and adapted next time to produce even better results.
And there you have it. It’s as simple as that. Except it’s not. There’s a lot that can go wrong. There’s a lot of work involved to get your 6 steps working properly and your teams operating seamlessly as one. At every stage, the progress of the value engineering project risks stalling because everyone has their day job to attend to, time is short, and new priorities are emerging within the business.
As you start to plan your value engineering project, you should carefully consider whether you have the resources internally to keep the momentum going on such a critical but resource-hungry process. If not, you should explore options for consultation and third-party support as you run your initial workshops and plan the required changes.
After all, the value engineering opportunities are extraordinary, but they can only be realised if the company-wide energy and commitment can be sustained over time.
Until the process becomes part of the ‘way you do things’, you may need a helping hand to define and deliver on your VE goals, working practices, and objectives.
To help you get started with the value engineering process, download our free guide to implementing VA/VE now, or contact our team for expert advice.
Value analysis (VA) focuses on analysing functions vs cost; value engineering (VE) applies those findings through design/process changes. In practice, OEMs often use VA/VE (VAVE) as one continuous approach.
When a product’s cost base is rising (materials, labour, logistics), obsolescence threatens supply, margins are compressing, or you need to improve competitiveness without redesigning from scratch.
The VE team should be a cross-functional group, including engineering (design/manufacturing/test), procurement/supply chain, quality, operations, plus finance for ROI validation, and a clear project lead to maintain momentum.
A prioritised list of change options, quantified savings assumptions (and costs to implement), risks/constraints, and an implementation plan with owners, timeline, and tracking.
Editor's note: This blog was originally published in 2021 and updated with new information and insight in January 2026.