What is Value Analysis and Value Engineering

What is Value Analysis and Value Engineering


Value Analysis is a systematic approach to reduce the product cost. Value analysis approach identifies unnecessary manufacturing cost and indicates the ways to reduce it without lowering down the performance of product.

People think that VE means an alternative design with the intention to cost cutting exercise for a project but we can work on the material and manufacturing process to reduce the cost without affecting the product function.

The VA approach is almost universal and can be used to analyze the existing products, services, manufacturing companies and service providers alike.

The Value Engineering (VE) approach is different in case of the new products which applies the same principles and many of the VA techniques to pre-manufacturing stages such as concept development, design and prototyping.

Mostly mechanical engineers use value analysis and value engineering approaches to reduce the product cost by developing the alternative design with the help of CAD software’s.

Value analysis Value engineering methodology adds an advantage to the mechanical engineers who are willing to move to the design and development companies. Also it is a future technology for CAD engineers.

Why Use Value Analysis?

In reality, a complex number of reasons exists that necessitate the structured approach of value analysis as a means of logical cost reduction. These reasons can be divided into two key sources, those that lie within the business and secondly those that are stimulated by the market for the product or service.

The current business trends are very demanding with a continuous demand from the market forces to reduce the product cost to be competitive in the market. The companies have to perform the exercises on product development and manufacturing expenditures to bring down the product cost as demanded by the market forces.

Manufacturing costs of a product can be broadly categorized in the following heads:

  1. Raw Material Cost
  2. Labor Cost
  3. Design and Development Cost

Product engineers are constantly faced with the following challenges:

  1. Reduce the design cost
  2. Minimize production cost.
  3. Reduce the material cost.

Value Analysis & Value Engineering (VAVE) methods are very important and useful in driving down the product cost which helps companies retain market share and sustain their profitability.

The VA process of design review has provided major business returns to the many of the world’s leading companies including names like Hewlett Packard, Sony, Panasonic, Toyota, Nissan and Ford.

The key to realizing these returns is knowledge of the customer requirements, the costs of the product, and an in-depth knowledge of manufacturing process and the costs associated with failures due to poor or inadequate product design. All these inputs to the VA process are very important for making the decisions regarding product and process re-design to lower the costs and enhance customer value.


Value engineering began at General Electric Co. during World War II. Because of the war, there were shortages of skilled labor and raw materials. Lawrence Miles and Harry Erlicher at GE looked for acceptable substitutes for materials. They noticed that these substitutions often reduced costs and improved the product, some cases both. They were started as an experiment driven by necessity was turned into a systematic process and it has been adapted by many companies. They called their technique as “Value Analysis” and the name gradually changed to Value Engineering.

Value Analysis and Value Engineering Definition

Value analysis is the most effective technique known to improve value, and eliminate unnecessary costs in product design, testing, manufacturing, construction, operations, maintenance, data, and processes and practices. While its application to processes and practices is less well known, effectiveness in this area has been highly successful.

Defining Cost and Value

While dealing with the value of a product we must consider two elements, the first concerns the use of the product (known as Use value) and the second source of value comes from ownership (Esteem value).

This can be explained as the difference between a luxury car and a basic small car that each has the same engine and accessories. From a use point of view both cars perform the same function – they both offer safe economical travel (Use value) – but the luxury car has a greater esteem value.

Let us take an example, the difference between a gold-plated ball pen and a disposable pen. However the use value and the price paid for a product are rarely the same but the difference is actually the esteem value. So even though the disposable pen is priced at low, the use value may be far less.

  1. Use value – which is based on those properties of the product, which enable it to perform work or service.
  2. Cost value – which is based on the minimum cost of achieving a useful function.
  3. Esteem value – which is based on those properties of the product, which contribute to pride of ownership.
  4. Exchange value – which is based on those properties which make a product valuable for exchange purposes.

Value Analysis Methodology

There are six phases in the VA process.

Value analysis stages
Value analysis stages

1. Information Phase

The Objective of the Information Phase is to complete the value study data package started in the Pre-Study of the project. The project sponsor and / or designer brief the value study team, providing an opportunity for the team to ask questions based on their data research.

The scope statement is reviewed for any adjustments due to additional information gathered during the information Phase.

2. Function Analysis Phase

Function definition and analysis is the heart of Value Methodology. It is the primary activity that separates Value Methodology from all other “improvement” practices. The objective of this phase is to develop the most beneficial areas for continuing study.

3. Creative Phase

The objective of the Creative Phase (sometimes referred to as Speculation Phase) is to develop a large quantity of ideas for performing each function selected for study. This is a Creative type of effort, totally unconstrained by habit, tradition, negative attitudes, assumed restrictions, and specific criteria. No judgment or discussion occurs during this activity. The quality of each idea will be developed in the next phase, from the quantity generated in this phase.

4. Evaluation Phase

The objectives of the Evaluation Phase are to synthesize ideas and concepts generated in the Creative Phase and to select feasible ideas for development into specific value improvement. Using the evaluation criteria established during the Pre-Study effort, ideas are sorted and rated as to how well they meet those criteria.

5. Development Phase

The objective of the Development Phase is to select and prepare the “best” alternative(s) for improving value. The data package prepared by the champion of each of the alternatives should provide as much technical, cost, and schedule information as practical so the designer and project sponsor(s) may make an initial assessment concerning their feasibility for implementation.

6. Presentation Phase

The objective of the Presentation Phase is to obtain concurrence and a commitment from the designer, project sponsor, and other management to proceed with implementation of the recommendations. This involves an initial oral presentation followed by a complete written report.

Areas of VAVE Application

Value Analysis has been successful in several domains




Software development

Water treatment

Civil engineering

Aerospace Engineering





Manufacturing Engineering


Power Tools Engineering

Oil and Natural Gas

Medical Equipment

Hydraulics and pneumatic

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