BEYOND VALUE MANAGEMENT ‘VA-VE’
Value Vistas for the 21st Century
By Dr. R.V. GOPALAKRISHNAN
Value Analysis-Value Engineering (VA-VE) is over half a century old! The concept evolved, during the ‘40s, as a ‘creative problem-solving system, implemented by the use of a specific set of techniques, a body of knowledge and a group of learned skills’.
The practice of VA-VE Team Approach spread ‘like wild fire’ and by the ‘70s, emerged as a systematic Value Management (VM) Methodology, achieving larger and quicker value-gains for many an organisation across the world, including India. What is refreshing about it now is its lasting strategic value for sustained organisational renewal - in the fiercely competitive market place, as we step into the 21st century.
VA, the ‘Function’ Fetish:
It was Mr. L.D. Miles of General Electric in USA, who developed the functional approach to purchasing. During and after World War II, material shortages were galore; he found that he could search for and procure alternate materials for performing the same needed functions - and in most instances, at less cost. Miles was hailed as ‘the Father of Value Analysis’.
According to Miles, ‘All Cost Is for Function’ and ‘VA aimed at one specific need, viz. accomplishing the functions, that the customer needs and wants, reliably, at the lowest cost’. VA served as a ‘searchlight’ to locate ‘unnecessary costs’; cost reduction resulted through removal of cost to perform the function, not of cost in making the part.
First VA Gains for India:
The earliest VA gains in India can be traced to the transportation sector - by road and by sea. During the ‘40s, the best bus transportation system, run by ‘TVS’ (M/s T.V. Sundaram Iyengar & Sons, Madurai), could keep their fleet of buses running on the roads for about 96% of the time, as against the then ‘world benchmark’ usage-factor of 97% in USA and Western Europe!
This was made possible by their quicker, and more cost-effective approach to ‘restore mobility’ of buses ‘broken-down’. TVS was the first to stock critical and essential assemblies of a bus in their depots. When a part of an assembly ‘failed’, the whole assembly was removed and a new one from the stock was fitted.
The bus was then made mobile within one or two hours, as against many hours (sometimes days) taken to repair and refit the same in the traditional method. Their VA/Cost-benefit analysis paid TVS good dividends over the decades. This approach has since become a ‘standard’ industry practice to ‘ensure availability’ of Plants & Equipments.
The largest VA gains for India - from transportation by sea - were first achieved by an Indian bureaucrat, while in service in USA in the early ‘60s. Mr. M.S. Ram, IAS, who was the Director General of India Supply Mission in Washington during 1957-62, could effect more cost-effective shipments of wheat to India (under PL 480). The savings were nearly one fourth, amounting to several millions of dollars - every year, throughout the ‘60s - on transportation as well as foreign exchange.
Mr. Ram had learnt about the VA efforts at GE and applied the VA Techniques to ‘transport cargo’. Traditionally, tankers from US Gulf were coming to the Persian Gulf ‘in-ballast’ to pick up oil and return to America. If only a method could be found to utilise the tanker to carry grain, it could come loaded with grain from America to Bombay and return with oil from the Persian Gulf to America, thus getting cargo two-ways.
The India Supply Mission in Washington was the first to boldly experiment transportation of grain in tankers, ‘seizing’ quickly on two developments, viz.
(i) a chemical injected into the tankers immediately after discharge of oil, could completely eliminate the oil & smell and make the tanker fit for grain; and (ii) a Vacuaator to speed up the grain-discharge. Instead of paying $ 25/Ton for dry cargo ships, the rates paid to the tankers were only $ 19/Ton. On over million tons of wheat transported every year, the gains were significant indeed! With India Supply Mission succeeding in transporting grains in tankers, all the other 20 countries who were moving wheat from USA in that period, followed suit!
Hundreds of Indian Organisations have achieved significant value-gains during the last 25 years or more. A token ‘sample’ of their impressive gains is given in Fig. 1.
Fig.1: Impressive VA-VE/VM Gains in India
A Token Sample*
Company & Value-gain
Ashok Leyland: Completely eliminated field complaint of gear-seizure in trucks.
Best & Crompton Engg: ‘Clinched’ the tender by quoting ‘lowest’ bid (with margin intact!) for the ‘Lighting Project at HVF-Avadi’.
BHEL (Electronics): Catered to customers’ changing priority-need.
BHEL (Tiruchi): Improved competitiveness / better tender acceptance.
BHPV: Erased the ‘late deliverer’ image; got more orders.
Eicher: Retained market share through better product design and large price reduction.
Lucas-TVS: Improved reliability; reduced assembly-time & cost.
MICO: Conserved Cutting Oils (Extended to all Petroleum products- after 1973 oil ‘crisis’)
Thermax: Obtained better ‘architecture’ and export-worthiness.
TISCO: Improved Capacity Utilisation of Coke oven plants.
VE Team changed gear-material from the costly phosphor bronze to cast iron.
Team conducted ‘pre-tender-submission’ VE; involved supplier (Philips) in developing their ‘most attractive’ bid.
Developed ‘Electronics’ Energy Meters pilfer-proof -acceptable to Electricity Boards, though costlier.
VE team reduced ‘unnecessary’ weight of Boiler Superstructures. (Gains Rs.50 million p.a. on one type alone!)
Several VM Teams & Circles reduced total cycle time to manufacture and deliver.
Team redesigned & developed ‘flywheel-mounted’ alternator; Costreduced by one-third; all gains passed on.
VE team on Auto-alternator assembly used DFMA; number of parts reduced by more than half through in-situ molding etc.
VE team involved Oil Companies & implemented changes to ‘conserve oil’, with significant gains.
Team on ‘Thermopac’ Boiler reconfigured it, trimmed parts and reduced costs.
VE team reduced the width of leveller bar to ‘spread coal’; capacity increased by 2.3%, gaining Rs.70 million+ p.a.
* There are numerous others from hundreds of Indian Organisations!
From ‘VA’ through ‘VE’ to ‘VM’:
VA swiftly moved on to cost prevention / avoidance, at the ‘upstream’ stage of product design & development. VE was first adopted in 1954 by the US Navy Bureau of Ships to analyse engineering drawings, before their ships were built. ‘Design to Cost’ and ‘Cost Assurance’ were the later versions of VE.
VM, the `umbrella term’, denoting cost effectiveness, came into being in 1974 to encompass VA-VE at any stage and in any endeavour such as Construction/Projects/Programmes, Processes and Services. More importantly,
VM for World Class Companies now aims at delivering superior quality at lower cost - both as perceived by the customer.
Better Value from Product Design:
VA-VE recognises that ‘All Designs Have Unnecessary Costs’ , and it is not possible to get the best balance among Cost, Performance and Reliability without a VE study. It is not a reflection on the designer’s ability, but rather a management problem to be addressed.
While traditional VA-VE tends to overlook small parts in an assembly, which may constitute a larger percentage in parts count, DFMA (Design For Manufacturability & Assembly) is deployed with VE to reduce the number of components and enhance design efficiency, quality & reliability.
DFMA specifically analyses the need for a part to be a separate one and explicitly seeks possible elimination / combination of parts of ‘low functional importance’, with others. VE+DFMA Workshops, conducted by the author during the ‘90s, have shown an average potential reduction of 25% in the number of components of product-assemblies, across organisations.
Many enterprises strive also to improve the aesthetic features, appearance and packaging for better customer satisfaction/export worthiness. Illustratively, BHEL has an ‘Appearance Engineering Department’ at their Corporate R&D Centre.
Multiple Ways of Providing Value:
Fig. 2 lists various ways of providing customer value. Recent advertisements, for example, invite us to ‘value-shop’, viz. buy ‘superior’ products at ‘unbeatable’ prices.
A few value-providers, in the Indian scene, are exemplified below:
* Modi Xerox’s VE-d low-cost Copier 1025 ST; Simple with
‘Single Tray’, it became their largest selling model;
* Motorola India on ‘Six Sigma’ quality initiatives;
* Sundaram Fastener’s Zero defect quality,
Zero deviation from delivery schedules;
* BHEL’s ‘New’ products (introduced within last 5 years)
generating one-fourth of annual revenues;
* Maruti Zen’s Value-for-money;
* Titan Watches’ innovative designs;
* LML’s tollfree MTNL ‘helpline’ service;
* ITC Welcomgroup’s ‘time-guaranteed’ Room Service.
Many organisations have, during the last decade, taken to new services such as financial, franchising, leasing, logistic and repair / retrofitting. To be thriving in the coming decades, ‘winning’ organisations will seek more ways of providing value, which will lead to customer satisfaction / delight.
Many Attributes to Quality:
While VA-VE emphasises reliable cost-effective performance, the term ‘quality’ itself has taken a broader view, during the last decade, to denote many other attributes, besides performance.
Interestingly, the twin goals of Baldrige Quality Award criteria are: ‘to project key requirements for delivering ever-increasing value to customers, while at the same time, maximising the overall productivity and effectiveness of the delivery organisation.’ World Class Companies perhaps reckon that ‘quality’ and ‘cost’ are outflanked by ‘value’, ‘productivity and effectiveness’ !
Fig. 2: Multiple Ways of Providing Customer Value
Earlier 1. Low Costs
2. High Quality Differentiation
Now 3. Product Proliferation
4. Value for money
5. Design as a Strategic Weapon
Is the Company competing
better in its market place?
...View Part 2