Let’s face it, you want to execute your project well but you don’t want to spend a lot of money doing it. That, in a nutshell, is value engineering. It’s a way to look at your project, whether it’s project management, construction or manufacturing, and figure out how to execute it for the best value.
As you can imagine, value engineering is a popular business pursuit. But what is value engineering, how do you implement it and is it different across industries? We’ll answer those questions and more as we explore its process and applications.
What Is Value Engineering?
Value engineering is when a business looks at how it functions and develops a systemic and organized approach to deliver its project at the lowest cost possible. It does this through the substitution of less expensive alternatives such as materials and methods. However, this must be done without sacrificing quality or functionality.
The focus of value engineering is only on the functions of the various components and materials of the project, not their physical attributes. Also called value analysis, it reviews new or existing products during the design phase of a project and determines how certain substitutions can reduce costs while increasing product value.
The way a business determines the value of an item as it works on value engineering is by finding the most cost-effective way of producing it without neglecting or diminishing its purpose. As a concept, value engineering was first developed during World War II in the 1940s at General Electric. The shortages demanded a more creative approach, which was found to reduce costs while providing equal or better performance.
There are many tools used in value engineering such as work breakdown structure (WBS), network diagram and Gantt charts. ProjectManager is online project management software with dynamic Gantt charts to plan your value analysis. The Gantt chart is a great tool to solve problems such as cost or schedule overrun. You can filter for the critical path and set a baseline to track your planned effort against your actual effort to make sure you’re meeting your goals. Get started with ProjectManager today for free.
Value Engineering Steps
Value engineering is calculated as a ratio of function to cost. The way to add value to a product is either by reducing cost or improving functionality. It’s more likely a business will seek cost-cutting and preserve the function of its product. This process can be broken down into five phases: information, creative, evaluation, development and presentation.
1. Information Phase
The first stage involves gathering data and analyzing it. This includes understanding the product and design as it currently is and looking at the key functional issues of the project. Define any objections or broken components. Then identify methods that the team can use to evaluate the progress of the project. There’s also a functional analysis to determine if there are improvements that can be made.
2. Creative Phase
Now it’s time to get creative as you explore the ways to improve the functions that you discovered in the first phase. This is done by brainstorming with the team and looking at all possible solutions to the problems you’ve identified and alternatives to the function. The team should create a list of potential solutions to the function with a verb/noun combination.
3. Evaluation Phase
At this time, you’ll look over the suggested solutions from the previous phase and determine the merits and demerits of each. The team should present their ideas and describe the advantages and disadvantages of each. If there are more disadvantages, the suggestion is stricken. The team can perform a weighted matrix analysis to rank the alternatives. The best ideas will make it to the next phase.
4. Development Phase
This phase involves an in-depth analysis of the best alternatives that have made the cut. You’ll need to understand how to implement each and what the cost will be. It’s likely that you’ll need to sketch out these possibilities, create cost estimates and use other technical analyses. The implementation plan is then developed, outlining the processes involved for the final recommendations that have gotten this far in the process.
5. Presentation Phase
The team now presents its winning solutions to management and stakeholders. This is done with reports, flow charts and other presentation materials. They will need to convince management and stakeholders of the viability of their solutions to add value and cut costs. The presentation is detail-oriented, with associated costs, benefits and potential challenges all outlined. Once approved by management and any requested changes are applied, it becomes an implementation plan that’s executed.
Value Engineering in Project Management
As we mentioned, value engineering is used in many industries. We’ll look at a few, starting with project management, which is commonly used to optimize the overall value of the project. The project manager and project team will consider all costs associated with the project and explore any cost-saving alternatives. This is done throughout the life cycle of the project.
Value engineering in project management includes an in-depth look at the functions of things like equipment, facilities, services, systems and materials that are used in the project. As these are analyzed, project managers look for ways to improve cost-effectiveness without negatively impacting quality, reliability, performance or the reputation of the product or service.
Methods used in value engineering a project can include reduced production time, reduced expenses, increased earnings, expansion of the market share, using existing resources more efficiently and improving quality. For a more detailed look at value engineering as it relates to project management, check out the Project Management Book of Knowledge (PMBOK) published by the Project Management Institute (PMI).
Value Engineering in Construction
Value engineering in construction is employed by the project team to improve value by examining function, just as it does in general. The construction and design team needs to understand the project fully as every project is different and every client’s idea of what is valuable differs, too.
Construction projects include evaluating the project with three main criteria: cost reduction, added quality and the life cycle/maintenance. The value engineering in construction takes place at a high level and can occur during the project planning, design and construction of the project. There are pros and cons to making changes in each of these project phases.
The planning phase is the best time to address value engineering as the cost to implement any change is lower than in other phases and the impact on the schedule is less. However, most value engineering takes place during the design phase. The owner works with an architect to create plans that constructors use to estimate costs and schedules. If the costs are too high, the process starts over. Value engineering occurs during construction when contractors feel there’s a good option. These changes can be expensive and will likely alter the schedule.
Value Engineering in Manufacturing
The basic structure of value engineering is the same in manufacturing. You start by breaking down your costs and assigning a dollar value to each item. This helps you determine the cost of goods sold. Now, what are the cost drivers? Whatever these are, such as metal parts, that’s where you need to focus on value engineering. But don’t forget to speak to your customers and see where they see value in your product.
Just as with other industries, the process of brainstorming with your team is how to come up with ideas that can help cut costs and maintain the quality of your product. However, your brainstorming topics could be different. In manufacturing, it’s about analyzing the materials and seeking alternatives, looking at features that might no longer serve a function or others that need to be added, as well as exploring your supply chain and seeing if changes to that strategy are appropriate. Then, as discussed above, you evaluate, implement and review the solutions.
ProjectManager Helps With Value Engineering
Now that you understand what value engineering is and how important it can be, you’ll also understand the need for software that can help you plan and implement these changes to your construction project, manufacturing or any project management work. ProjectManager is online project management software that can help you plan, implement and review your value analysis while working more efficiently and saving you money.
Use Multiple Project Views
Different industries work in different ways, which is why we have different tools to manage your work that all share the same real-time data. Having one source of truth means everyone is working on the same page as they implement the value engineering across departments. Whether you use a traditional Gantt chart to plan or prefer the more agile kanban board or even a sheet, list or calendar view, we have them all. That adds value and efficiency just as you’re adding value and efficiency with value analysis.
In order to make sure you’re getting the value you expect from the plans you’ve implemented, you need to monitor progress and performance. Reporting is crucial for keeping stakeholders updated but also to gather data to help you make adjustments when necessary to achieve your value engineering goals. With one click you can turn complex data into helpful reports on status, portfolio, plan, tasks, variance and more. All reports can be customized to zero in on what you want to track and download. You can also print the dashboard or send it electronically to stakeholders.
Our collaborative platform makes it easier to brainstorm and collect ideas and documentation with unlimited file storage. Files can be shared and teams can comment at the task level, which connects everyone from remote workers to other departments. ProjectManager is the one tool you’ll need to oversee value engineering from start to finish.
ProjectManager is award-winning project management software that helps you work more efficiently. Our real-time data allows for more insightful decision-making and allows teams to work better together. It’s already serving teams at NASA, Siemens and Nestles to deliver success. Why not join them? Get started with ProjectManager today for free.