Value Engineering in Manufacturing

Revised: January 15, 2013

Reducing manufacturing cost of a product without compromising client specifications

INTRODUCTION

This case study explains the Value Engineering (VE) approach of reducing manufacturing cost of a product utilised in the Electrical Utility Industry.

The objective reflects a requirement of having the manufacturing cost reduced by 20% to be able to compete against competitors with similar products.

The objective was achieved and the implementation of the action plans resulted in a more functional product and a major contract from a Utility Services Provider exceeding more than R50million.

This case study will show the various steps of Value Engineering processes applied:

A team of Design Engineers, Operational Management including Logistics held a workshop over two days.

The first step was to understand the current issues and concerns that initiated the need for drastic cost reduction on the Products XXXX.

Some of these Issues and concerns are shown below:

ISSUES AND CONCERNS

-Limitation of face design
-Lack of information of market needs
-Cost driven
-Adaptability to other models
-Universality versus cost
-Selling functions/features
-Ease of installation
-Ease of maintenance

Agreement was obtained on the objective, indicating a clear target of more than 20% reduction in product cost.

Below the objective with timeframe and expectations (Client specification requirements)

OBJECTIVE

Establish an action plan which will reduce the current manufacturing cost of the “Product XXXX” by 20%, before the end of January 2XXX, whilst adhering to Client specifications and SABS xxxx.

The team then defined the actual requirements needed to be addressed to achieve the objective, presented as Results to Achieve, together with environmental influences that could impact on the outcome of the VE study (Results to Achieve, Available Resources and Constraints)

The Objective Matrix is shown below:

OBJECTIVE MATRIX

After obtaining a common understanding of the product requirements the functional requirements were listed as seen below:

FUNCTIONAL REQUIREMENTS

-Display Information
-Control Credit
-Interrupt Power
-Prevent Tampering
-Ensure Safety
-Locate Components
-Protect Components
-Measure Energy
-Withstand Surge
-Facilitate Mounting
-Optimise Maintenance

Having the product’s parts and assemblies analysed against functionality and cost a matrix was obtained where potential cost savings could be achieved.

FUNCTION / COST ANALYSIS

The product had 28 components / assemblies reflected in 9 functional requirements.

On 17 components / assemblies opportunities have been identified.

Below an example of one of the functional requirements and it’s related components with recommendations and potential savings.

RECOMMENDATIONS (1 Example only)

CONCLUSION

The product cost was reduced by over 20%, but more important the new cost was the catalist for winning the tender in a very competitive industry.

Benefits: Reduction in operational cost, increased sales, more profit

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