August 1967 Electronics World
Wax nostalgic about and learn from the history of early electronics. See articles
Electronics World, published May 1959
- December 1971. All copyrights hereby acknowledged.
topics are timeless. This is one of them. The term "Value Engineering"
is not so familiar these days, since ostensibly it was developed
back in the World War II era. Per
, "Value engineering (VE) is a systematic method
to improve the "value" of goods or products and services by
using an examination of function. Value, as defined, is the
ratio of function to cost. Value can therefore be increased
by either improving the function or reducing the cost. It is
a primary tenet of value engineering that basic functions be
preserved and not be reduced as a consequence of pursuing value
improvements ." This article from the August 1967 Electronics
World was a good read then, and it is a good read in 2011.
Value Engineering for the Electronics Industry
By Fred H. Posser/Director of Value Engineering Airborne
Instruments Lab. (Div. Cutler-Hammer)
A management philosophy of applying a forced organized approach
to reducing costs while maintaining product quality. Many examples
are included, showing what creative thinking' can do in this
Value engineering is an organized attack on all elements
which affect cost in order to provide a required function or
product at an optimum price. These techniques can be applied
to hardware, processes, schedules, or procedures. Since there
is much confusion in the field, let us differentiate between
value engineering and some of the other terms that appear to
be part of this subject.
Value analysis is the application of the techniques and philosophies
of value engineering to existing designs or products. In many
companies the terms "value engineering" and "value analysis'"
are used interchangeably, but we prefer to separate them and
consider value engineering the application to new designs and
value analysis the application to existing designs or products.
Cost reduction is the effort made to reduce the cost of a
required item by analyzing the fabrication techniques and procedures
necessary for its production. This means we do not consider
ways of changing what is specified or required, but rather investigate
methods of obtaining what is required at a lower cost. When
this investigation is applied to the item's or procedure's function
after the item has been designed, we call it "value analysis".
When it is applied to the function of an item still to be designed,
we call it "value engineering".
Cost effectiveness analysis refers to optimizing the total
cost of a product or a system, i.e., user's cost to purchase,
service, repair, maintain, and satisfy the staffing requirements
of a piece of equipment or system for a specified number of
PERT is a technique for analyzing the occurrence of sequential
and parallel events or operations in order to determine the
path that is most critical in establishing the required output.
Value engineering may be used to reduce or investigate the cost
of specific events.
Zero defects is a philosophy emphasizing each individual's
importance in doing a job right, the first time. Zero-defects
philosophy, therefore, applies to everything, including how
the value-engineering job is done.
is important to the electronics industry since it applies a
forced organized approach to the reduction of the costs of all
elements of the business. This is accomplished by taking a hard
look at the individual element requirements and then determining
first if the requirements are necessary, and second, how individual
requirements may be met to yield optimum cost. This is not an
attempt to reduce cost by reducing performance, reliability,
or quality. Investigations have indicated that successful value-engineering
efforts not only reduce cost and schedule, but usually improve
other characteristics as well.
In May 1964, The Department
of Defense published a document entitled "Fringe Effects of
Value Engineering" prepared by the special committee on value
engineering of the American Ordnance Association. The report
indicates that 44% of the 1961 changes investigated resulted
in improvements in reliability while 1% did not; 40% improved
and 2% decreased maintainability; 38% improved and none decreased
quality; and 21% improved and 3% decreased performance. This
is because successful value-engineering efforts usually simplify
design, resulting in lower cost, increased quality and reliability,
and improved maintainability.
Some Practical Examples
In each of the examples we will examine, the resultant new
design reflects a careful investigation of each detail of the
old design. In the first example shown in Fig. 1, the heavy
steel plate used in the capacitor required expensive machining
while the redesigned piece is turned out as a stamping. The
soldered connection is replaced by an easily produced and assembled
threaded part while the relatively expensive ceramic parts,
which were not required, were replaced by molded rubber parts.
Fig. 1. This capacitor was used by Lear Siegler's
Power Equipment Division. The previous design resulted in a
cost of $11.22 each. After redesign, cost dropped to $4.65 apiece,
thereby resulting in total savings of $6570 for every thousand
Fig. 2 not only illustrates a cost saving obtained by replacing
a custom-molded assembly with an easily made harness enclosed
in heat-shrinkable tubing but also demonstrates the possibility
of obtaining "fringe-effect" improvements. In this case there
was improved quality control as well as ease of repair and modification.
Fig. 2. Redesign of the molded-cable assembly
used by General Electric Missile and Space Division. In the
original design, custom molding was required and six types of
cable assemblies were used. Typical costs for one type was $250
each, for another type was $940. After value analysis was used,
the leads, breakouts, and connectors were assembled using oversized
tubing, then heat-shrink tubing was used. Typical costs for
each unit fell to $100 and $530 respectively. The total savings
for manufacturer amounted to some $111,000 per year.
Fig. 3 is an excellent example of value analysis as applied
to a fabrication process. In this case the end product is the
same, yet there is an appreciable annual saving. Individual
spools of color-coded wire always present a problem in that
they rarely come out even with the run or not enough of a given
color is available when needed. In addition, when a small amount
of a particular color-coded wire is required, it is necessary
to obtain a whole spool. In-plant color coding of white wire
provided the solution.
Fig. 3. The line drawing (above) illustrates
the previous method used by Lockheed Electronics Co. to dispense
color-coded wire. In this case individual spools of color-coded
wire were purchased from an outside vendor. In new method, shown
in the photo, white wire is bought and up to three colors are
applied by the in-plant machine (below) to the exact lengths
required for each job. This eliminated surplus and resulted
in saving $43,500/yr.
Fig. 4 illustrates the application of value analysis to a
product that had been in use for some time. In this case the
initial design was developed for a specific application and
then adopted by a number of programs for other uses. The initial
design permitted the handle, frame, and connector to be eliminated
if desired. But this fact was forgotten from the time of the
initial design until the assembly's latest application. This
example illustrates the importance of continually reviewing
products and designs even when they are acceptable and have
been in use for a fairly long time.
Fig. 4. Modifications in printed-circuit
card assembly used by Airborne Instruments Laboratory. The photos
show that the handle (1) and frame (2) were removed, the connector
(3) was replaced with printed contacts (4), and the test points
(5) were replaced with a flow-soldered test strip (6). These
changes resulted in a total unit savings of $85.25. The total
quantity involved was 1200 units so that the total savings amounted
to about $102,000. The implementation cost for the newer version
was $20,000 for a total net savings of $ 82,000.
Fig. 5 is still another example of a change in design which
resulted in less costly fabrication techniques. The built-up
sheet metal structure was replaced by a precision casting and
the welded interconnections by a soldered printed-circuit board.
This was done when a thorough analysis indicated that the change
from welding to soldering was possible and that an increase
in quantity allowed use of more expensive tooling. In smaller
quantities, the sheet metal structure was less expensive and
for other environments the welding was found necessary.
Fig. 5. A log i.f. amplifier manufactured
by Airborne Instruments Laboratory is shown before and after
value analysis. The original version used built-up sheet metal
construction and welded interconnections. The newer version
used a cast casing and soldered printed-circuit board. There
was a per-unit savings of $50, resulting in a total savings
of $50,000 for a 1000-unit run. The implementation cost in this
particular case amounted 10 about $4500, resulting in $45,000
These five examples clearly indicate that there is no one
way to solve a problem and what is an excellent solution a one
time may be less than optimum at other times.
Value Engineering Method
Value engineering developed
as the result of discussions held some time prior to 1947 in
the Purchasing Department at General Electric. The individuals
involved recalled that during World War II it was necessary
to locate substitutes for the required materials. Many times,
it was discovered that the alternate proved far superior, both
in cost and function, to the material that had been originally
specified. Mr. Larry Miles, who is considered to be the "father
of value engineering," was given the responsibility of developing
In the course of investigating the various
techniques employed, it was found that the individuals most
successful at it were those using creative thinking. If we review
the usual texts on creative thinking or creative problem solving,
we find that a seven-step procedure is involved: 1. orientation,
2. preparation, 3. analysis, 4. hypothesis, 5. incubation, 6
synthesis, and 7. verification .
These steps have been changed slightly by the value-engineering
people and are referred to as the "job plan." Some companies
use seven steps, some five. When five are used the form becomes:
1. familiarization, 2. speculation, 3 analysis, 4. evaluation,
and 5. implementation. The relation between the five steps of
the job plan and the seven steps of creative problem solving
is shown in Fig. 6.
Fig. 6. Relation between the seven steps
of creative problem solving and the five steps of the value
engineering job plan.
1. Familiarization. During the familiarization phase all
effort is concentrated on understanding and defining the required
function. An attempt is made to define the primary function
in two words: one a verb, the other a noun. In this way, one
is forced to define the central purpose of the effort in unambiguous
terms. During this phase, a solution is not attempted. This
produces a problem-oriented rather than a solution-oriented
attack. It also overcomes one of the greatest handicaps to problem
solving-a misstatement of the problem.
2. Speculation. This step involves listing all possible
solutions. An important characteristic of this step is the fact
that no attempt is made to justify or criticize any of the suggested
solutions. By not being critical of any of the solutions, freer
thinking is encouraged. This is extremely effective when a number
of individuals are involved and is very close to the technique
of "brain-storming" which was popular with some industries a
few years ago.
Included in this speculation phase is
an "incubation" period. This is a time when the mind is allowed
to concentrate on other matters with the solution to the primary
problem coming as a ''bolt from the blue".
The analysis phase critically reviews the ideas generated during
the speculation phase with a view to developing an optimum solution.
Many times a number of possible solutions are advanced during
this phase. The output of this phase is one or a limited number
of complete solutions which are then evaluated.
During evaluation, the solution or solutions developed during
the preceding phase are completely evaluated. Back-up data is
collected or generated and a complete solution is documented.
If a number of solutions are offered, these are ranked in some
manner so that a final selection may be made.
The "job plan" is set up so that a solution to the value problem
may be found either by a team or by an individual. The individual
may be a value expert working in a staff position or a design
engineer authorized to make his own decisions. Implementation
in this latter case is no problem. Implementation in the case
of the value expert may present some problems so it is included
as a discrete step in the plan. In this way, the entire effort
is covered from investigation to solution.
has embraced the whole subject of creative thinking and placed
it in a new context. The success of the technique is due to
its vigorous application and from forcing people to think toward
a goal. In value engineering, this goal can be stated as the
least cost for a function.
Value can mean prestige value,
aesthetic value, resale value, or use value. We are interested
in use value. Use value is the lowest cost that can be obtained
while still providing the required function or service. Many
times this is expressed as V = F/C where V is value, F is function,
and C is cost. We are trying to obtain the greatest value for
a given function and obtain this function for the least cost.
"Least" is a relative term since in actuality we usually work
to a definable or target cost.
The selling price of
the equipment has been established by the time an engineer starts
actual work on the project. Not only is the selling price established,
but this total price has been prorated, as has the schedule,
among individual segments of the company involved in producing
the finished product. (This is demonstrated by the issuance
of budgets and schedules to all departments involved before
work is even started.)
Value engineering is a staff
function which provides value information, assistance, and training
to other departments. It is responsible for guidance and information
- not direction. It provides a check and balance system for
the cost characteristics of a design or procedure.
relationship between the value engineer and the design engineer
has been a matter of concern ever since the inception of value
engineering. The degree of this concern involves the maturity
of the organization and the type of business in which the company
is involved. Where the company is predominantly development-oriented
with a small production business, value engineering has had
limited acceptance. Where the company is product-oriented with
emphasis on production, value engineering has usually been well
In the first case, emphasis is placed on developing
a product within a tight schedule and on a limited budget. In
the second case, design for production involves a product which
can be produced for a pre-determined cost. Additional investment
to achieve this goal can be amortized over a large production
run. In this environment value engineering has thrived and the
usefulness of the value engineer is very well understood and
his services are fully utilized.
It is important to
realize that value engineering cannot be utilized effectively
on all projects or even within all companies. As the type of
program or project approaches the research area, value engineering
is of less use. This is because the cost of the hardware, procedures,
or equipment is such a small part of the project cost. As the
cost of hardware, procedures, or equipment increases, however,
the usefulness of and need for value engineering also increases.
Electronics organizations holding government contracts
have acquired industrial "know how" over the past 20 years working
on the relatively low-risk cost-plus-fixed-fee contracts. The
usual measure of such an organization was its ability to solve
problems within the schedule. Within broad limits, profit in
terms of return on investment, didn't take into account how
the work was done but whether or not the company could meet
the contract deadline. With a change in both procurement policies
and the competitive environment, the entire picture has changed.
Not only is the profit potential greater but the risk of loss
is greater. The vigorous application of value-engineering principles
and philosophies is one of the most important shelters available
to manufacturers in this new environment.
Introducing value engineering into
an existing company framework is an extremely sensitive matter.
If the company has a history and modus operandi for utilizing
corporate or division staffs, this is an acceptable and useful
organizational set up. If this prior acceptance and use has
not been established, value engineering will have to be introduced
in the department where it will receive maximum utilization.
This will eliminate the problem of the "outsider." No matter
how mature and intelligent department personnel may be, design
assistance from outside groups is rarely accepted with enthusiasm.
Where value engineering personnel should be placed is
also dependent on whether their primary function will be in
value engineering or value analysis. If they will be concerned
primarily with value engineering, they should work out of the
On the other hand, if
the primary activity is to be value analysis, personnel can
be assigned on a much more flexible basis. In a company where
the responsibility for product improvement rests with the original
design group, value-analysis personnel should be attached to
the product-engineering department. If some other department
is responsible for product improvement, say, purchasing or manufacturing,
the value-analysis group should be attached to that department.
Because value engineering is a relatively new "profession,"
some confusion exists as to the qualifications required of a
value engineer. It is doubtful that such a man exists in "newly
minted" form since one of the requirements is experience. He
must have a broad background to enable him to understand the
multiple facets of the problem and sufficient information regarding
allied fields to seek the solution there if that is the answer.
He must be mature enough to accept honest differences of opinion
and senior enough to be respected for his views. These basic
requirements can be met only after a number of years of experience
- ten seems to be the minimum.
The requisite experience
should be acquired in creative rather than analytical fields.
In addition, special training in creative problem solving techniques
will be required - usually via work-shop training seminars.
The Department of Defense
The Department of
Defense has always been an enthusiastic supporter of value engineering
and continues to push the technique as a means of reducing costs.
To this end. the Armed Service Procurement Regulations incorporate
contract provisions for value engineering. These are of two
types: one is called Value Engineering Program Requirements,
the other Value Engineering Incentive Provisions. The Program
Requirements define the value-engineering effort and specify
the amount of effort to be expanded as an item of the contract.
Cost reductions resulting rom this effort are shared on a pre-negotiated
basis with the customer.
The Value Engineering Incentive
Provisions do not require any specified amount of effort, are
not funded as an item of the contract, but do include provisions
for sharing any savings. The contract-sharing benefits that
are available under the incentive provisions are more liberal
than under the program requirement.
In addition to saving-sharing
available on existing (referred to as instant) contracts, provision
is made for sharing savings realized on future purchases by
the customer as well as other customer collateral savings.
Value engineering includes the application
of philosophies and principles that are far from new. All have
been used by individuals and groups both now and in the past.
(This is particularly true in the case of electronics firms
which make products for the commercial and consumer markets
as contrasted with those whose principal customer has been the
U.S. Government. - Editor) What has happened in the past few
years is that all of these programs have been coordinated in
a number of defense-oriented industries into a useful technique.
As is the case with most new approaches, value engineering
has encountered some resistance. Most electronics firms have
never seen fit to divorce development design from product design
and have continued to handle both functions within the same
department. Shorter contract schedules and limited production
runs have seemingly justified this approach. Yet it is a fact
that it is virtually impossible to handle development and production
at the same time, as one area invariably suffers. The experience
with government electronics contracts has been that the cost
portion of the formula has been the loser as optimum production
costs cannot be obtained during the development phase.
On the other hand, value-engineering efforts, especially
the cost-target approach, can do much to improve the costs of
limited-production items with short development schedules. As
competition grows, more companies will discover that the application
of value engineering can improve control of product costs and
thus improve their market position and their profits. This will
only happen if they investigate the tools available and then
apply them in the manner which best fits their philosophies.