How to integrate value engineering into NPD
April 27, 2023
When designing a new product, speed and quality tend to take priority over product costs.
But as inflation and supply chain disruptions make it increasingly difficult to achieve cost-down targets, engineering teams are looking for new ways to reduce costs — including saving costs upfront, during new product development (NPD).
Value analysis (VA) and value engineering (VE) are often grouped together. Yet most companies are still heavily focused on VA, generating cost-saving ideas for products that are already in the market. That means there’s a huge opportunity for teams that integrate VE into their NPD process to find more savings during early design phases, and gain an edge on the competition.
This article covers what integrated VE is, why it matters, and how engineering managers can get started with implementing this approach.
What is integrated VE and why does it matter?
Value engineering aims to improve a product’s cost-value ratio. This is done either by reducing costs without losing value, or by adding value without increasing costs. It’s a systematic method for maximizing value, though it can be accomplished using a variety or combination of techniques.
However, the term “integrated value engineering” can be interpreted in multiple ways. For the purposes of this article, we’re using integrated VE to mean deliberately including at least 1 review cycle in your new product development process focused solely on cost/margins.
By integrating VE directly into the NPD process, you can identify unnecessary costs sooner — and design them out before the product launches. Integrated VE is important because savings you capture here are realized throughout the entire lifecycle of the product. The earlier in a product’s lifecycle you realize savings, the more savings you realize.
In an article titled “Making cost engineering count,” McKinsey gives the example of an aerospace company that “had become adept at the use of cleansheet target costing and other analytical techniques to achieve short-term component cost savings” yet knew “that it was leaving money on the table by not capturing longer-term opportunities through modifications to early product designs.”
After examining the issue, the root cause turned out to be poor cross-functional collaboration — which was making it challenging to get required product changes made. By taking a new approach that addressed “longstanding bottlenecks,” the company achieved cost savings that averaged over 10 percent.
The new approach included:
- Establishing a new cost engineering department to work cross-functionally with purchasing, supply chain, and engineering to “analyze and deliver the end-to-end impact of design changes across its product portfolio”
- Collaborating directly with suppliers to develop improved designs for manufacturing and assembly approaches
- Creating a central cost engineering fact base and using it to inform the design of new products earlier on, during the concept stage
Despite the benefits, many teams don’t yet have the proper structure or processes in place to integrate VE into NPD. With teams already facing such high expectations, it’s easy to feel like there’s no time to put a greater focus on VE during early product design. However, as the global competitive environment continues to accelerate, teams that start making the shift to integrated VE now will start accruing the benefits that much sooner.
So how can you get started? First, let’s consider 3 potential sources of cost-saving ideas for integrated VE.
3 sources of cost-down ideas for new products
Using VA to generate cost-saving ideas for existing products is, perhaps, slightly more straightforward than integrated VE. Since the products are already in-market, VA workshops may also include data and information that isn’t yet available for products still in development.
However, there are many ways to generate ideas for new products. For this article, we’ve explored three possible idea sources to consider when integrating VE into your NPD process.
1: Core design team
You’ll have to excuse us for stating the obvious, but it only makes sense to start with your core design team. Given the complexity of NPD and the vast array of factors that go into it, it’s difficult for engineers to always stay on the lookout for cost-saving opportunities during early design — even though they’re in the best position to spot them.
That’s why even introducing a single dedicated VE review cycle can be a productive starting point for generating ideas. Because it creates a place in the development process to focus specifically on costs, and consider the impact of different design choices on overall product cost and value.
Companies also miss out on VE opportunities during new product development because they’re not involving their suppliers as true partners in the design process.
- Are you waiting until the production validation stage to bring in suppliers?
- Do suppliers have any access to 3D CAD, or are they working from drawings only?
- Are designs already frozen by the time they make it to suppliers?
If you answer “yes” to any of these questions, your suppliers’ design knowledge is an untapped source of cost-down ideas. By making it easier for your team to collaborate with suppliers, you can get design feedback earlier and more often — which deepens the pool of collective expertise available to you throughout all stages of the design process.
3: Other teams/departments
Your production team, other disciplines, subject matter experts, frontline technicians, the list could go on. Within your organization, there’s a bounty of internal knowledge you can tap into. It’s mainly a matter of figuring out how to present the right information to the right people at the right time — without creating a ton of extra work in the process.
One way to take advantage of internal, cross-functional expertise is to leverage what already exists. At the beginning of an NPD cycle, look at similar products and find any lessons learned or outputs from VA events. Often, these findings will contain relevant insights and ideas from a range of perspectives.
However, for some teams, this information is either difficult to gather or simply not tracked anywhere at all; if that’s the case, you may need to get a little more creative to bring in other viewpoints in an efficient way.
How to implement integrated VE at the team level
Ready to get started with incorporating VE directly into your NPD process? As with any process change, it’s good to remind yourself that changes take time. It’s easy (and tempting) to get carried away with big plans and ambitious goals, but the best way to test out an integrated VE approach is with a continuous improvement mindset. Start small, test and iterate, then only build upon what works.
But before you even worry about planning your VE initiative, take a moment to consider your team. Do they currently collaborate effectively together? Will they commit to the process? It’s wise to make sure your team dynamics are healthy before introducing a new initiative. Otherwise, if it doesn’t go well, it will be hard to know if the initiative itself failed — or if the team environment simply wasn’t ready to take it on yet.
Depending on your situation and your existing VA/VE process, there are many ways to approach implementing integrated VE at a team level. Ultimately, though, there are three basic steps to get started with integrating VE into your NPD workflow: set a clear objective, develop a VE plan, then create a continuous feedback loop to measure and adjust the process over time.
Step 1: Set a clear objective
Even if it seems obvious, define the specific purpose of implementing VE for NPD. Is the goal to reduce costs? Or to improve product quality? Or is it actually about shortening development time?
Identifying the primary reason doesn’t mean the other benefits won’t follow, but it’s important to understand the root motivation and ensure it aligns with the organization’s overall goals. You also need to decide how you’ll evaluate your VE initiative and track your progress. Using a goal-setting framework like SMART or OKRs, choose 2-3 key metrics you want to measure.
Step 2: Develop a VE plan
What’s the “minimum viable product” that will get you up and running with integrated VE? That’s what you want to figure out in this step. Your VE plan should be more of a living thing than a “one-and-done” document.
First, decide on an initial timeline and scope for the initiative. Outline all the tasks that will be involved, who will be responsible for each, and any major deadlines or milestones that are relevant. Going back to our definition of integrated VE above, this may simply mean defining when and where to include a VE review cycle during your typical NPD process — along with setting the review’s specific purpose and parameters.
During this step, you should also consider any VE tools or methodologies you’ll want to use. For example, you may want to consider techniques like Function Analysis System Technique (FAST), Quality Function Deployment (QFD), and Design for Manufacturability and Assembly (DFMA). You may also want to reflect on what software and technology you’re already using, and what’s potentially available to you.
Step 3: Monitor, measure, evaluate, adjust (then repeat)
Once you get the ball rolling, don’t forget to regularly review the project's progress against the VE plan and make adjustments as necessary. This may involve revising the plan, reallocating resources, or revisiting decisions.
Exactly when and how often you review the plan will depend on things like your typical design cycle lengths and your team’s project volume. As you compare the project’s progress and outcomes to your initial objectives, you should be able to identify areas for improvement and suggestions for future VE efforts.
Signs of a successful integrated VE initiative include:
- Achieving defined goals — You meet or exceed your initial objectives.
- Demonstrating effective collaboration and continuous improvement — The team shares knowledge and ideas, makes informed decisions together, and applies lessons learned to future work.
- Positive organizational impact — Success at the team level leads to a broader adoption of integrated VE within the organization, leading to overall improved NPD processes and outcomes.
The role of organizational structure and incentives
As you begin to drive an integrated VE initiative at the team level, you may run into roadblocks that stem from broader organizational factors. These are important challenges to notice and analyze, so that you can communicate upward to your manager or leadership team about what kind of support is needed.
If organizational-level incentives aren’t aligned with your integrated VE efforts, it’ll be an uphill climb trying to gain traction. Goals, targets, and metrics at the business level need to be structured properly to support integrated VE. For example: if your gross margin targets are not aggressive enough on the front end, and your VA or margin improvement targets are too aggressive in Y2, Y3, etc — then you’ll incentivize your team to leave cost in the product, just so it can be engineered out later.
It’s also vital to consider the product development process as a whole before introducing new engineering-led cost reduction initiatives. Is it reasonable and realistic to add an expectation of integrated VE without changing anything else about your NPD process?
The best way to incentivize and support integrated VE is to make everything else easier.
Product development is hard enough. It may already be challenging to get design changes implemented efficiently, or to stop mistakes from slipping through the cracks. So if your NPD workflows involve engineers using spreadsheets to track thousands of issues, or communicating with design stakeholders via PowerPoints full of screenshots, those kinds of inefficiencies will hamper your integrated VE efforts from the get-go.
That’s why the best way to incentivize and support integrated VE is to make everything else easier. Right now, legacy bottlenecks still hold back almost every engineering team in the world. So one of the biggest challenges large engineering organizations face today is how to find and address those bottlenecks, as quickly and effectively as possible.
That way, your team has the time and space to work on more impactful strategic initiatives like VE — so you can deliver better products, faster.
This article is part of the Effective Engineering series by CoLab. To get more articles like this one delivered to your inbox every 1-2 weeks, subscribe here.