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.
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:
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 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.
Value Engineering can 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.
Getting started: 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 June 2023 for accuracy and relevance.
