As discussed in our January 2013 column, Value Analysis Value Engineering is a formal problem-solving process that can help improve productivity and value. While it has benefits as a tactical tool in a Lean manufacturing toolbox, it is even more powerful when used strategically.
VAVE has several benefits from a strategic standpoint. When implemented early in the product development lifecycle, it can become a scheduled part of the product lifecycle roadmap, driving down cost and mitigating obsolescence risk as the product enters each new phase of its lifecycle. A good VAVE strategy creates a series of cost-reduction ladders that unlock value at specific points in time, similar to the way bond ladders spread risk and optimize returns by sequencing redemption at set points in time. Most important, this ensures a proactive focus that minimizes the likelihood or impact of supply-chain interruption.
From a management perspective, it is also a good tool for driving a collaborative process between OEM engineering teams and a contractor’s engineering teams. One of the biggest fears engineering teams have about outsourcing is the potential loss of control or product knowledge as the contractor takes over responsibilities. VAVE opens the door to greater communications between the OEM’s product design and manufacturing engineering teams and the contractor’s engineering and manufacturing teams. This ensures that critical data about the product’s manufacturability and testability issues resident at the contractor are fed back to the engineering team at the OEM and can be used to not only improve the current product, but also enhance future product generations. Similarly, the contractor’s materials expertise may drive improvements in component selection in future products.
Finally, from a marketing standpoint, it provides OEM product managers with a greater range of options in terms of extending the life of mature products that still have viable markets, particularly when a full redesign may not be cost-effective. As an example, a manufacturer of a long-lifecycle product with a large installed user base was facing increased competition from companies offering a lower price. The current market was saturated, making a full redesign or new generation of products unfeasible. Yet, failing to address the cost competition would cause erosion in the existing business base.
A VAVE workshop at EPIC Technologies yielded over $225,000 in savings for one 20-year-old design. The list of proposed changes generated through the workshop included:
Each option was costed so that the customer could evaluate cost savings against tradeoffs. Following a feasibility workshop, the customer provided feasibility assessment of the ideas presented, and an evaluation plan was jointly developed. The Idea Report tracking worksheet was used to track the recommendation, approved plan and cost savings.
The VAVE session drove a brainstorming effort that looked across multiple disciplines for possible cost-reduction opportunities. Instead of cutting profit margins to compete on price, the customer was able to cut manufacturing cost. Plus, existing product life was extended and market position preserved.
A robust VAVE process goes far beyond the benefits of optimizing component sourcing, manufacturability or testability. When implemented as it is done at EPIC Technologies, it drives a much closer relationship among program stakeholders and changes the contractor’s position from that of supplier to that of an equal member of the product team. The result is better product competitiveness, which can lead to increased market share with concomitant benefits for both OEM and contractor. Done strategically, this process ensures a proactive approach to unlocking value at specific points over the product’s lifecycle. It also reduces the potential for production interruptions related to obsolescence issues or unanticipated supply-chain interruptions.
Steve McEuen is director, commodity management at EPIC Technologies. He can be reached at email@example.com.