Value Engineering Techniques for Cost Reduction
Uploaded by
Sudeep D'SouzaValue Engineering Techniques for Cost Reduction
Uploaded by
Sudeep D'SouzaMethods and
Techniques
Sudeep
Tightening Budgets
Rising Inflation rates
Spiraling Costs
Still need to make a
profit???
“Engineering as a management technique using a
systematized approach to seek out the best functional
balance between the cost, reliability and performance of a
product or a project”
Value Engineering was developed in 1947 just after
World War II at the General Electric Company by
Lawrence Miles. He was asked to find ways to produce
products using fewer available materials and resources.
Simple Smart
Design
Is the process of redesign to reduce part count either by
combining different parts of an assembly into one, or
combine the functions of several parts.
New Method:
Current Method: Investment Cast,
Machine Hog Out, Machined,
Gun Drilled, Ceramic Core for cooling
Welded Fabrication from channel
316L SST
Est Cost: $6,500
Current Cost: $10,700 Est Tooling: $50,000
Material Substitution
“For every material of a part, there can always be found a less
expensive substitute”.
• Metal with plastic
• Plastic with EPS
• ABS with Polycarbonate
$4.70 $1.75
$1.27 million
saved
Supplier Change
Move from One supplier to another for a reduced cost.
e.g. Embraco to Danfoss, Samsung and LG
ECI Mexico to ECI
China
Price Compensation
Get quotes from suppliers and ask the current supplier
to reduce his cost to meet the quote.
Low Cost Country Suppliers
Move parts from high cost to low cost coutries
e.g., China, India, South Korea or Brazil
Long Term Contracts
Create a long term, EoS contract with supplier to bring down the price.
GE Appliance’s contract with SAABIC to sell HIPS is an example
Part Standardisation
Several parts made one.
Economies of Scale
Brain Storming: Sit in a room and throw ideas
to reduce the cost of a specific product
Teardown: Break a product down into
component parts and give ideas on each.
Like Grade Quality Comparison: Tear
several products down of the same price range
of your product and generate ideas based on
cost, material, and design.
Yield for a project is the cost reduced the project for that product in one
year.
Investment is the amount of resources such as time, money and
manpower required to take the project from idea generation to its
implementation.
Payback > 0.5
Benefits of Value Engineering
Value Engineering
•Reduces the total life cycle cost of the part or process,
•Optimises the Quality and Performance,
•Minimises the waste in manufacturing or design by reducing the
unnecessary parts or actions,