Value Engineering the Forgotten Lean Technique

1. Value Engineering the Forgotten Lean Technique University Of Idaho, Industrial Technology Program, PTTE434, J. R. Wixson, Instructor Left click to advance slides

2. Overview • What is Value Engineering? • How is VE Applied? • When is it used? • How can it enhance Lean & Six Sigma? • What are the differences and similarities between VE, Lean and Six Sigma? • What is Function Analysis and FAST?

3. Lean and Six Sigma Are Not Enough • Historical focus on touch labor and variable overhead ignores the largest piece of the pie. • Sourcing programs fall short • Material cost is embedded in the product design

4. Value Engineering the Forgotten Lean Technique Don't look now, but an old discipline (value analysis/value engineering) is on the comeback trail. Originally called merely VA by its inventor, Larry Miles, an engineer in GE's purchasing operation in 1947, VA/VE uses a value equation that says value is equal to function divided by cost. If, for example, the buyer wants to get more item value, he/she needs to either increase the item's functionality at the same time he/she is containing cost; or he/she needs to reduce cost while holding or improving its functionality. Either way, the result is more value for the customer (Excerpt from Purchasing Magazine - "Value Analysis makes a comeback," Jim Morgan, November 20, 2003.").

5. Value Engineering the Forgotten Lean Technique Value Engineering is truly the "Forgotten Lean Technique." However, over 50 years later, it has gained recognition in private industry and governmental agencies as an indispensable tool for cost reduction, improved product development and product re-engineering. It is also used to improve organizational performance and cost effectiveness as well. The heart of VA/VE is function analysis and "Function Analysis Systems Technique" that sets it apart from other lean methodologies by opening the door to creative problem solving that capitalizes on an interdisciplinary teams creative juices to arrive at truly value added, cost effective solutions to problems ranging from design problems, quality and reliability problems, to organizational problems resulting in increased value and performance for the customer and the organization.

6. Value Engineering the Forgotten Lean Tool • Value Engineering (VE) is an intensive, interdisciplinary problem solving activity that focuses on improving the value of the functions that are required to accomplish the goal, or objective of any product, process, service, or organization. • VALUE METHODOLOGY“The systematic application of recognized techniques which identify the functions of the product or service, establish the worth of those functions, and provide the necessary functions to meet the required performance at the lowest overall cost.” John M. Bryant, VM Standard, Society of American Value Engineers, Oct. 1998

7. FUNCTION VALUE = COST Concept of Value

8. VE adopted by NASA ofc of facilities. Larry Miles takes VE to Japan. 1947 1952 1955 1959 1962 1964 1969 1985 1988 1990 1993 Today 1970 OMB circular A-131 published requiring all Federal Agencies to use VE to identify and reduce non-essential costs. OMB circular A-131 passes “Sunset Review” VE Timeline Larry Miles assigned to cost reduction at GE Navy adds VE incentive clause VE included in ASPR for military procurements DOE Order 4010.1 Larry Miles dies. VE a success, training of employees and suppliers begins SAVE formed in Wash. DC on Oct.22, 1959 Army Corps of Engineers begins VE training First VE incentive clause published in Fed. Register, GSA staffs for VE. Charles Bytheway invents FAST Modeling

9. Video - The Principles of Value Analysis/Value Engineering Click here to view video(Note: For the Fall 2007 class, please contact instructor for new link)

10. When is VE used • Value Engineering is used to determine the best design alternatives for Projects, Processes, Products, or Services • Value Engineering is used to reduce cost on existing Projects, Processes, Products, or Services. • Value Engineering is used to improve quality, increase reliability and availability, and customer satisfaction . • Value Engineering is also used to improve organizational performance. • Value Engineering is a powerful tool used to identify problemsanddevelop recommended solutions.

11. Some Thoughts on Lean • The cause of poor performance is wasteful activity. Lean is a time-based strategy and uses a narrow definition of waste (non-value-adding work) as any task or activity that does not produce value from the perspective of the end customer. [1]Increased competitive advantage comes from assuring every task is focused on rapid transformation of raw materials into finished product. [1] James P. Womack, Daniel T. Jones. "Lean Thinking," Simon & Schuster; 1st edition (1996)

12. Lean Strengths • Provides a strategic approach to integrated improvements through value stream mapping and the focus on maximizing the value-adding-to-waste ratio. • Directly promotes and advocates radical breakthrough innovation. • Emphasis on fast response to obvious opportunities. (just go do it) • Addresses workplace culture and resistance to change through direct team involvement at all levels of the organization. Stephen W. Thompson - Lean, TOC or Six Sigma: Which tune should a company dance to?, Lean Directions, Society of Manufacturing Engineers, Aug. 11, 2003

13. Lean Weaknesses • May promote risk taking without reasonable balance to consequence. • May not provide sufficient evidence of business benefit for traditional management accounting. • Has a limitation when dealing with complex interactive and recurring problems (uses trial and error problem solving). Stephen W. Thompson - Lean, TOC or Six Sigma: Which tune should a company dance to?, Lean Directions, Society of Manufacturing Engineers, Aug. 11, 2003

14. Some Thoughts on 6s Six sigma:The cause of poor performance is variation in process and product quality. Random variations result in inefficient operations causing dissatisfaction of customers from unreliable products and services. [2]Increased competitive advantage comes from stable and predictable process allowing increased yields, improved forecasting and reliable product performance. [2]George Eckes. "General Electric's Six Sigma Revolution: How General Electric and Others Turned Process Into Profits," John Wiley & Sons; 1 edition (2000)

15. 6s Strengths • The rigor and discipline of the statistical approach resolves complex problems that cannot be solved by simple intuition or trial and error. • The data gathering provides strong business cases to get management support for resources. • The focus on reduction of variation drives down risk and improves predictability. Stephen W. Thompson - Lean, TOC or Six Sigma: Which tune should a company dance to?, Lean Directions, Society of Manufacturing Engineers, Aug. 11, 2003

16. 6s Weaknesses • Statistical methods are not well suited for analysis of systems integration problems. (sigma can be calculated for a product specification, but how is sigma established for process interactions and faults. • The heavy reliance on statistical methods by its very nature is reactive, as it requires a repetition of the process to develop trends and confidence levels. • The strong focus on stable processes can lead to total risk aversion and may penalize innovative approaches that by their nature will be unstable and variable. Stephen W. Thompson - Lean, TOC or Six Sigma: Which tune should a company dance to?, Lean Directions, Society of Manufacturing Engineers, Aug. 11, 2003

17. Some Thoughts on VE • VE uses a interdisciplinary approach to problem solving. • VE takes a systems approach to problem identification and problem solving. • VE uses function analysis to improve communication among team members • The function analysis systems technique (FAST) promotes a synergistic approach to problem solving that develops solutions far beyond that which only an individual could produce.

18. Value Engineering Strengths • VE relies on a rigorous interdisciplinary approach to problem solving. • VE uses a systems approach to problem identification and solution. • VE is function oriented and promotes a “clean-sheet” approach that supports innovative solutions. • Creativity is a key component to the VE problem solving activities that promotes “breakthrough thinking.” • VE uses a structured “job plan” that promotes consistency in application and helps assure results. • Increased competitive advantage comes from the identification of innovative ways to accomplish key functions at a lower cost with improved quality and reliability.

19. VE’s Weaknesses • Successful VE results are dependent on the quality of information brought to the VE workshop for evaluation. • Many times, VE is used too late in the product development cycle to impact the design, and when changes would be too costly to implement. • There are many misunderstandings and biases against VE that have been built up over time due to misuse of the methodology. • “It cheapens the product without improving it.” • “I’m an engineer. We do VE all the time.” • “VE is only used for cost reduction.”

20. VE Weaknesses Addressed by Lean Six Sigma • VE weaknesses are addressed by Lean Six Sigma • Six sigma can provide the statistical evaluation necessary to support VE solutions. • Lean can provide Value Stream information that can lead to improved quality and throughput. • In combination with VE, Lean and Six Sigma provide a suite of tools that can lead to superior value through innovative solutions to problems in design, quality, and productivity.

21. Comparing VE to Lean • VE is not limited to areas of high volume or high dollar value (e.g., aircraft). • VE can be used by organizations with great effect in a variety of situations, including VE analysis of product/item design, packaging, industrial and logistical processes, and other areas of high cost. • Lean principles and practices offer no direct method of addressing product design. • Up to 80% of a product’s final cost could set at the time of concept approval. This leaves Lean with only 20% of vehicle cost available for Lean to improve.

22. Comparing VE to Lean (Cont’d) • Lean is a strategic decision, while organizations can choose to use VE successfully and effectively in a tactical manner. • VE can work well as an isolated study event – it does not require the encompassing and pervasive level of support that an effective Lean effort requires. • Lean will reduce waste over time. VE, on the other hand, will find and fix wasteful effort very quickly, but it will generally (not necessarily) do so on an episodic basis, not a continuous or systematic basis. • VE’s value approach and tools help teams focus on the high payoff areas first and will generate larger savings sooner than you might otherwise get in Lean.

23. Lean and VE Similarities • Both VE and Lean rely extensively on transforming operations into alternative forms of visual information. • In Lean, a Kaizen team will consider using a variety of visual analytical tools to identify waste. • Spaghetti diagrams, flow diagrams, bar charts, standard work sheets, and production control boards, are all part of the Lean analytical lexicon. • VE uses function analysis and FAST diagramming to describe the functional relationship of the product, process, or service and identify functions where the team should focus on improving value. • Creating by function is the high-octane fuel generating VE performance and success.

24. Formula for Superior Continuous Improvement (CI)3= Lean Six Sigma x x Value Engineering

25. End SixSigma Process - Click Here • A) Identify what the customer wants. • B) Organize an improvement team. • C) Create a process flow chart - (SIPOC) Define the Problem • A) Select “Critical to Quality Characteristic” metrics. • B) Define Performance Standards. • C) Validate the measurement System. • D) Establish baseline performance in terms of Sigma Capability - Defects per Million Opportunities. Measure • A) Identify significant characteristics and establish process capability. • B) Define performance targets for significant characteristics. • C) Identify root cause of process variation. Analyze • A) Identify and evaluate potential solutions. • B) Implement short-term countermeasures. • C) Implement long term corrective actions. • D) Identify systemic indirect effects and unintended consequences of improvement ideas. • E) Establish operating tolerances for new process. Improve • A) Verify corrective actions and validate new measurement systems. • B) Determine process capability. • C) Establish and implement control plan. Control • Move on to next highest priority process.

26. Value Engineering/Value Analysis - Why is it important? • Last 3 years (FY2000 – 2003), 2.7 million manufacturing jobs left the U.S. • The U.S. is loosing the battle to foreign competition. • Labor costs $12 to $30 per hour in U.S., less than $1 elsewhere. • Fewer and fewer people will be required to produce the world’s goods. • Lean and Six Sigma alone are not enough!

27. Function Cost Competitive Advantage • Quality is defined as “conformance to specification.” • Value is defined as: • You can’t have one without the other! • Competitive Advantage = Quality + Value

28. Six Step Value Engineering Job Plan • Clearly identify the problem(s) to be solved, and gather information on the background, functions and requirements of the product, process, or system. Information Phase • Brainstorm ideas on how to improve the high cost, broken, or inadequately performed key functions. Creativity Phase • Screen ideas for acceptance, score remaining ideas on a scale and group ideas into categories. Develop design scenarios, and selection criteria. Rate and rank ideas. Evaluation Phase • Plan how to sell ideas to management, identify key recommendations, plan management presentation. Planning Phase • Give oral presentation to management, or develop written report. Reporting Phase • Get management approval for go-ahead, make management plan, make assignments, implement, follow-up. Implementation Phase

29. 6s VA/VE Define the Problem Information Phase Measure Creativity Phase Evaluation Phase Analyze Planning Phase Improve Reporting Phase Implementation Phase Control Mapping VE to 6 • Value-based decision process • Value-based decision process • Uses statistical approach • Uses functional approach • Follows a very structured, organized plan • Follows a very structured, organized plan • Focus on maximum possible solution based on creativity techniques. • Focus on maximum possible solution based on analytical optimization techniques. Michael Mladjenovic - Intier Automotive Interiors, Toronto, CA

30. 6s s Level 5s 4s 3s 2s 0% 20% 60% 40% 80% 100% % Usage Basic Tools Statistical Tools Design for 6s and Innovation w/VE Application of 6s Tools Michael Mladjenovic - Intier Automotive Interiors, Toronto, CA

31. VE Job Plan with 6s Michael Mladjenovic - Intier Automotive Interiors, Toronto, CA

32. Interdisciplinary Team Formal Job Plan Trained Facilitators Function Analysis/FAST Documentation Problem Solving/Decision Analysis Strategic Planning New Product Development Re-engineering efforts How and When is Value Engineering Applied? How When

33. No engineering Change Revision Document Revision Re-Test/Re-qualification Drawings Released Tooling Changes Net Savings from VE Total Cost of VE Implementation VE Implementation beyond this point results in a net loss. Engineering &Production Release Concept Design Production Potential Savings from VE

34. Why use Value Engineering? Save Time Money Save Teamwork Build Quality Improve Satisfy Customer

35. FEDERAL DEPARTMENT OR AGENCYDOLLARS SAVAD BY VALUE ENGINEERING -- FY 95

36. SUMMARY OF PAST VE SAVINGSFederal-Aid Highway Program http://www.fhwa.dot.gov/ve/index.htm

37. A Failure to Communicate

38. Sacred Cow A non-functional constraint or perceived restriction SACRED COWS MAKE GREAT STEAKS

39. Core Team Support Support Support Support Support Support 5 to 8 PARTICIPANTS OPTIMAL VE Task Team/Quality Process Improvement Team

40. INFORMATION HELD BY ONE MEMBER ONLY INFORMATION HELD BY TWO OR MORE MEMBERS INFORMATION OR EXPERIENCE COMMON TO ALL The Synergistic Effect of Value Analysis/Value Engineering

41. Function Function Value = Cost Cost Concepts of Value - Desirable Passable Ideal Good Acceptable

42. Function Function Value = Cost Cost Concepts of Value - Undesirable Undesirable but Passable (cheapening the product)

43. Information Phase

44. Fact Finding • What do you need to know about the problem that you don’t know now? • What facts are known? • What are the requirements of the system? • Are these facts, opinions, assumptions, or prejudices? • Where or how can information be obtained?

45. Function Analysis • Function Analysis is the key to understanding the problem. • Start with defining the mission of the product, process, service, or organization. • Then, brainstorm all possible functions necessary to accomplish the mission. • Next, build a FAST Model to help identify any missing functions and show dependencies.

46. Function Analysis • Functions - Describe what something does • Functions - Use active verb and measurable noun • FAST (Function Analysis System Technique) - A logic diagram to describe how a system works. • Examples of Verbs and Nouns: Active Verbs Transmit Irradiate Project Dissipate Generate Convert Receive Reflect Provide (passive!) Nouns Signal Information Data Heat Radiation Current Light Image

47. HOW? WHY? INDEPENDENT FUNCTION (SUPPORTING) DEPENDENT FUNCTION OBJECTIVES OR SPECIFICATIONS MINOR CRITICAL PATH INDEPENDENT FUNCTION INPUT B OUTPUT (concept) MISSION, OBJECTIVE, OR HIGHER ORDER FUNCTION LOWEST ORDER FUNCTION D E BASIC FUNCTION DEPENDENT FUNCTION A (AND) (concept) C ACTIVITY 1 ACTIVITY 2 WHEN MAJOR CRITICAL PATH SCOPE OF THE PROBLEM UNDER STUDY LOWER ORDER FUNCTIONS HIGHER ORDER FUNCTIONS The Technical FAST Model

48. HOW? WHY? FACILITATE PORTABILITY ALLOW SAFETY (concept) WHEN GENERATE HEAT FOCUS IMAGE (concept) DISSIPATE HEAT SUPPORT IMAGE GENERATE NOISE AMPLIFY IMAGE OBJECTIVES OR SPECIFICATIONS FAST Example - Overhead Projector F.A.S.T MODEL OVERHEAD PROJECTOR OUTPUT INPUT CONVEY Information PROJECT IMAGE GENERATE LIGHT CONVERT ENERGY RECEIVE CURRENT TRANSMIT CURRENT

49. Customer Oriented FAST ModelVacuum Cleaner

50. FAST Model of 737/757 Autopilot