Page 155 - Design for Six Sigma for Service (Six SIGMA Operational Methods)

Chapter
7

Value Engineering

7.1 Introduction

For any service product, customer value and satisfaction can be improved
by increasing customer benefits and reducing cost. Among the customer
benefits, functional benefits are of key importance. People pay for functions,
not for hardware, not for paperwork. For example, people go to a fast-food
restaurant to buy such functions as relieving hunger, getting nutrition, and
getting taste. People go to hospitals, not to buy doctor’s time, surgery, or
hospital beds, but to buy such functions as curing a disease and relieving
symptoms. Value engineering is a systematic, team-oriented, creative
approach that seeks to deliver customer-desired functions with lower cost.

The Society of American Value Engineers (SAVE) defines the term value
engineering as follows:

Value engineering is the systematic application of recognized
techniques which identify the functions of a product or service,
establish a monetary value for that function and provide the
function at the lowest cost.

However, value engineering is not merely a cost-cutting program; it only
cuts unnecessary cost. Unnecessary cost is the cost that can be removed
without affecting the functional performance of the product or service. In
the value-engineering approach, it is important to maintain a high level of
functional performance while cutting cost. That is, the new design coming
out of a value-engineering project should have the same or better functional
performance than the old design. It has been estimated that 30 percent of the
cost of an average product or service is unnecessary. This unintentional cost
is the result of habits, attitudes, and all other human factors.
Value engineering originated at the General Electric Company in 1947.
Mr. Harry Erlicher, vice president of purchases, noted that during wartime, it

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