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An investigation into the systematic use of value engineering in the product development process

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Value Engineering (VE) is a methodical technique which aims to achieve the best functional balance between product cost, reliability and performance, and it is the operational tool that facilitates the achievement of the target cost in a product development process (PDP). VE is aligned with recent philosophies for proactive cost management by analyzing cost parameters and drivers in the early stages of the PDP. A typical VE study accomplishes the decomposition of the product's functions, and the subsequent evaluation of them, in order to pursuit cost reductions without trading-off the product's functionality, quality and value delivery to clients/users. This research investigates how to use the VE technique in a construction product in a systemized way. VE tools, such as Function Analysis, FAST Diagram, Mudge Technique and Compare Method were combined and applied in a handicap bathroom, as an example of the detailed application of this technique. By means of the VE exercise, a cost reduction in the order of 12% was achieved, even with the addition of two new items, enhancing value delivery to end users.
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AN INVESTIGATION INTO THE SYSTEMATIC
USE OF VALUE ENGINEERING IN THE
PRODUCT DEVELOPMENT PROCESS
Joyce de Andrade Ruiz
1
; Ariovaldo Denis Granja
2
; Flávio Augusto Picchi
3
;
Reymard Sávio Sampaio de Melo
4
ABSTRACT
Value Engineering (VE) is a methodical technique which aims to achieve the best
functional balance between product cost, reliability and performance, and it is the
operational tool that facilitates the achievement of the target cost in a product
development process (PDP). VE is aligned with recent philosophies for proactive cost
management by analyzing cost parameters and drivers in the early stages of the PDP.
A typical VE study accomplishes the decomposition of the product’s functions, and
the subsequent evaluation of them, in order to pursuit cost reductions without trading-
off the product’s functionality, quality and value delivery to clients/users. This
research investigates how to use the VE technique in a construction product in a
systemized way. VE tools, such as Function Analysis, FAST Diagram, Mudge
Technique and Compare Method were combined and applied in a handicap bathroom,
as an example of the detailed application of this technique. By means of the VE
exercise, a cost reduction in the order of 12% was achieved, even with the addition of
two new items, enhancing value delivery to end users.
KEYWORDS:
Value engineering; target costing; product development process; cost management in
construction; value delivery.
1
M.Sc., Construction Management and Technology Research Group (GTE), School of Civil
Engineering, Architecture and Urban Design, Department of Architecture and Buildings, State
University of Campinas(UNICAMP), joyce.andrade.ruiz@gmail.com
2
Asst. Professor, Construction Management and Technology Research Group (GTE), School of
Civil Engineering, Architecture and Urban Design, Department of Architecture and Buildings,
State University of Campinas(UNICAMP), Avenida Albert Einstein, 951, Caixa Postal 6021,
Campinas/SP, CEP 13083-852, Brazil, Tel.: +55 19 3788-2082, FAX + 55 19 3788-2411,
adgranja@fec.unicamp.br
3
Asst. Professor, Construction Management and Technology Research Group (GTE), School of
Civil Engineering, Architecture and Urban Design, Department of Architecture and Buildings,
State University of Campinas(UNICAMP); and Director, Lean Institute Brazil, Rua Topázio 911,
São Paulo-SP, Brazil, CEP 04105-063, Tel.: +55 11 5571-6887, Fax:+55 11 5571-0804,
fpicchi@lean.org.br.
4
Ph.D. candidate, Construction Management and Technology Research Group (GTE), School of
Civil Engineering, Architecture and Urban Design, Department of Architecture and Buildings,
State University of Campinas(UNICAMP), reymardsavio@yahoo.com.br
1. INTRODUCTION
The Lean Thinking, a broad concept of efficiency and productivity in the
manufacturer environment, has been adapted to the construction sector to improve its
production process, reasoned in the Toyota Production System (TPS) (PICCHI, 2003;
MORGAN; LIKER, 2006; WARD, 2007). As basis, the lean orientation has the
absolute waste elimination and high efficiency of the production process. Its’ proven
retrospect of results enhancement is challenged to continue giving good results but
now not only in the production process, but also in the development phases
(MORGAN; LIKER, 2006; WARD, 2007; BALLARD; RYBKOWSKI, 2009). In this
actual context the Value Engineering (VE) is useful to contribute and make part of a
lean product development process with the objective of achieving the highest product
performance design, focused on the incorporation of clients’ values, perspectives,
wants and needs since the early design process (WARD, 2007). This is shown as the
new frontier of Lean Thinking evolution and VE is a tool that can subscribe in a
product development process (MORGAN; LIKER, 2006).
The VE concept was originated too in the industrial environment and has an
impressive history of success in product value and quality improvement
(DELL’ISOLA, 1997). It facilitates the identification of opportunities to remove
unnecessary costs, ensuring product quality, reliability, functionality and performance
using as a main target market competitiveness (COOPER; SLAGMULDER, 1997).
VE is a part of the target cot strategy that permits the achievement of the target cost
through its application in the product development process, by working its functions
cross-analyzed with value parameters (COOPER; SLAGMULDER, 1997).
This research addresses this issue, showing results obtained with a systematic
application of VE. Its objective is to investigate how to use the VE technique in a
construction product, in a systemized way, specifically at the product development
phase. In order to identify and analyze the VE possible applications in construction, a
literature review of VE was carried out. A handicap bathroom design was analyzed as
an example, using a combination of VE tools, identifying opportunities for value
enhancing and cost reduction, and calculating the potential results of this systematic
approach.
2. VALUE ENGINEERING (VE)
VE, first called ‘Value Analysis’, was created by Lawrence D. Miles in 1947
(CSILLAG, 1995), in the period during and immediately after the Second World War
(SPAULDING et.al, 2005). Miles was commissioned to explore methods of
substituting materials, construction techniques, reducing manufacturing times and
costs without reducing the products’ functions and quality (MILES, 1989). Lessons
learned in this process were evolved and applied by Miles in his later VA work.
According to Cooper, Slagmulder (1997) VE consists of a systematic and
multidisciplinary examination of factors that decomposes the product cost to identify
reasonable ways to reduce costs without jeopardizing its functionality and quality. It
is a fundamental part of the target costing strategy, as the tool that provides costs
reductions by analyzing and working the product’s functions. One could say that it is
an intelligent cost reduction technique trough “best value for money” concept (LIN;
SHEN, 2007; SHEN; LIU, 2003). This guarantees that products will perform their
basic functions and essential characteristics with quality and an acceptable cost, or a
target cost, from the client’s perspective of value.
VE methodology can be applied in various fields, especially at the product
development process and project design. The ideal phase for VE use is the design
phase, maximizing results, due to the fact that 95% of the product costs are already
committed at the design phase (COOPER; SLAGMULDER, 1997).
It is a technique that provides cost reduction (measurable parameters) and
guaranteed value (immeasurable parameters), the performance evaluation must
consider both aspects. According to Lin, Shen (2007) the difficulty in evaluating
value is one of the reasons why VE is still less utilized in construction.
Another point of concern is the moment when VE is used. The later VE is
incorporated in the product development cycle, the lower are the results and benefits
it can provide (DELL”ISOLA, 1997). Consequently, this kind of use leads to a bad
use of the technique, tending to reduce specifications, quality and even profit
(BALLARD, RYBKOWSKI, 2009).
2.1 VALUE
It is important to conceptualize the clients’ value, which encompass basically two
perspectives in this context. Thinking of a construction enterprising there are in
resume two clients whose perspectives must be fulfilled; the first is the one that
represents the company that is making profit from the enterprising (that will be called
company) and the second one are the users that effectively are going to use the space
under construction (that will be called users). This both perspectives are most of the
time contradictory because the company wants to reduce costs to make more money
and to have a commercial and marketable product, and, on the other hand, the users
want a space as better as possible with all comfort, benefits and equipments that
usually leads to an excessive spending of money. In Brazil, some research efforts
have been recently carried out on this subject focusing on social housing provision,
e.g., Bonatto; Miron and Formoso (2011), and Kowaltowski and Granja, 2011.
To reach the balance between these two different perspectives the VE is used to
allow the company design team to analyze and modify the project reducing costs, but
oriented by the users’ value. This provides a balance between the two different values
perspectives, as shown in Figure 1.
Figure 1 Value concept: Context perspectives. Adapted from Cooper e
Slagmulder (1997)
The “perceived benefits” comprehended the clients’ factors of desire and need and
the “necessary sacrifices” refer to the purchase costs and use of the product. It is
important to clarify what point of view is going to be focused on the work, who is the
real client, the stockers, the users, the company. Because their expectations are
usually different, a solid VE work that considers both aspects, function and value, is
relevant to achieve the balance and best result for the evolved stakeholders (players).
2.2 VE’S TOOLS
The practical VE operation is attained with the use of various tools to provide a
detailed analysis of the product under study. In this work, the following VE tools
were adopted following consideration of their potential for construction detailed
analysis: Function Analysis, the FAST Diagram, the Mudge Technique and the
“Compare” Method.
2.2.1 Function Analysis
The function analysis is the most important VE technique. (DELL’ISOLA, 1997;
COOPER; SLAGMULDER, 1997). It consists of detailing the product under study to
identify functions, classify them and associate their costs under the adopted
component level criteria (SPAULDING et.al, 2005). The functions are characterized
by two words, a verb plus a substantive, for example, the function of a wall can be “to
limit area”. The VE concept in manufacturing, according to Miles (1989), classifies
functions in two parts: i) Basic Functions (BF) - those that represents the specific
function of the product and, ii) Secondary Functions (SF), those that are part of the
product but are not directly related with the basic function (COOPER;
SLAGMULDER, 1997; CSILLAG, 1995).
From the regular classification of functions, Dell’Isola (1997) proposed a
differentiation to make a better adaptation to construction. He created the “Necessary
Secondary Function” that corresponds to those required by regulations, laws and
technical standards. Adopting this definition, the functions classifications are: i) Basic
Functions (BF); ii) Secondary Necessary Functions (SNF); iii) Secondary Functions
(SF).
2.2.2 FAST Diagram
Charles Bytheway developed the Function Analysis System Technique, known as
FAST Diagram, in 1964, about 17 years after the beginning of VE. The objective was
to introduce a visual tool that could depict a schematic relationship of dependencies
between the functions that were previously classified by Function Analysis (ABREU,
1996; CSILLAG, 1995).
Based on VE principles, a multidisciplinary group is formed with representatives
of different areas that will discuss and analyze the product and its functions from
different points of views, developing a logical representation (ABREU, 1996). These
special meetings are called “charrets” (SPENCER; WINCH, 2002). The main
objective is to obtain detailed information from different perspectives by stimulating
problem solving and creative activity on the part of the participants. An experienced
VE facilitator is usually required to guide the process. A flow chart is created during
the process to show inter-relationships between functions and solutions.
This phase generates a large number of ideas, some of them innovative, useful,
and some others irrelevant (MAO; ZHANG; ABOURIZK, 2009). Because of this,
they recommend being careful and critical in this intense brainstorming phase and to
pay special attention to the objectivity and focus on the outcome of these meetings.
Rozenfeld et.al (2003) highlights the increasing use of FAST in the product
development process (PDP) of new products.
2.2.3 Mudge Technique
The technique of numerical function relations evaluation, known as Mudge
Technique, consists in the pair to pair comparison of the functions that compose the
product (CSILLAG, 1995). In this tool, scores are assigned by the comparison of
importance between two pairs of functions (CSILLAG, 1995; MORAES et.al., 2008).
The weight scale used is: i) 1 to a less important function; ii) 2 to a significantly
important function; and iii) 3 to a very important function (CSILLAG, 1995).
The objective of this technique is to show the relative percentage that is obtained
from the total points weight of each function divided by the total sum of all products
functions weights. Based on the obtained results, it is possible to prioritize the
functions relevance in order to enable the analysis of their inter-relationships.
2.2.4 “Compare” Method
The “Compare” method, name created by joining the initials of the words compare,
parameters and resources (CSILLAG; 1995), results in a chart and a graphic based on
the Function Analysis, the FAST diagram and the Mudge Technique, with the
inclusion of cost parameters. All information obtained from the cited tools is gathered
and the results are synthesized into a graphic known as "Compare Graphic". This
graphic is formed of two data series, the first, called “relative needs” comes from the
relative results obtained from the Mudge Technique and the second comes from the
chart that has the costs of the product’s functions, and it is called “resource
consumption”. Cost, time or material consumption units can be used for the resources
(CSILLAG, 1995). From this graphic evaluation it is possible to analyze the functions
and to consider those that have higher potential for achieving cost reductions, without
trading-off the basic functions of the product and the value perceived by the customer.
3. RESEARCH METHOD
The method used in this study consists of two parts; the first one is the literature
review identifying applicable tools, and the second one is the simulation of the
techniques using a handicap bathroom as an example.
From the literature review, a sequence for VE tools application on a construction
product is proposed. The chosen tools were those more recognized and used for VE
work analysis in the manufacture, such as the Function Analysis and FAST Diagram.
The “Compare” Method has also been used, because of the systematic way in which it
incorporates costs parameters, combined with client’s perspective of value obtained
by the Mudge Technique. A proposed flowchart for the whole construction process
(MESQUITA; FABRICIO; MELHADO, 2003) and for the VE application in a
systematic way is depicted in Figure 2.
4. HANDICAP BATHROOM VE SIMULATION
A handicap bathroom was used to simulate the use of VE technique and tools in a
systematic way, in order to identify opportunities of costs reductions and, at the same
time, to guarantee end-users needs. This handicap bathroom is a project of a Brazilian
energy provider company that is replicated among its facilities buildings in order to
make then accessible for the use of handicap people. In this study, the perspective of
value to the end-user is given by the Brazilian standard recommendation, NBR
9050:2004, for accessibility of buildings, furniture, spaces and urban facilities.
Function
Analysis
Identify object
study ApllyVE tools
Declare study
objective
Maintainfocus
at the product
Organize VE
application
AnalyseResults
Results
achieved
the goals?
Rethinkprocess:
Creativityfocus
Yes
No
Present
Final results
FAST
Diagram
“Compare”
Method
Initiate
Job Plan
UseExecution
Design for
Production
Product
design
Briefing
Figure 2 Proposed sequence for VE systemic application Process flowchart
4.1 HANDICAP BATHROOM CHARACTERIZATION
Figure 3 (A) and (B) shows the handicap bathroom in a broad representation (A) and
in its detailed form (B).The bathroom area was chosen for the simulation of the VE
application. This micro space was chosen to concentrate and initiate the
understanding of VE use and to provide elements for future studies.
Reception
& Service
Ramp
Bathrooms
Parking
Sidewalk
Maintanance
& Operation
Maintanance
& Operation
2,55m
1,70m
Figure 3 (A): Building design and activities in each area. (B): Handicap bathroom
design and dimensions. (ENERGY PROVIDER COMPANY, 2005).
4.2 SIMULATION OF THE VE APPLICATION
The simulation was oriented through the proposed sequence on Figure 1, having as
first steps product identification and job plan preparation, objectives, participants,
availability and needed resources. The next step was to prepare the Function Analysis.
This tool was used to guide the decomposition suggested by the Brazilian Standard
Norm “NBR 15575:2010” that comprises building performance. This Standard
divides the building in five macro systems: i) Structural systems; ii) Internal floors;
iii) Vertical closures; iv) Roofing; and v) Sanitary Installations. Besides these five
systems, it was necessary to add two more systems: Electrical and Handicap
Accessories (Table 1).
The next steps were to prepare the FAST diagram and the Mudge technique
(Figure 3). The “Compare” Method synergizes the three tools applied previously. The
component chart provides the costs’ identification of each function, enabling a
calculation of total cost per function (this chart could not be presented in this article
due to lack of space). These totals divided by the total cost of the product, generates
the second data series necessary to make the “Compare Graphic” that will be
presented in the next section.
5. RESULTS
The results obtained from the simulation of the VE application are mainly the
functions’ methodic evaluation and their parameters of value, end-user needs and
related costs. Table 1 brings the Function Analysis that provides the start of VE
application, which makes it possible to prepare the FAST diagram, and the Mudge
Technique. Figure 4 shows the Mudge Technique, whereas is possible to find each
function relative need, for example, “F” function is obtained through the division of
the sum of all “F” weights (highlighted column and line: 2+2+3+2=9) by the total
sum of all functions weights (140), leading this specific function to have a relative
need of 6%.
The “E” function (Table 1) was the first one to be focused in order to reduce costs
because it presented the lowest relative needs (Figure 4). By changing the
construction technique used, that is reducing the number of mortar layers, a cost
reduction from R$3,042.43
5
to R$1,327.19, (- 56% (R$1,715.24)) was achieved.
The cost savings enabled the incorporation of new components with high "relative
needs", which had equal or lower costs than the savings made. Thus, two elements
that are indicated by NBR9050:2004, but are not mandatory, can be added to the final
product, increasing the end-users’ value perception. Those elements are a hygienic
shower and a storage rack, corresponding respectively to the functions: "I Provide
sanitary use", and "K Provide ease of use". The modifications added up to a total of
R$334.03, and still provided a reduction of R$ 1,381.21 on the total costs,
representing cost reductions of 23% over the initial three functions total cost. The
changing of the functions "E", "I" and "K" resulted in handicap bathroom total cost
reductions from R$11,847.84 to R$10,466.62, which means 11,7% of savings, but
delivering more value to the end-users.
5
Exchange rate as March/2011: 1US$ = 1,70R$; 1€=2,31R$
Table 1 Function Analysis of the handicap bathroom under study
Function's classification
BF / SNF / SF
Foundation's beams, structural
masonry
INTERNAL FLOORS
Plaster horizontal
surfaces
ROOFING
SANITARY
INSTALLATIONS
Hydraulics, drainage, sanitary wares
and metals fittings
ELECTRICAL SYSTEMS
(**)
HANDICAP
ACCESSORIES (**)
(*) Two additional necessary subsystems (**) beyond those appointed by the NBR 15575
Legend:
BF Basic Function
SNF Secondary Necessary Function
SF Secondary Function
U Use Function
E Esteem Function
Construction's subcomponents
Handicap Bathroom
FUNCTION ANALYSIS: HANDICAP BATHROOM (Provide sanitary and accessible use)
STRUCTURE
VERTICAL SEALS
(PARTITION WALLS)
Functions
(verb + substantive) (*)
Components
A B C D E F G H I J K
Si
i=AigKi
Somatory of points of each
function (Si ; i=AigKi)
Relative needs
(%) *
A-A2 C2 D3 A3 F2 G3 H2 I3 A2 K3 AS = 75%
B-C2 D3 B3 F2 G3 H2 I3 J2 K3
SB = 3 2%
C-D3 C3 C2 G3 H2 I3 J2 K3
SC = 9 6%
D-D3 D2 D2 D2 I3 D2 K3
SD = 20 14%
E-F3 G2 H2 I3 J2 K3
SE = 0 0%
F-G2 H2 I3 F2 K3
SF = 9 6%
G-G2 I3 G2 K3
SG = 17 12%
H-I3 H2 K3
SH = 12 9%
I-I3 K3
SI = 27 19%
J-K3
SJ = 6 4%
K-
SK = 30 21%
Total points of the crossfunction's analysis S ( S i=A g K): 140 100%
* Relative result of the somatory of points of each function divided by the total points of the product under study. Si / S
Figure 4 Mudge Technique results for the handicap bathroom
Table 2 depicts the results obtained from the simulation of the VE application on
the handicap bathroom, and Figure 5 shows the “Compare” graphic, a visual tool that
helps designers to identify cost intervention opportunities by considering the relative
consequences on the value delivery effectiveness for end-users.
Table 2 Results obtained from the VE study on the handicap bathroom
Systems
Relative needs
(%)
Total Initial
Costs (R$)
Initial Resource
consumption (%)
Total
Modified
Costs (R$)
Modified
Resource
consumption (%)
A Transmit vertical loads 5% 1.567,25 13% 1.567,25 15%
B Transmit horizontal loads 2% 477,48 4% 477,48 5%
INTERNAL FLOORS C Plaster horizontal surfaces 6% 1.234,70 10% 1.234,70 12%
D Limit area 14% 673,84 6% 673,84 6%
E Plaster vertical surfaces 0% 3.042,43 26% 1.327,19 13%
F Grant ventilation 6% 316,35 3% 316,35 3%
G Aloow access 12% 767,04 6% 767,04 7%
ROOFING H Protect from weather 9% 268,68 2% 268,68 3%
SANITARY INSTALLATIONS I Provide sanitary use 19% 1.103,11 9% 1.237,29 12%
ELECTRICAL SYSTEMS J Provide illumination 4% 540,83 5% 540,83 5%
HANDICAP ACCESSORIES K Provide ease of use 21% 1.856,13 16% 2.055,98 20%
100% 11.847,84 100% 10.466,62 100%
Modified Functions
Functions
ESTRUCTURE
VERTICAL SEALS
(PARTITION WALLS)
Totals:
5%
2%
6%
14%
0%
6%
12%
9%
19%
4%
21%
13%
4%
10%
6%
26%
3%
6%
2%
9%
5%
16%
15%
5%
12%
6%
13%
3%
7%
3%
12%
5%
20%
0%
5%
10%
15%
20%
25%
30%
A
B
C
D
E
F
G
H
I
J
K
COMPARE Graphic - Handicap Bathroom
Relative needs (%)
Initial Resource consumption (%)
Modified Resource consumption (%)
Figure 5 “Compare” Graphic for the initial and the modified project
6. CONCLUSIONS
The VE simulation exercise used in the previous example of a handicap bathroom has
achieved a cost reduction around 12% with enhancement of delivered value. This
systematic VE exercise showed that it is possible to incorporate the perception of end-
users’ value and, at the same time, to reduce costs considering both perspectives of
value as shown in Figure 1. This exercise can contribute to answering the question of
how to assess cost issues in the early stages of project definition, without trading-off
the value delivery proposal to end-users. The “Compare” Graphic provided a clear
path for establishing cost reduction interventions priorities focusing on functions with
higher contrast between resource consumption (cost) and relative needs.
The research has limitations however, as the chosen context was deliberately
restricted to a facility’s single room, in order to better understand and evaluate the VE
use in a construction product development process. As further research suggestions, it
is recommended the VE simulation to be used in broader construction context and in a
whole projects.
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... Overall, the literature reports favourable experiences in connection with the application of Value Methodology in the construction industry. Various studies have found that VM can generate savings of 5 to 10 %, while also significantly increasing user satisfaction (de Andrade Ruiz et al., 2011;Perera et al., 2011). It is important to introduce VM in the earliest possible phase of the project, as the benefits to be derived from its application are the greatest in the early phases (SAVE, 2019). ...
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... Overall, the literature reports on favorable experiences in the application of Value Methodology in the construction industry. Various studies claim that using VM, savings of 5-10% can be achieved, while user satisfaction can also be significantly increased [18,19]. It is important for Value Methodology to be introduced in the project as soon as possible, since its application in the early stages results in greater benefits [4]. ...
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... The name of the method is an initials abbreviation of the words compare, parameters and resources. All pieces of information collected with the use of the cited tools and methods are gathered together and synthesized into a graphic known as the "Compare Graphic" [Ruiz et al. 2011]. It consist of two data series obtained from the Mudge Technique and the chart that includes the costs of the object's functions. ...
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