Value Engineering (VA/VE)
Value Engineering (VA/VE) is a structured method for improving the “value” of products and services by examining the “function” (purpose).
Value is a ratio of function to cost: V=F/C
Therefore value can be improved either by increasing the function or reducing the cost.
Normally the aim is to reduce cost but preserve the basic functions.
The analysis is performed on our client’s product and their competitors product. Best in class is selected for each function. Finally, options are identified and prioritised to close the gap on clients product.
We use this pen example for training purposes.
The client is competitor A and current estimate for their product is £2.94.
The best in class estimate is £1.61 so there is overall gap £1.33 (45%).
The largest gap is “look attractive” function where the gap is 61% (£1.35 v £0.52).
Therefore, client’s gap closure activity should focus on this function.