7 Steps of an Effective VA/VE Process that Protect Product Quality
September 16, 2022
Developing innovative new products can challenge the boundaries of science, pushing the industry to its limit and testing cornerstone principles that have bounded the technology landscape.
That is, if engineering imagination and physics were the only limitations for NPD.
The iron triangle of Good, Fast, and Cheap—of which only two are achievable at a time—deprioritizes cost when leaders want high-quality solutions in a hurry. Despite the importance of profitability, the choice must be Good and Fast to keep up with the rapid pace of business. To recover cost in later product phases, companies are assessing design through an impactful process: value analysis/value engineering (VA/VE).
The VA/VE Methodology
Businesses can achieve cost reduction through multiple channels. For example, procurement-led initiatives such as incorporating annual pricedowns in supply agreements, identifying alternative suppliers, and raw material price hedging still deliver substantial savings. In addition, supply chain efforts like lean events, implementing predictive maintenance on machines to increase operating efficiency, and containerization analyses to reduce freight costs can uncover additional savings.
But these practices are becoming less novel, with businesses constructing their commercial and supply chain processes to incorporate these from the outset of a product launch. To reach the next plateau for cost savings, best-in-class companies add engineering-led cost reduction to their end-to-end product lifecycle.
Engineering-led cost savings consider the impact on a product's value when making a savings-focused design change. But the product function can change as well, creating the dynamic for assessing a cost savings idea:
By maximizing this "value ratio" instead of targeting straight cost reduction, you protect your brand and consumer satisfaction while improving your profitability.
Value analysis (VA) and value engineering (VE) are two methods to optimize product value through product-based cost savings. These terms differ because value engineering considers cost savings at the initial design phase, and value analysis considers existing products.
Here are seven steps to perform a powerful VA/VE project.
How to conduct VA/VE on a product
- Product selection
Selecting the best product for analysis involves choosing a product with a large enough cost-of-sales value to justify a design change. In addition, it is helpful to choose a product that may be already planned for a capital update to improve the payback of the design change
- Cost Pareto
Obtaining a cost card from Finance lets you see where the costs fall for 80/20 prioritization. It also delineates the design-affected costs from logistics.
- Marketing and voice-of-consumer interviews
Meeting with the marketing and consumer experience team members shows which functions are most valuable and which may be redundant and ripe for removal from the design. These conversations can also highlight gaps that would be functional improvements during a redesign.
- Manufacturing process go-and-see
Often overlooked, visualizing the manufacturing process flow and talking with process operators uncovers frequent headaches and efficiency improvement options. For example, they may add a patchwork process step (or two) to mitigate a design flaw. Fixing that could have compound cost benefits in operating efficiency and material cost.
- Review of prior work and design review and ideation with product SMEs
Many products that are good candidates for cost reduction may have been assessed in the past. Reviewing past cost-reduction ideas that the business did not adopt are great places to start the VA/VE assessment. In addition, talking with those most familiar with the product provides context around design decisions, and often can point you to over-engineered areas.
- Ideation with engineering and design from external team members
Savings ideation workshops with those less familiar with the design offer fresh perspectives. Team members can suggest relevant design ideas from their core segment that the product team had not considered. An emerging trend is to use collaborative software like CoLab to host a virtual VA/VE event.
- Idea summaries scored and presented
Summarize all cost savings ideas and develop a visual scorecard (red-yellow-green) to present to stakeholders for acceptance. Considerations include:
- Total cost savings
- Capital expenditure (and respective payback period)
- Customer or consumer impact
- Functional additions or subtractions
These steps outline a roadmap for effective VA/VE that protects product quality and integrity. Many companies trade time for cost in the initial design, leaving "low-hanging fruit" for design-led cost reduction for Gen-2. It is responsible to engage NPD immediately following the design freeze—while design decisions are fresh—to understand and realize these opportunities.
In addition, product changes that use a more environmentally-friendly material or decrease the need for packaging deliver sustainability wins plus cost savings, further increasing the value proposition to the business. You can also quantify sustainability improvement on the idea summaries as a benefit in moving toward company sustainability goals.