11.4 Value Analysis, Value Engineering & Design for Manufacturability
Key Takeaways
- Value engineering (VE) is applied before production during design; value analysis (VA) is applied to an existing product already in production — the timing is the distinction.
- Lawrence Miles developed the value methodology at General Electric in the 1940s, defining Value as Function divided by Cost.
- Function analysis expresses every function as an active verb plus a measurable noun, such as 'transmit torque' or 'exclude moisture'.
- The value methodology job plan has six phases: information, function analysis, creative, evaluation, development, and presentation or implementation.
- Design for Manufacturability and Assembly reduces cost mainly by reducing part count, and each eliminated part removes its purchase price, inventory, quality, and assembly labour cost simultaneously.
Value Analysis, Value Engineering & Design for Manufacturability
The value methodology is the structured, function-focused technique for improving value in a product, process, or service. It is the discipline that turns "make it cheaper" into a repeatable analytical process, and ISM expects supply management to lead or co-lead it.
The Core Definition
Lawrence D. Miles developed the approach at General Electric during the 1940s materials shortages, when substitutes forced engineers to ask what a part actually had to do rather than what it was made of. His relationship is the foundation of the whole domain:
Value therefore improves in four distinct ways, and exam items test whether you can name them:
- Same function at lower cost — the classic cost-reduction case.
- Improved function at the same cost — performance improvement.
- Improved function at lower cost — the best outcome, usually via part elimination.
- Substantially improved function for a modest cost increase — legitimate value improvement even though cost rose.
Exam trap: value improvement is not the same as cost cutting. Removing a function the customer requires reduces cost and destroys value. The methodology protects required functions and attacks the cost of delivering them.
Value Engineering vs. Value Analysis
The distinction is purely one of timing, and it is directly tested.
| Value Engineering (VE) | Value Analysis (VA) | |
|---|---|---|
| When applied | Before production — during design and development | After production begins — to an existing product or service |
| Cost of change | Low; the design is not frozen | High; tooling, qualification, and inventory exist |
| Savings potential | High | Lower, but still material |
| Typical trigger | New product development, stage-gate work | Cost-reduction target, margin pressure, obsolescence, supply disruption |
Value Analysis of a Purchase (VA/PA) is the procurement-specific variant applied to a bought-out item, usually run jointly with the supplier under an open-book arrangement.
Function Analysis — the Distinctive Step
Function analysis is what separates the value methodology from ordinary cost reduction. Every function is expressed as an active verb plus a measurable noun, deliberately stripping away how the current design achieves it.
| Component | Poor description | Function statement (verb + measurable noun) |
|---|---|---|
| Gasket | "Rubber sealing ring" | Exclude moisture |
| Bracket | "Stamped steel L-bracket" | Support load |
| Housing | "Injection-moulded ABS enclosure" | Protect components, enclose assembly |
| Shaft | "Hardened steel shaft" | Transmit torque |
| Label | "Printed adhesive label" | Convey information |
Functions are then classified:
- Basic function — the reason the item exists. Removing it destroys the product. There is normally exactly one per item.
- Secondary / supporting functions — required by the chosen design approach, not by the customer need. These are where cost hides.
- Aesthetic functions — appearance and perception. Real for consumer goods, often over-provided in industrial goods.
- Unwanted functions — side effects the design creates, such as generating heat or requiring maintenance access.
Cost is then allocated to each function, and the analysis looks for functions absorbing cost disproportionate to their importance. A FAST diagram (Function Analysis System Technique) maps functions in how-why logic: reading right to left answers "why," reading left to right answers "how."
The Six-Phase Job Plan
| Phase | Purpose | Key activities |
|---|---|---|
| 1. Information | Understand the item and its costs | Gather drawings, specifications, volumes, cost breakdowns, customer requirements |
| 2. Function analysis | Define what it must do | Verb-noun statements, classify basic vs. secondary, allocate cost to function, build the FAST diagram |
| 3. Creative (speculation) | Generate alternatives | Brainstorming with no evaluation permitted; quantity over quality; cross-functional and supplier participation |
| 4. Evaluation (analysis) | Screen alternatives | Feasibility, cost, risk, and performance screening; weighted scoring; shortlist |
| 5. Development | Build the business case | Detailed cost estimates, prototypes, testing, implementation plan, risk assessment |
| 6. Presentation / implementation | Secure approval and execute | Recommendation to decision makers, implementation, tracking of realized savings |
Exam anchor: the creative phase forbids evaluation. Judging ideas as they are generated suppresses the unconventional options that produce the largest savings. Items describing a workshop where each idea was costed as it was raised are describing a corrupted creative phase.
Worked Value Improvement Calculation
Scenario: A sheet-metal enclosure assembly is built from 9 parts costing $41.20 per unit at 60,000 units per year. Function analysis identifies the basic function as protect components; six of the nine parts exist only to join and align the other three.
A value engineering team proposes a single-piece deep-drawn housing with integrated features, eliminating five parts:
| Current | Proposed | |
|---|---|---|
| Part count | 9 | 4 |
| Purchased material cost per unit | $41.20 | $33.10 |
| Assembly labour per unit | $6.40 | $2.30 |
| Scrap and rework allowance per unit | $1.90 | $0.70 |
| Total unit cost | $49.50 | $36.10 |
- Unit saving = $49.50 − $36.10 = $13.40 (27.1%)
- Annual saving = $13.40 × 60,000 = $804,000
- One-time investment: new tooling $310,000, requalification and testing $45,000 = $355,000
- Simple payback = $355,000 ÷ $804,000 = 0.44 years ≈ 5.3 months
- First-year net benefit = $804,000 − $355,000 = $449,000
Beyond the arithmetic, five fewer part numbers also removes five sets of purchase orders, receipts, inspections, storage locations, safety stocks, and supplier relationships — the indirect savings that a unit-cost comparison alone never captures. When Exam 2 asks for the full benefit of part-count reduction, the expected answer includes these administrative and inventory effects.
Design for Manufacturability and Assembly (DFMA)
DFMA is the engineering discipline most closely aligned with value engineering. Its core principles:
- Minimize part count. Boothroyd-Dewhurst's three tests: does the part move relative to its neighbours, must it be a different material, and must it be separate to allow assembly? If all three answers are no, the part is a candidate for elimination or consolidation.
- Design for ease of assembly. Top-down assembly, self-locating features, chamfers and lead-ins, no reorientation of the workpiece.
- Standardize. Use common fasteners, materials, and existing qualified parts.
- Error-proof (poka-yoke) the design. Make incorrect assembly physically impossible through asymmetric locators and keyed connectors.
- Avoid tight tolerances unless functionally required. Tolerance drives process choice and cost non-linearly.
- Design for the intended process. Draft angles for moulding, bend radii for forming, tool access for machining.
Related disciplines: design for serviceability (access and repair time), design for sustainability and disassembly (recyclability, material separation, reduced material variety), and design for supply chain (packing density, shipping cube, storage footprint, and postponement-friendly modularity).
Running the Program in Supply Management
- Target selection: rank candidates by annual spend times realistic savings percentage, filtered by remaining product life. High-spend items in the first half of their lifecycle repay the effort; items entering obsolescence do not.
- Team composition: design, manufacturing, quality, finance, supply management, and — where the item is bought out — the supplier.
- Supplier participation: run VA/PA jointly under an open-book arrangement with a defined gain-share formula agreed in advance. A supplier that receives no share of the savings has no reason to identify them.
- Governance: track the funnel from idea to validated saving, and require finance validation before a saving is booked. Ideas counted at proposal stage rather than at realization are the standard way value programs overstate results.
A cost-reduction team is analyzing a gasket currently described in the parts master as a 'moulded nitrile rubber sealing ring, 62mm OD'. Under function analysis, how should the requirement be expressed, and why does it matter?
A value engineering team eliminates five parts from a nine-part assembly, cutting unit cost from $49.50 to $36.10 on annual volume of 60,000 units, at a one-time tooling and requalification investment of $355,000. What is the simple payback period, and what additional benefit should the business case capture?
During a value methodology workshop, the facilitator costs and critiques each idea immediately as team members propose it. What is wrong with this approach?