10A VALUE_ENGINEERING

8/7/2019 10A VALUE_ENGINEERING

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OPERATIONS MANAGEMENT

VALUE ENGINEERING/VALUE ANALYSIS

SR. NO. TOPIC PAGE NO.

1 DEFINITION AND TYPES OF VALUES 1

2 DEFINITION OF VALUE ENGINEERING 2

AIM, SCOPE, OBJECTIVES

3 FUNCTIONS OF VALUE ENGINEERING 4

4 VALUE ANALYSIS 5

5 METHODS OF ANALYSIS 6

6 STEPS IN VALUE ENGINEERING 7

7 CASE STUDY OF VALUE ENGINEERING 9

:- PETROCHEMICAL INDUSTRY


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VALUE

What does a value mean?

Value is the lowest cost to reliably provide the required functions and servicesat thedesired time and place with the essential quality. Value is given as:

Value = Function / Cost

TYPES OF VALUES

Use valueThe monetary measure of the properties and functions of an item or service which

contribute its usage and hence saleability.

Esteem valueThis is the monetary measure of the properties and functions of an item or service which

contribute to its esteem demand and saleability. In other words, it refers to the specialfeatures which make one want to possess the item or service.

Cost valueThis is a monetary measure of input efforts such as material, labour, overhead, required

to produce an item or service which contribute to its cost and saleability.

Exchange value

This is the monetary measure of the properties and functions which contribute to itsexchange ability for something else. Normally, the sum of use value and esteem value is

equal or greater than the exchange value.Use value + Esteem value> Exchange value

Time valueIt is the value determined predominantly by the time of availability of the item or service.

Computers are capable of computing fast and hence are capable of giving their services

without any time delay. This is time value.

Place value

Value of an item depends upon its availability at a place where it is required. Waterprovided to a traveler in the desert, life saving medicine made available to a dying patientat the hospital etc., are some of the examples of place value of an item or a service.


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VALUE ENGINEERING

Definition:

Value engineering is the process of determining the value of a product and/or service

during the various phases of product life cycle (PLC). The design phase provides morefreedom for Value Engineering to get better results. During the maturity phase in PLC,

the focus will be on the components. Here, the cost reduction is possible throughsubstitution and locating alternate sources of original components. Value Engineering

highlights the awareness of determining the values to establish the cost of every item or

activity of human endeavor.

Industrial Engineering and Value Engineering

Industrial Engineering Value Engineering

1. Intrinsic 1. Extrinsic

2. focus on manufacture of product 2. focus on use of product3. Manufacturing of product is taken forgranted

3. question the necessity of manufacturingthe product.

4. Examines only the best process tomanufacture leading to the best process

4. Examines the design, utility, valueleading to make the buy decision.

5. Concern with producer 5. Concern with customer

6. Reduce the cost of production 6. Reduce cost per unit value

AIM OF VALUE ENGINEERING

To determine the best design alternatives for Projects, Processes, Products, orServices

To reduce cost on existing Projects, Processes, Products, or Services. To improve quality, increase reliability and availability, and customer

satisfaction . To improve organizational performance and effectiveness. To reduce import content. To reduce Maintenance costs.

V E is a powerful tool used to identify problems and develop recommendedsolutions.

SCOPEInitially, the scope of Value Engineering was confined to the substitution of materials in

manufacturing. The scope has now enlarged to cover the areas of R&D, production andoperations management, selection of capital equipment, material management, marketing


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and even administration in government departments. In fact, since Value Engineering

tries to reduce the cost per unit of value, it extends even beyond manufacturing fields andcovers business, public administration, government departments and utility services.

Example would be:

An MIS system which can supply 90% of the information promptly may be bettercompared to another system which could give 100% information with some time delay.

OBJECTIVES

The basic objectives of Value Engineering are:

Reduce cost without reducing quality

Increase value without increasing cost

Increase value for the given cost

Therefore, the three important factors relevant here are quality, cost and value. It is a wellknown fact that quality can be bettered by improved design by the use of high qualitymaterials and by better workmanship. This costs money. Higher the quality, higher the

cost. However the value of equipment need not necessarily increase in the same

proportion as that of the cost. At higher quality level, the level goes up at increasing ratewhereas the value goes down at decreasing rate. The desirable quality level lies between

these two extremities.

FUNCTIONS OF VALUE ENGINEERING

Value Engineering is based on functional approach. A product is analyzed by the function

it is required to perform. Product is essentially the result of an appropriate design to

perform certain primary functions. Product also has certain secondary functions. As pervalue engineering concept, the cost/value of a product must be distributed between these

two functions, proportional to their relative importance. In other weightages are assigned

between these functions.

In addition to primary and secondary functions, there may be some other functions whichare not directly related to these two functions. These are termed as optional functions.

Primary FunctionPrimary functions are the basic purpose of the product and/or service. For example

consider an iPod. The primary function of iPod is to reproduce recorded music.

Considering the trend in the market, perhaps one could even say the primary function isto provide status symbol. The important thing is that within the organization there

should be an identity of views with regard to the desirable functions. One of the basic

objectives of manufacturing organization is to make profit. While the primary functionsare decided, the organization must not forget about its competitors. The product must

compete with similar products in the market and look more attractive to its customers.


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Secondary FunctionThis is derived from design considerations. If the design is based on wiring of transistors

or valves, such items provide the secondary functions. If the design is based on ICs andPCBs, the method chosen to perform the basic function changes and secondary functions

are provided not by transistors and valves but by ICs and PCBs.

Optional FunctionsThese are the functions which do not directly to its functional value. Optional features

cost money but the resultant value is only marginal. If it is not properly applied, the high

cost might make the product non-competitive. A value engineer must eliminateunnecessary functions. If a function can be eliminated then the need to find out the means

of reducing the corresponding components cost for retaining such function can also bedone away with. The best option is to eliminate the same altogether. This will make theproduct more competitive and yield better profits.

ILLUSTRATION

Consider a dot-pen. The primary function is to write. Following table shows the main

components and distribution of various functions between them:

Functional analysis

SR. NO. ITEM FUNCTION PRIMARY SECONDARY

1 Dot point To write on paper __

2 Plastic body Facilitates holding in

between fingers

__

3 Top cover Prevents dust and acts as

holding filter

__

4 Bottom guide Guides filler & fits the outer

body and inner filler

together by grooves

__

5 Retainerspring

Provides spring loading tofiller

__

6 Filler Helps to write on paper &holds ink inside

__


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VALUE ANALYISIS

Value analysis is the application of certain techniques which also form a part of valueengineering. The main objective of value engineering is to increase the value of the

product. We also know that,

Quality

Value = --------------

Cost

Therefore, value is increased by increasing quality, by reducing cost or by both. This ispossible through logical analyses of functions of the product and sub-systems, through

the application of scientific methods. Such a process to increase the value of the productand/or service is called value analysis.

The steps involved are:

Identification of product for VE studies. Identification of the desired quality level of the product. Identification of the systems, sub-systems and components and their inter and

intra-relationships to perform the function. Identification of functions primary, secondary and optional of each sub-

system and component.

Assignments of weightages to the functions in each of the sub-systems andcomponents.

Isolate functions which are superfluous or unnecessary. Identify alternative means of achieving the function which give better value to the

product.

Identify alternate components and materials to perform the function which ismore cost effective without compromising on quality.

Recommend means of achieving optimum value of the product. Implement recommendation which is finally accepted.

METHODS OF ANALYSIS

A value engineer must approach the problem with an open mind. At the same time, heshould never take anything for granted. He should proceed in a systematic and orderly

manner and develop a scientific approach in his analysis. He should develop facts from

cause-effect relationships established by the analysis of the relevant data throughscientific methods. Different methods are suggested to conduct value analysis. P.R.


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Atwood has developed a method called DARSIRI, an anagram having seven steps for

value analysis. The steps are:

Data collection

AnalysisRecord of ideas

Speculation

InvestigationRecommendation

Implementation

M.S.S Varadan has suggested following phases for value analysis viz,

1. Information Stage-Here, all relevant material regarding raw material and the finished product in which it is

incorporated such as the cost, the manufacturing method, the performance characteristics

etc. is gathered. The more detailed the information gathered in this initial stage, the betterwill be the value analysis.

2. Functional stage

At this stage, the functions that the material performs are listed in terms of basicfunctions and secondary functions. After having listed the functions, each of these

functions is given the value points or weightages in terms of its importance/priority or

desirability. If the value is expressed in terms of 0-100 points then the total for all thefunctions of material should add to 100 points. We also mention the cost incurred for

each of the functions. Placing the cost and the value points side by side immediately

reveals those areas of material where much money is spent for little value. These cost-to-worth functions are the focus of our attention in suggesting a substitute design of a

bought-out part or a substitute material. If the value of the function is small, then the

function can be dropped altogether in the substitute product.

3. BrainstormingAfter having done the analysis of the functions and the cost of material, we are now

required to think of various alternative possibilities for the material. The main idea here isto encourage creativity. Many suggestions may seem like wild guesses. Still, they are

recorded even if all may not be feasible. The idea is to break away from rigid thinking

and encourage creativity.

4. Evaluation

Each of the ideas is evaluated again in terms of functional analysis i.e. by finding variousfunctions that the substitute can perform. Such analysis will indicate a few of the


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alternatives which might offer similar functional values as the earlier material but at a

lowered cost.

5. Implementation

In this phase, the selected substitutes or new ideas are discussed with the appropriate

departments for their implementation. Such a systematic analysis of the functional valuesof input material along with their cost structure will help in finding alternative material of

equal functional value while reducing the procurement costs.

In the authors opinion, its better to implement similar methods for value analysis, as

that for method study. This suggestion is made because it is found that many things arecommon between value analysis and method study as its evident from the following

basic characteristics of both:

Applied for finding better methods Focus on cost reduction

Nothing is taken for granted Questioning method is applied Approach is unbiased and open minded Emphasis on analytical and logical solution Success based on creativity and innovative spirit of the specialists

The following stages are also recommended for value analysis:

Selection of product/activity Recording of relevant data Examination of existing design/process Development of new design/process Installation of new design/process Maintaining new design/process


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CASE STUDY

Schenectady International Group, Inc. is a leading producer of petrochemicalsin India having technological tie-ups with several large international corporations.

Schenectady International Group, Inc. is a global leader in alkylphenols,phenolic resins. It has 25 manufacturing facilities spread over 14 countries. Ofthese there are two sites in India for the manufacture of chemicals, viz.Schenectady Herdillia Limited and Schenectady Specialities Asia Private Limited,both in the vicinity of Mumbai.

A customer driven company, Schenectady Herdillia's wide range of qualityproducts is well accepted globally and has been accredited byBVQIwith the ISO9001 : 2000, ISO 14001 : 1996 and OHSAS 18001 : 1999certifications.

The Company's plants for Cumene, Phenol, Acetone, Diacetone Alcohol,Phthalic Anhydride, and Phthalate plasticisers were set up at Thane-Belapur,Navi Mumbai, in collaboration with leading international licensors such as UOP,BP Chemicals, Hercules and Scientific Design. Commercial production wasestablished in 1968.


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The Company has since made considerable progress in terms of productionvolumes, plant operation, market development, R&D, pollution control, expansionand diversification and in keeping with its high customer oriented profile, is ratedamong the leading petrochemical companies in India.

Case Study: Value Engineering - petrochemical Industry

Schenectady Herdillia was one of the highest profitability making company in1980s because of monopoly business. But after liberalization in 1992 the importmarket was open and licenseraj was ended. Therefore many companies wasshifted from highest profitability into losses. Therefore key requirement was thatthe new design should operate at a higher efficiency than the existing facility. Itwas suggested that value engineering might improve the process and minimizethe cost. The idea was refined and implemented.

PRODUCT LICENSOR CAPACITY (MTA)

CUMENE UOP, USA 30000

PHENOL B.P. CHEM, U.K.HERCULES, USA 32,500

ACETONE KELLOGG BROWN 19,900

CUMENE TECHNOLOGY

A CLEAR COLOURLESS LIQUID WITH AROMATIC ODOUR ALKYLATION REACTION OF PROPYLENE & BENZENE DIFFERENT ACID CATALYST USED

BORON TRIFLUORIDE ALUMINIUM CHLORIDE SOLID PHOSPHORIC ACID WIDELY USED

USES :

EARLIEST USE AS HIGH OCTANE AVAITIONGASOLINE ADDITIVE

MAJOR PETROCHEMICAL INTERMEDIATE THINNER FOR PAINTS, LAQUERS AND ENAMELS

PROCESS CHEMISTRY:-


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Main Reaction: Exothermic, proceeds to complete conversion of propylene

CHCH

CH

CHCHCH2

23

33

3P O /H PO

5 4

34 kg / 230C

Propylene Cumene

(Iso propyle benzene)

+

Benzene


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After Cumene Zeolites project

PROCESS FLOW DIAGRAM


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Catalyst: - A substance that initiates or accelerates a chemical reaction

without itself being affected.

Cumene Production Via Zeolites Gaining.

Zeolite Catalysts benefit lower production cost. No waste-stream problems. CUMENE PRODUCTION using zeolite catalysts is superseding solid

phosphoric acid (SPA) and aluminum chloride-based processes, which

are complex and difficult to handle.

High Quality ( Purity 99.95 % ) Less Reaction time.

Catalyst life is more. Increase in production ( From 100 MT/ day to 160 MT/ day ).


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BIBLIOGRAPHY

Production and Operation management- Chunawalla Patel

N.G. Nairs.n. Chary

Internet

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10A VALUE_ENGINEERING