Value Analysis and Value Engineering (VAVE) is more than a crude cost-cutting exercise to be led by a crusading procurement department. For Original Electronics Manufacturers (OEMs) it can open up opportunities to build better value solutions that answer customer needs more creatively and efficiently.
What is VAVE?
VAVE stands for Value Analysis/Value Engineering (or VA/VE). It focuses on the analysis and engineering of value in a product with the objective of improving its value proposition, reducing costs, or enhancing its overall performance.
VAVE is commonly used in manufacturing and product development, as companies are always striving to improve their products and stay competitive in the market. By applying VAVE principles, manufacturers can find and implement changes that add value to their products or processes. This, in turn, leads to happier customers, cost savings, and better overall productivity.
| Value analysis (VA) | Value engineering (VE) | |
|---|---|---|
| What it is | A systematic assessment of a product's value | Changes to the product's design, based on value analysis findings |
| Core question | Does the cost exceed what's needed to perform the product's functions? | How can design, materials, or processes deliver the same or better function at lower cost? |
| Typical output | A clear view of each function, its value to the customer, and its cost | Recommended alternatives for design, material sourcing, manufacturing, and logistics |
| Typical timing | Commonly applied to existing products | Commonly applied during design and development |
| Shared goal | Lower cost while keeping or improving function | Lower cost while keeping or improving function |
What is Value Analysis?
Value analysis (VA) is a systematic approach used to evaluate the value of a product to ensure that its cost is no greater than is necessary to carry out its functions.
What is Value Engineering?
Value Engineering (VE) focuses on the modification of a product design according to value analysis. It is a highly evolved process for end-to-end product analysis and adaptation. It drives increased value for customers through multi-discipline, systematic, and intelligent cost reduction. Value Engineering and VAVE are synonymous and often used interchangeably.
Where did VAVE originate?
Although it’s now used in many sectors, particularly the construction industry, it was a methodology originally pioneered for the manufacturing industry by the General Electric (GE) engineer Laurence Miles during World War II.
VAVE began as a way to source alternative materials to manufacture vital products in times of chronic, national shortage. But Miles soon discovered that his system for re-engineering products not only maintained functionality - it also saved money and, even, improved performance.
After the war he went on to perfect this approach - which he christened 'Value Analysis' (VA) as a strategic tool for manufacturers to bolster competitive advantage. VA soon become known as VAVE - and is now referred to by practitioners simply as Value Engineering (VE).
What can Value Engineering do for OEMs today?
OEMs today are facing growing cost pressures as a result of rising material prices, new compliance demands and surging competition - to mention just a few reasons.
But too often businesses haven’t got the tools and systems they need to address these cost challenges effectively. Inefficiencies and waste are too enmeshed in their manufacturing process to be easily removed. And without a standardised methodology to analyse products or drive change, individual cost-cutting initiatives can struggle to gain traction.
Value Engineering is a solution that many OEMs choose to face these tangled cost challenges. It is a defined engineering methodology that cuts the cost and improves the value of a project, product, or process through the detailed analysis of its functions.
What do we mean by value, function, and cost?
Value = What the product is worth to the customer
Function = Properties and qualities of the product
Cost = Cost of goods sold (aka COGS)
How do you calculate value?
The value of a product is calculated using a simple equation:
Value = Function ÷ Cost
How is value maintained or increased for a customer?
You can increase the value of a product to a customer by increasing or maintaining the function, or by reducing the cost, or by a mixture of both:
But what defines the ‘function’ of a product?
Good question.
A products’ functions are its properties and qualities. It’s what a product does for a customer, rather than its specific features. This distinction is important because it can help companies be more creative and radical in the way they reimagine their products and processes in the future.
If we think about what the customer wants and gets from the product (rather than how the product itself works), then we are free to rethink what it is made from, how it carries out its functions and even the entire way it is manufactured.
So, what’s the objective of VAVE?
VAVE weighs the cost/benefit ratio of every single function and component of a product. It brings in specialists from across your organisation to propose alternative materials, designs, manufacturing process and more - it reduces costs while maintaining and (often) improving functionality.
To this end, VAVE brings together a multi-discipline team to analyse costs and suggest creative and ‘best value’ alternatives to designs, material sourcing, manufacturing processes and even logistics.
Why is Value Engineering so important for OEMs right now?
In the wake of Covid-19, Brexit, and other natural and geo-political ‘earthquakes’, vulnerabilities have been exposed in supply chains and the way entire sectors operate.
These vulnerabilities have destroyed agility and increased costs for producers and consumers alike.
Meanwhile, automation, AI, and all the extraordinary developments of Industry 4.0 and 5.0 are dramatically eroding the profitability of traditional business models - and the products many OEMs have been happily building for years.
How can value engineering help OEMs survive and thrive?
To survive and thrive in these challenging times, therefore, OEMs can’t simply carry on developing, manufacturing and products in the same old way. They need to understand exactly where the unnecessary costs lie in their products and eliminate them - and they also need the tools to find these economies in the most creative and innovative ways possible.
Dealing with the complexities of modern electronics, outsourcing and global supply chains means costs can be hidden deep inside product designs, processes, and logistics arrangements. And the multi-discipline approach of a Value Engineering project can tease out these issues, wherever these may be, and make recommendations for appropriate adaptation.
Are there any downsides to Value Engineering?
Value Engineering is a powerful tool, but it’s no silver bullet. It can’t be applied to every product. Some products just may not lend themselves to the process.
It’s also worth noting that the later it is applied in the product timeline, the less rewarding it is likely to be. That’s why it’s important to make it part of your new product development process as opposed to a ‘one-off’ post-launch activity. This way you will maximise the impact your investment will make in the long term.
A VE project will also only be as good as the team you have working on it. You need a strong leader and team members should be selected for their specific expertise and the value they can add.
If you can assemble a strong VE team and put in place a well-structured, systematic and repeatable VE process, you’ll have a powerful tool at your disposal. This tool can be used over and over again to fine-tune and re-engineer your products, ultimately bringing your business the greatest profits.
What are the six steps of the value engineering process?
There are six steps to the Value Engineering process, including:
1. Information: Gather information, conduct functional and cost analysis.
2. Creative: Brainstorm ideas and possible solutions.
3. Evaluation: Evaluate ideas to develop further.
4. Development: In-depth analysis of chosen ideas.
5. Presentation: Present ideas to key stakeholders.
6. Implementation: Put the chosen plan into effect.
Summary
Done right, Value Engineering (or VAVE) projects can generate spectacular cost savings through smart material substitution and process transformation, making products more competitive and commercially attractive in the process.
The challenge for many OEMs, though, is finding the time and expertise to develop the Value Engineering processes that will lever its benefits across the product life-cycle.
This post was originally published in May 2021, and updated in October 2026 for accuracy and relevance.
FAQs
1. What does VAVE stand for?
VAVE stands for value analysis and value engineering. They're two closely related disciplines that examine a product's functions and costs to improve its value. In practice, the terms value engineering and VAVE are often used interchangeably.
2. What is the difference between value analysis and value engineering?
Value analysis assesses whether a product costs more than it needs to in order to perform its functions. Value engineering takes those findings and modifies the design, materials, or manufacturing process to deliver the same or better function at lower cost.
3. Is value engineering just cost-cutting?
No. Value engineering aims to lower cost while maintaining or improving what the product does for the customer. Value can rise by improving function, by reducing cost, or by doing both, so a good project often makes the product better as well as cheaper to make.
4. When should an OEM apply value engineering?
Value engineering delivers most when it's built into new product development, rather than run as a one-off exercise after launch. A repeatable process means it can be reused to keep refining products throughout their lifecycle.
5. Who should be involved in a VAVE project?
A VAVE project needs a capable leader and a multidisciplinary team drawn from across the organisation, with members chosen for relevant expertise. Together they review every function and component and propose alternative materials, designs, and processes.
