What is Value Engineering?

Value engineering is a structured process for reducing the cost of products by using less-expensive components and minimizing costs in the production process. This can include alterations to the product design, adding efficiencies to the production process, sourcing from lower-cost suppliers, and so forth. A variation on the concept is to improve the functionality of a product without increasing its cost. Ideally, costs are reduced without negatively impacting customer perceptions of the product. The best point at which to engage in value engineering is the design phase of a product, since this is the point at which costs are locked in for the life of the product.

Value engineering can be a valuable tool for continually reducing the cost of a product throughout its product life cycle, which makes it more competitive.

Value Engineering Activities

There are multiple activities in which an engineering team can engage during a value engineering project, as outlined in the following steps.

Step 1. Obtain Information

The key foundational step in value engineering is examining the projected lifecycle of a product. This includes a review of the budgeted expenditures that will be made over the life span of the product, not only to produce it, but also to market and distribute it to customers. This examination may reveal certain steps in the lifecycle in which inordinately large sums are spent; these steps represent the best targets for value engineering projects.

Step 2. Develop Value Creation Ideas

The engineering team reviews the information compiled during the first step, using it to develop ideas for how to create a more cost-effective product. This may involve entirely new approaches that represent some additional risk, but which have a high payoff associated with them. Other ideas may be low-risk, without generating overly large savings. The team will need to decide which options to pursue, and which ones to examine further. Sometimes high-risk items are parked until later, when their associated risk might have declined through additional research.

Examples of value creation ideas are the use of entirely new materials, design alterations to make it more easily manufacturable, eliminating selected features that no one is using, or altering the method of distribution to reduce costs.