21 truths for large engineering companies to build a powerful VA/VE engine
March 31, 2023
Yesterday’s tactics won’t get you to today’s targets.
That’s the reality for engineering leaders tasked with cost reduction goals right now.
From inflation to supply chain stress, there are hard-to-predict pressures coming from all sides. Margins are getting squeezed tight, forcing businesses to dig deeper when it comes to driving costs down. Targets have shot up.
Yet, despite having a bigger cost reduction number to hit, most engineering teams don’t actually have a clear roadmap for how to scale their cost reduction efforts effectively (and quickly).
So CoLab brought together several cost engineering experts for an hour-long panel on what high-performing VA/VE programs are doing differently. Collectively, the panel represented over 50 years of experience and billions of dollars in realized cost savings. The panelists were:
- Brian Stauffer — Global Product Design Manager at Johnson Controls
- Cori Sarver — Director of VA/VE, Americas at Adient
- Todd Diersing — Director of Variable Cost Productivity at Dematic
- Adam Keating — CEO and Co-founder at CoLab
For this article, we combed through the panel discussion and pulled out the 21 most useful nuggets of wisdom on how to build a winning cost reduction strategy.
If you’re an engineering leader looking to revamp your approach to value analysis (VA) and value engineering (VE), this is a great starting point for thinking about the current gaps and opportunities that exist within your business processes.
Here are 21 truths about running successful enterprise-scale VA/VE programs in 2023, backed up with quotes from our expert panelists.
1. Cost reduction cannot be an afterthought.
“Cost reduction, it's not a new concept. It's been out there for a very long time. But with the higher inflation here lately, that's just driven more of a need and more of a focus on cost reduction programs. It's on hyperfocus now to find even more creative ways and more ways to bring that bottom value to our businesses.” -Cori Sarver
“It's part of our strategy to make sure VA/VE is part of the process. It's not an afterthought for us. We're purposely looking at it upfront and trying to drive as much savings as we can.” -Brian Stauffer
“We look to get out in front of it before it even gets here. Because if you're just now starting to get into it, you've missed the bus. And the people that have already gotten into it, they're gonna eat your lunch as far as your competition goes. They're gonna steal your business.” -Todd Diersing
“36 months ago we started a pandemic, and then the last 12 months we've gone into this place where cost is top of mind in everything. For many years it wasn't the number one focus, and I think now it's becoming something that's top of mind for everybody. What we're seeing probably most commonly now is that… the average team isn't sure exactly how and when to do it, and most times it's an afterthought. So what we're hearing from people is that there are these big targets, they’re growing constantly, and the pressure is always around. We're hearing from OEMs that the market wants them to have better margins; we’re then hearing from suppliers that the OEMs are pushing them to have a better competitive price. And all the way around, this equation just doesn't work if we keep doing it the way we've been doing it.” -Adam Keating
2. When VE is properly integrated into your NPD process, you don’t have to slow down to save costs the first time.
“Value engineering, that's where you actually can save while you're doing it. Actually build it into your engineering process and not just wait until the product's in the market to engineer it out. I think there's a lot of teams making that shift. They’re thinking about: how do I make VE continuous and integrated into the process? So that engineers are responsible for it the first time and not just doing the cleanup work afterwards.” -Adam Keating
3. Hybrid and virtual VA/VE leads to a) more ideas, and b) better ideas.
“The pandemic really kicked us into gear. In previous years we did our VA/VE events at the factory level. We would actually send people to the factory, we would select ideas over a couple day period, and we would implement those ideas when we got back. Because we wanted to continue the cost-saving activities throughout the pandemic but we weren't able to travel to the factories, CoLab was one of the things that we really looked at hard to see if this would suit our needs. We've actually seen a very large increase of idea generation based on having more people available during those events than we could have ever sent to the factory. So it's been a larger volume of people being included, and we're getting more ideas being generated and larger cost savings being implemented because of that.” -Brian Stauffer
4. Get cross-functional alignment upfront to maximize engineering’s impact.
“The companies I work with, product management owns the product. So as far as the other functions go, we don't want to do anything that goes contrary to what’s helping them sell the product. Rather, we want to be able to enhance what they’re doing. So we listen to them as to where we go mine for those opportunities, whether it’s the value engineering for new product releases or the value analysis on the follow-up for existing products. We look to them for where to go. We set our workshops and idea generations around their product roadmaps so that, again, we're not mining in a product that's gonna be obsolete in a year or we're not trying to cost out an option that the customer loves and they don't want us to touch… When we kick off our events, certainly we want all of the functions involved so that we're not doing this in a silo. We give plenty of time. We bring in the appropriate functions… Engineering and procurement, they work together in the workshops to support one another. Obviously engineering is there to provide a design that meets the requirement that product management's looking for, or any of the ideas that are generated in a workshop. They do that in concert with procurement, our suppliers, and even manufacturing, so that what we are delivering is a cohesive idea that everybody can agree into.” -Todd Diersing
5. To accomplish big goals, you need buy-in from leadership.
“One of the things you really need to have in order to be more successful is also to have support from the executive levels within your organization. Not just, ‘Here's a KPI, go work in a vacuum to be able to deliver it.’ But really having the support behind it, influencing their teams in these matrix organizations to really drive support behind the initiatives.” -Cori Sarver
“Most companies won't go hire a whole bunch more engineers to do VA/VE work. They're going to pull from their existing pool, so they've got to shoehorn it in there some way. They've got to figure out a way to be able to balance the NPD stuff and sustaining stuff, along with your VA/VE activities. That has to come from upper management to be able to drive it down.” -Todd Diersing
6. Share expertise by assigning people to continuously cross-pollinate learnings between teams, disciplines, and business units.
“Once we started using CoLab for VA/VE, we actually started looking at sharing our experience with other business units within JCI. We've actually got two other business units on board with doing a similar process. But what we've been trying to do is have this cross-functional team that works on the VA/VE projects. So as we look at one product then another, we take these similar people and merge them in with the new people, so we have some training back and forth between the groups. A lot of the product teams now have been at least involved, if not sponsoring, the events, and we’re sharing priorities and sharing expertise across the different engineering groups.” -Brian Stauffer
“For our teams, we've established different commodity leads, and then they integrate back and forth within our different business units to really try to bring across that continuity. So we're constantly interfacing with each other, but then having the leads make sure that we have that diligent check through our parts and through our product.” -Cori Sarver
7. Standardize the process for repeatability, but continually update it as you learn.
“We talk about, what are the top-performing pockets doing? We bring those to light and make that a best practice throughout the company. So everybody knows this is the standard process and there's boxes that you check when you do certain things to make sure that your commodity managers are involved, or certain engineers are involved, so that everybody's engaged and it brings those other pockets up to the next level. A lot of that is making sure you have a process that everybody is using that's consistent. You always have best practices; you always find something, add it to the list of things to prep for, or in execution, or follow up on. You always have those, in those three areas, so that when it comes time to do an event you're doing them consistently, you have the participants you want, and the outcome should be to the expectations of what they're looking for.” -Todd Diersing
8. When you harness your engineers’ competitive spirit, you get better results.
“One cool thing we actually saw now with Johnson Controls and a bunch of others was almost making this a little more competitive in a sense. Not necessarily where it's like team A versus team B. But you take a big product and we actually saw that, having smaller groups going off, you started to see who was coming back with the ideas. I think it’s one of the things that Brian's team liked for sure, is that it was tallying up and you could see that engineer X had 42 ideas and 14 of those were high quality. It became a bit of a cultural thing. We started to see that the same person would do well the next time — and then other people were like, why am I not on that list? It's a bit of human nature, but it's something we never, ever thought. It was kind of an ‘a-ha’, but we've had that a-ha now several different times and it's cool.” -Adam Keating
9. Recognize that everyone has different strengths, then use that to your advantage.
“Some engineers, they're good at designing. Idea generation and whatnot in these workshops, maybe not so strong. Others, they can complement one another. There's various ways of how you can bring them up and there's various ways of why they're not performing like they should… That's why you want people from other functions or other areas or divisions coming in to help you out.” -Todd Diersing
10. Continuous, asynchronous VA/VE lets everyone participate on their own time — which leads to more input, and better input.
“When we started doing this, we actually started increasing our virtual events to a longer period to give people the time to actually spend and look at the stuff. A lot of what we saw upfront was, when we did this in person, we had maybe four or five people there on the site looking at the physical product. Now that we can have 30, 40, 50 people looking at this and focusing on it at our own pace, we’re actually getting more ideas generated because of that. So we focused on making sure people had time to do it at their leisure.” -Brian Stauffer
11. Start your prep work at least 4-6 weeks ahead of time.
“You get out of it what you put into it. It’s like somebody has a fire drill of, ‘Our product costs too much and we need to hold an event, let's do it next week.’ And I've been part of those teams. All it makes you do, for people that know what it takes to do one of these things and do it right, it makes you shake your head in disbelief. Because a week's worth of time isn't enough time to get your suppliers involved, open schedule on your internal folks, competitive equipment, making sure that you're reviewing bills of material and that's all complete as well, drawings in place, everything that it takes to make a workshop. Now that we're back in the plants, we typically take four to six weeks. From the time we say we're gonna kickoff and do an event, we'll take four to six weeks to make sure we get on everybody's calendar, do all of the work. So that when we're in the workshop, everybody isn't just brought up to speed that morning. They already know what to do.” -Todd Diersing
“One of the key things though, too, is just making sure that we have the right people and the time in advance. Because everyone's schedule is busy. It's crazy. Just locking that in advance, that's big. If you try to do it the week before, a lot of people's schedules are already tied up. I know it's relatively simple, but it is one of the key things.” -Cori Sarver
12. Don’t skip or skimp on the prep work — but do templatize it.
“Get your checklist out, make sure you've got the people that you want to have in there… The repetitive tasks that you always ask, that you go through, they’re so that when you have your event, it's successful. Because if you don't, people may get left out or activities may get missed because there wasn't a checklist of things to look at and to do in preparation for the event.” -Todd Diersing
“That's what we did early on. We created a template that we needed to follow for each event. We started about four to six weeks ahead. We're looking at: what's the focus of the event, what products are we going to look at, trying to narrow the scope, making sure we have the right people involved. So all that work upfront is equally dependent on the outcome of the event, right? If you don't spend the time upfront, you're not going to get the benefit that you should at the end.” -Brian Stauffer
13. Always focus your idea generation around a specific purpose.
“I've seen good events and I've seen bad events across dozens of teams now — and the ones that have a very specific purpose have been by far the most successful. Not just, get cost out of X product. It's been looking at, like, a chassis on a particular vehicle that had a failure before or some kind of recall and it was like, we are gonna make this better. Because I think that stokes the engineering curiosity and imagination… and I've seen it no matter how they host it. The more specific you are, the better the outcomes are going to be.” -Adam Keating
14. If you’re not collaborating directly with your suppliers, you’re going to miss cost-saving opportunities.
“Supplier workshops are one of our key initiatives. For the past two years, actually. Yes, we have a lot of expertise within our own four walls, but reaching out to our suppliers who have expertise in what they do as well, we've found that to be very beneficial. That's something we are definitely having, workshops and reviews with our suppliers.” -Cori Sarver
“We definitely want suppliers there. I've seen a lot of companies that just pull legacy stuff forward to make their new launches and they don't really know what they're doing to the supplier at the time. And the supplier being a good supplier will give you what you're asking for, but that cost is going to be inflated because you've got high tolerances or you're using expensive materials or you don't know what else that supplier could bring to the table to help reduce costs. So we want them there in every step of the way, whether it's on the VA side or the VE side, so that we're optimized as much as we can be for the event that we're holding.” -Todd Diersing
15. Cost reduction will always end up on the backburner unless you assign dedicated design resources to it.
“It takes focus, right?... That's actually why my team exists right now, is to put the focus. A lot of times you run into situations where, let's say the main design team is bombarded with a thousand other directions. They're just not putting the focus onto it. So really our team was established to be that squeaky wheel, be that voice to keep that out there and in the forefront, so that we can ultimately end up delivering that cost savings… I think we're seeing success because we do have that focus structure.” -Cori Sarver
“For us, we have leaders. We have VA/VE engineering teams that basically run the events for us. They're in charge of all the VA/VE events, across all the products. So they're the ones facilitating and making sure that ideas that were captured in one are carried over into other products as well, along with our engineering and product management teams.” -Brian Stauffer
16. To implement ideas effectively: carve out resources ahead of time, then validate ideas with a business case.
“If you're really top heavy with opportunities and VA/VE is just new to you, certainly ideas flow and the business is ready to jump on them right away. But, for companies that have matured with VA/VE, moreso on the VA side, we hold events with a purpose. We always know that there's gonna be one-off ideas from any function and even our suppliers. And, throughout the years, if the business case supports it, sure we can always come up with some finances or the money and if we can get some functional support, let's jump on it right away. But if you're talking about a workshop itself, that takes planning… The year before, we would put all of the events that we wanted to have on a calendar so that the business at the higher level could tell exactly what we wanted to do. So we did not have a workshop unless we were going to follow through on implementation of those ideas. So once we held that workshop, those ideas, those business cases were created for all of the ideas. We kicked out the ones we didn't want, we kept the ones that we did. They either went on the AOP planning for the following year, or there was already money set aside in the current year to be able to execute those ideas. So that's one of the things that as a company grows with VA/VE, that’s one of the things you really want to do.” -Todd Diersing
17. Don’t let VA targets de-incentivize your team from capitalizing on VE opportunities.
“Why is there never enough time and money to do it right the first time, but plenty of time and money to do it two and three times over? I wish I could take credit for that statement, but I can't. But that's the way value engineering is. Because the time-to-market when you're competing with your competitors to get it out there, you don't have time. I've seen it so many times. They don't have time to do it… as far as VA people, it makes us look like heroes on the backside. Unfortunately for the value engineering stuff, it makes us look like we're idiots because we didn't do it right the first time.” -Todd Diersing
“I won't name names, but I've definitely talked to a couple of directors and VPs in different companies that have told me they leave cost in, to engineer it out, because their KPIs only care about VA… Whatever you set your KPIs to, it does direct behaviour, and I think we are very VA focused… How do we change that culturally? Because the problem is, it's not going to work in five years. The OEMs are going to want something crazy, the cost, everything's going up. You're not going to have time to save it later. It just won't be possible.” -Adam Keating
18. Prioritize ideas based on savings potential, then implement the highest-impact ideas first.
“A lot of times, things get deferred to later on. But we've been focusing on making sure that we evaluate all the ideas, we prioritize them, and we pick the high runners first, right? The biggest cost savings, we implement first. And then, as we’ve been doing this for a couple years, we see that now we're left with the smaller things. So you need a lot more ideas now than what you did initially, because you got the big cost savings upfront. So I think the focus again, on the back end, is just as important as it on the front end of the prep as well.” -Brian Stauffer
19. Use your prep work to avoid idea duplication.
“The expectation for the workshop needs to be identified. So that if you're supposed to stay out of an area or you're not going to change this area of the product, it's very clear we're not going there. Or if somebody feels like this is a great idea, let the numbers speak for that idea. What's that thing worth, as far as cost savings? What's it cost to implement? And let the business decide whether they want to do it. That's a good way to say, ‘Oh hey, that idea came up before. Here's the results of it. We're staying out of it.’ And that ought to be part of the prep work when you go into your workshops, as far as that pre-work goes, and that way the expectation is set.” -Todd Diersing
20. Make lessons learned digestible and accessible.
“How do you make it digestible? What I hear from teams is that there's a lot of stuff, it's hard to read through, and it's a big list. Every program we ever talked to tells me they do lessons learned at the end, and that's it. Then they make the same mistake on the next program because no one's actually read the lessons learned, and they’re not integrated into the process… When you leave a piece of feedback in CoLab, it's right on the 3D model. If I go in and look at a flange and I'm going to suggest something, I might see little pins. So I already know that the context is there. And I think that's worked really well for teams… We've seen that actually spur the next idea, right? It's like someone's already thought about this, that doesn't work.” -Adam Keating
21. Internal communication matters (a lot).
“Make sure that there's communication. Because, really, what's breaking down there is communication. C-Suite wants this, it's not happening at the working level. One of the things that we do within our teams, is we have monthly touchpoints with leadership to say, hey this is what we’re all working towards, this is where we stand, and go through the roadblocks that we may be having. Having that additional communication — it's not just doing the workshops or idea generation, but then this leads into the followthrough and the communication aspect of it. It’s to ensure that we’re making the plans and executing out the way that we want to, to be hitting the deliverables.” -Cori Sarver
Here’s the full list of 21 truths for large engineering companies who want to build a powerful VA/VE engine:
- Cost reduction cannot be an afterthought.
- When VE is properly integrated into your NPD process, you don’t have to slow down to save costs the first time.
- Hybrid and virtual VA/VE leads to a) more ideas, and b) better ideas.
- Get cross-functional alignment upfront to maximize engineering’s impact.
- To accomplish big goals, you need buy-in from leadership.
- Share expertise by assigning people to continuously cross-pollinate learnings between teams, disciplines, and business units.
- Standardize the process for repeatability, but continually update it as you learn.
- When you harness your engineers’ competitive spirit, you get better results.
- Recognize that everyone has different strengths, then use that to your advantage.
- Continuous, asynchronous VA/VE lets everyone participate on their own time — which leads to more input, and better input.
- Start your prep work at least 4-6 weeks ahead of time.
- Don’t skip or skimp on the prep work — but do templatize it.
- Always focus your idea generation around a specific purpose.
- If you’re not collaborating directly with your suppliers, you’re going to miss cost-saving opportunities.
- Cost reduction will always end up on the backburner unless you assign dedicated design resources to it.
- To implement ideas effectively: carve out resources ahead of time, then validate ideas with a business case.
- Don’t let VA targets de-incentivize your team from capitalizing on VE opportunities.
- Prioritize ideas based on savings potential, then implement the highest-impact ideas first.
- Use your prep work to avoid idea duplication.
- Make lessons learned digestible and accessible.
- Internal communication matters (a lot).
This article is part of the Effective Engineering series by CoLab. Every 1-2 weeks, we publish right-to-the-point insights on effective product development.