The

Conten ts

PRESIDENT'S NEWSLETTER 1 A.R. Tocco

NOTES FROM THE EDITOR 2 Marvin Kaplan

VALUE ENGINEERING IN HEAVY INDUSTRY. . . 3 M.S. Merritt

WHAT'S WRONG WITH VALUE ENGINEERING TODAY? 6

F.S. Sherwin

VALUE ENGINEERING IN PAPERWORK 8 S. Simon

THE SPECIALTY SUPPLIER IN VALUE ENGINEERING 13

A.S. Winthrop

AN EVOLUTION IN DEPTH - L.A. S.A.V.E. COLLOQUIUM 17

D.O.D. COMMENTS (L.A. S.A.V.E. COLLOQUIUM) 25

J . J . Riordan

COMMERCIAL PRODUCTS V.E 27 C . L . Chase & T.H. Redman

MILITARY PRODUCTS V.E 30 Sol Mendelsohn

TECHNICAL NOTES & REVIEWS 34 David M. Natelson

S.A.V.E, CHAPTER NEWS 37 J . Waltzman

S.A.V.E. NATIONAL NEWS 40

J . Waltzman

V . E . CALENDER EVENTS 41

SEMINARS, WORKSHOPS & TRAINING AIDS . . . . 42

ENGINEER'S CORNER 43 Clyde Flackbert

OFFICIAL PUBLICATION o f t h e

S . A . V . E

J o u R N A L of

V a l u e

E n g i n e e r i n g

/MS

December

1 9 6 2

S O C I E T Y o f AMERICAN V A L U E E N G I N E E R S

N O . 1 2 - 6 2 - 2

S O C I E T Y OF A M E R I C A N V A L U E E N G I N E E R S

OFFICERS: 1962-1963

President: Anthony R. Tocco Space Technology Lab., Inc.

Vice-President, N.E. Region: Frederick S. Sherwin Raytheon Company

Secretary: Edward D. Heller Gen. Dynamics/Pomona

Treasurer: Wil l iam R. Feichtinger Dept. of the Navy

Ass't. Treasurer: Don Redmon, Chief, Value Analysis Plans and Programs Branch, Industrial

Division U.S. Ordnance

T H E J O U R N A L OF V A L U E E N G I N E E R I N G

Official Publication of the

SOCIETY OF AMERICAN VALUE ENGINEERS

EDITORIAL STAFF

Executive Editor - Marvin Kaplan i

Associate Editor - Arthur F. de la Parra

Secretary - Bertha Kaplan EDITORIAL BOARD

Technical Notes & Reviews David M . Natelson

Engineer's Corner Clyde Flackbert

Mil i ta ry Products VE Sol Mendelsohn

Commercial Products VE Ted H . Redman Carl Chase, Associate

S.A.V.E. News Jacob Waltzman

Distribution Ernest L . Kramer

Advertising Ernest Yurman

Illustrations Joseph Tomek Donald Connor

Board of Directors: C.W. Doyle Gen. Dynamics Corp.

George W. Gebhardt Dept. of the A i r Force

Edward O. Greeson Dept. of the Army

Marvin Kaplan Loral Electronics Corp.

Horace R. Lowers Dept. of the Army

Adm. R.S. Mandelkorn (USN Ret.) Sperry Gyroscope Co.

Lawrence D. Miles General Electric Co.

Morgan D. Roderick Dept. of the Navy

Anthony R. Tocco Space Technology Lab., Inc.

General Counsel: Leonard J. Williams Attorney at Law 1625 Eye St., N.W. Washington 6, D.C.

Published Quarterly by the SOCIETY OF AMERICAN VALUE ENGINEERS. Copyright 1962 by the Society.

Application to mail at 2 n d class postage rates is pending at New York, N.Y.

S.A.V.E. accepts no responsibility in connection with any liabil i ty which might develop as a result of articles or ad­vertising published. The opinions expressed are those of the authors and advertisers and do not necessarily represent the Society. Journal written permission required for reprints.

Subscription Prices: $5.00 per year; single issue $1.25. (Special issues available at additional cost). A l l Manuscripts for review should be submitted with drawings, suitable for reproduction, to the Executive Editor. Advertising rates, change of address notification, membership information, article contributions, and a l l other correspond­ence should be sent to:

S.A.V.E. JOURNAL c/o Loral Electronics Corp. 825 Bronx River Avenue Bronx 72, New York

Attention: Marvin Kaplan Executive Editor

President's Newsletter

PLEDGE p F SUPPORT TO DOD The Honorable Robert S. McNamara November 9, 1962 Secretary of Defense Washington 25, D. C.

Dear Mr . Secretary:

The Society of American Value Engineers is constantly on the alert fo r opportunities to assist the Department of Defense in the furtherance of national objectives. In this con­nection, we have followed with great interest your vigorous efforts to streamline logistic practices and reduce defense costs. The programs enumerated and steps taken thus far indicate that substantial savings are possible when meaningful cost reduction programs are f u l l y implemented.

The efforts of the Society of American Value Engineers to create a cost conscious climate within the defense industry have been gradually taking on specific dimensions. These efforts are intended to' complement the energetic activities of your office, as represented by OASD(I&L). Additionally, we have been privileged to develop data fo r the Logistics Management Institute's studies in the area of value engineering.

Your announced major drive on cost reduction through value engineering and the es­tablishment of a DOD-wide goal of at least 100 mi l l ion dollars annually constitutes a personal challenge fo r a l l value engineers. At the same time we recognize that specific organized actions must be taken i f the f u l l potentialities f o r cost reduction are to be realized. One such action might be to bring together a small working group of industry-defense personnel fo r the purpose of outlining and implementing a program fo r attaining and exceeding the established goals. The meetings of this working group might be ar­ranged independent of, but not in conflict with, the current cost reduction studies under the auspices of the National Security Industrial Association in cooperation with the DOD. The essential and distinguishing characteristic of this proposed effort would be an analysis and tailoring of technical/engineering concepts and methods for cost reduction purposes. There are many areas to be explored, including, fo r example elimination of "gold plating" through—

. development of rational cr i ter ia f o r tolerances

. prevention of costly engineering changes

. utilization of modern "design of experiment'' methods in testing.

With your endorsement, the Society of American Value Engineers would welcome the opportunity to serve as the focal point fo r establishing an appropriate working group. It is conceivable that a collaborative effor t of this kind could produce economies well beyond the established 100 mi l l ion dollar goal. This effort would require the active participation and authoritative representation of not only Mr. M o r r i s ' office but also Dr. Brown's office.

La any event, whether or not this communication culminates in some arrangement be­tween DOD and SAVE fo r confrontation of the cost reduction problem, I should like to assure you that a l l the resources of the Society of American Value Engineers are avai l­able to you to promote the national interest.

Respectfully,

A.R. Tocco President

Society of American Value Engineers

12-62-2 S .A .V .E . JOURNAL

Notes From The Editor

The report described in this article shall probably leave the reader speechless and slightly bewildered. The careful evaluation of an idea requires wisdom and common sense—attributes which sometimes are not always utilized.

SUBJECT:* Report of Special Technical Committee to consider the TELEPHONE as an i n ­vestment.

1. The TELEPHONE is so named by its inventor, Mr . A. G. Bel l , who sees f o r i t a vast future as a means of personal communication by voice. He believes that one day they w i l l be installed in every residence and place of business.

2. We note that Mr, Bell 's profession is that of a voice teacher, and particularly a teacher of the deaf. He appears to have no direct experience with the telephone or any other f o r m of communication, electrical or otherwise. Yet he claims to have dis­covered an instrument of great practical value in communication, which has been overlooked by the thousands of workers who have spent years in this f ie ld .

3. Mr . Bell 's proposal to place his instruments in almost every home and business house (and this is the only way in which their potential may be realized) is fantastic in view of the capital costs of installing the endless numbers of wires and cables that would be demanded. The central exchanges alone would represent a huge outlay in real estate and buildings, to say nothing of the electrical equipment.

4. Mr . Bell expects that the public w i l l use his instruments without the aid of trained operators. Any telegraph engineer w i l l at once see the fallacy

in this plan. The public simply cannot be trusted to handle technical communications equip­ment. In any home where there are children, to mention only one point, there would inevitably be a high rate of break­age and frivolous use of the Instruments.

Furthermore, when making a call , the subscriber must give the desired number verbally to the operator. No one on this Committee would like to be that operator, and have to deal with persons who may be i l l i terate, speak with lisps, stammer, have foreign accents, or who may be sleepy or intoxicated when making a call .

5. While every telegram constitutes in itself a written record of what has been communicated, Mr . Bell 's instrument uses nothing but the voice, which cannot be captured in any concrete f o r m , and therefore there would be no record of what was said or agreed upon. We leave i t to you to judge whether any sensible man of business would transact his affairs by such a means of communication.

6. Mr, Bell expects that the subscribers to this service w i l l pay to have the instruments installed in their premises and w i l l thereafter pay fo r each call made, with a monthly minimum even i f no calls are made. We feel i t very unlikely that any substantial number of people w i l l agree to such an arrangement, in view of the telegraph offices which are now giving efficient round-the-clock service in every neighbor­hood and in the smallest towns, which charge only f o r actual messages sent according to length.

7. In conclusion, this Committee feels i t must advise against any investment whatever in Mr . Bell 's scheme. We do not doubt that i t w i l l f ind a few uses in special circumstances, such as between the bridge of a ship and the engine rooms, but any development of the kind and scale which Mr . Bell so fondly imagines is utterly out of the question.

*The original source of the report is not known to the wri ter .

2 S .A .V .E . JOURNAL 12-62-2

Value Engineering in

Heavy Industry M.S. Mer r i t t , S.A.V.E. Manager, Value Engineering Babcock & Wilcox, Barberton, Ohio

The Value Engineering of a 25 story-high boiler is indeed one of the amazing examples of commercial products V.E. Compare the height of this item with the "man" in the photograph below.

This paper describes how a Value Engineering ap­proach was taken at the Babcock & Wilcox Company's Boiler division, a heavy machinery, low volume manu­facturer. The principal product, power boilers, ranges f r o m the highest capacity, highest pressure public u t i l i ty units down to the small, completely shop as­sembled package type boilers. The large u t i l i ty units range in height f r o m a 15 to a 25 story office building. The smaller size package boilers can be shipped on a single railroad f la t car. Except fo r small package size boiler units, there is relatively l i t t le standardiza­tion of complete installations. Certain components are standardized in a relatively wide range of sizes f o r both industrial and u t i l i ty boilers. However, each installation requires a considerable amount of ta i lo r -made engineering and fabrication of certain com­ponents to meet building or other space limitations, operating conditions and physical plant layout.

LOW VOLUME PRODUCTION

The Boiler division of Babcock & Wilcox certainly cannot be classified as part of a mass production industry in which mill ions, or even hundreds of thou­sands of duplicate parts are produced annually. In the fabrication processes we start with basic raw materials such as plate, tubes, structural shapes, rough forgings, casting, etc. Quality plate f o r the boiler drums ranges f r o m 5/8 in . to 7 in. in thickness, the larger plates as delivered to our shops weigh as much as 50 tons each. These plates are eventually formed into pressure vessels having an inside diameter

of 66 in . Such drums, when finished, can be 100 feet long and may weigh up to 240 tons.

STARTING THE V.E. PROGRAM

After reading many stories and articles about the amazing results

12-62-2 S .A .V .E . JOURNAL 3

achieved through Value Engineering in other indus­t r ies , we decided such a program was certainly worth investigating.

A Value Engineering consulting f i r m was retained to conduct a three week seminar and to assist us in the implementation of the program in the Boiler Division. The consultants gave us a date that was four months away. I t was fortunate that they did not have an earlier date available. Much work had to be done to create the proper atmosphere, select the participants and the type of project which would give a maximum coverage of various fabricated parts; including alloy steel, carbon steel and gray i ron castings, machinery p ro ­cedures, and a host of purchased items. In addition, drawings, shop orders, purchase orders, detail cost estimates and other data had to be prepared in ad­vance so that valuable time would not be lost searching fo r this material during the seminar:.

SELLING MANAGEMENT

Once top management was sold on the need and de­sirabil i ty fo r implementing the V.E. program in the Boiler division, the next step was to sell the next level of management. For this reason, people repre­senting various departments of the division were selected f r o m this secondary level to participate in the f i r s t seminar. Thir ty-s ix section heads and managers f r o m a l l departments of the division par­ticipated on a f u l l time basis and 20 other people f r o m the same management level were involved on a part-t ime basis.

V.E. PERSONNEL

After the in i t ia l seminar, thought and study were given to the organization of a permanent, fu l l - t ime Value Engineering component and to i ts place in the organizational structure of the division. I t was fe l t f r o m the beginning that to be successful this must be a continuing program and that a small core of f ive or six people, completely divorced f r o m their current assignments, should devote a l l their time and effor t to V.E. It was fe l t that these people should not be preselected, but, after the seminar, they would be chosen f r o m the participants on the basis of their demonstrated ability to learn and apply the techniques quickly, their enthusiasm f o r the program, and their experience background. If top management and the second level management were not in i t ia l ly sold on the program, i t can be imagined the resistance that might have been encountered in getting these people fo r a fu l l - t ime assignment. Even with the f u l l support of top management, the selection of this group and assignment was not easy,

V.E. ORGANIZATION STRUCTURE

The next important consideration in setting up a fu l l - t ime Value Engineering department is its position

in the organizational structure. Should i t be a line function of engineering, manufacturing, sales, or marketing, or should i t be a staff function, reporting through channels to the executive office of the division?

The conclusion was that the Value Engineering de­partment, since i t must work through a l l departments and cross functional lines, would operate most ef­fectively as a staff function. Accordingly i t was set up as a section of the Staff Services Section, which reports directly to the chief executive office of the Boiler division. Experience to date indicates that this was the proper decision f o r V.S.

SELECTING A V.E. PROJECT

After i ts organization and implementation the Value Engineering Section selected a project to be reviewed and to exercise the techniques presented in the semi­nar. A Steam Separator which in many respects resembles a 5-gallon mi lk can was selected. These separators are used inside boiler steam drums to separate the steam and water mixture discharged f r o m the furnace wall tubes. At the. present rate of operation, approximately 5,000 separators per year are required. B&W has been manufacturing these separators f o r approximately 25 years, andfromtime to time numerous refinements have been made to improve operations and to reduce manufacturing costs. In less than six weeks' t ime, through the application of Value Engineering techniques, further cost savings have been indicated. Pr imar i ly these cost savings w i l l result by changes in fabrication methods.

IMPLEMENTING V.E. IDEAS

Of course, our Value Engineering Section is i n i ts infancy. Potential cost savings have been indicated through i ts efforts. These potential savings cannot be realized unti l the ideas have been implemented. To implement some of the ideas w i l l require research laboratory testing and fieldtestingtoprovefeasibili ty. Capital expenditures need to be approved to acquire new tooling, and these must follow a depreciation schedule before cost savings can be attributed. As in any program, there are ini t ia l costs to be con­sidered. In evaluating our Value Engineeringprogram we have found that the budget set up fo r the f i r s t year of this new section w i l l be covered by the savings realized f r o m implementation of their ideas.

V.E. TRAINING

While the Value Engineering section w i l l continue to analyze and evaluate projects, their basic assign­ment w i l l be the training of additional people in Value Engineering techniques and philosophy and consultation with the engineering, marketing, and manufacturing

4 S .A .V.E . JOURNAL 12-62-2

departments of new or improved products.

As Value Engineering knowledge, the philosophy of i ts concepts cost knowledge, and cost consciousness are broadened, the potential fo r cost reduction is proportionately increased.

The boiler industry today is highly competitive, and the total productive capacity is nearly double the current demand fo r products. The prof i t margin has been traditionally low fo r the risk- type of business we are in , and like many other industries, the Company finds itself confronted with the problem of economic survival.

AFFECT OF COMPETITION

While we have a l l been faced to some extent with foreign competition in our domestic markets, we must be prepared f o r increased competition as a result of t a r i f f adjustments which can be expected, i f not this year, certainly, within the next few years. In addition, i f we are to expand our foreign markets and meet foreign competition, we must f ind ways and means of increasing productivity of our people and at the same time furnishing equipment that w i l l p ro­vide the required functions reliably and at the least possible cost. This is the f i e ld in which Value Engi­neering can play a most important role.

12-62-2 S .A .V.E . JOURNAL 5

What's Wrong With

Value Engineering

Today? Frederick S. Sherwin, S.A.V.E., Vice-Pres., N.E. Region Manager, V.E. Services Raytheon Co., Lexington, Mass.

The many problems associated with Value Engineering are clearly outlined in this article f r o m the many years of experience of the author.

The main thing wrong with Value Engineering today is people. Not what people may or may not be doing in the f ie ld , but the lack of people working in the f ie ld . Of course, like many other problems, any problem divides itself into a number of subproblems and there are many subproblems associated with Value Engineering—as a profession, as an activity and as a methodology.

KEY VALUE ENGINEERING PROBLEMS

The problems concerned with the methodology and activity, however, are mostly a direct result of a lack of sufficient manpower in the f ie ld . Many metho­dologies have recognized that in order to solve a problem, one must f i r s t procede through a fact finding, orientation, information gathering and problem def i ­nition phase. In these few words about "What's Wrong with Value Engineering?'' I hope to inspire those that are in positions to take action, to plan their programs and activities so that they are directed toward the solution of this key problem.

QUALIFICATION VS GROWTH

For the last 15 years, we have witnessed a growth in interest and activity in the f ie ld of Value Analysis and Value Engineering. This growth has seen an i n ­creasing number of people being exposed to the principles of V.E. , an increasing number of companies which have established V.E. programs and an increas­ing number of people designated as Value Specialist,

Value Analyst, Value En­gineer, Value Coordinator and other names which identify them as pr imar i ly concerned with the f ie ld of Value.

However, while the growth in numbers of companies with value programs and numbers of people being

educated might be considered to be satisfactory, the growth in the numbers of people who are qualified, competent and assigned to carry out Value Engineering activities has been exceedingly small. Both the r e ­quirements and opportunities fo r capable Value Engi­neering Specialists exceeds the supply of available people. For instance, one need only attempt to procure the services of a competent Value Engineer in order to realize this fact. Out of perhaps as many as 10,000 to 20,000 persons who have completed at least 40 hours of Value Engineering training, there is perhaps today less than 1% who have entered into the f ie ld and with moderate success carried out a Value Engi­neering program. An even significantly smaller num­ber are doing work to develop data, knowledge and approaches which w i l l make the methodology of Value Engineering a practical, working tool of every deci­sion-maker, and an accepted professional pursuit.

EVALUATE VALUE ENGINEERING

In terms of the creative problem solving approach, I am now attempting to describe the "mess." Some other factors related to the "mess" are:

1. The profession and industry have failed to provide the incentive to attract competent people in sufficient numbers into the Value Engineering f ie ld .

2. The functional positions which provide the opportunity and the opening fo r a person to work in the f i e ld do not exist in many organi­zations or are established on too low a level to attract the highly competent leader that is necessary to instigate the program, or the specialist to carry out the program,

3. Industry has not recognized value as a f u l l -time responsibility or as one of its prime functions.

4. Value or cost has been a part-time responsi­b i l i ty of so many people and different functions so long that a major or even moderate revision in organizational structure has not been made

6 S .A.V.E . JOURNAL 12-62-2

to accommodate the V.E. function. 5. Each Value Engineering activity springing up

within an industry requires a high level selling program to convince a l l echelons of business management that they should invest in Value Engineering.

6. Although many companies have Value Engi­neering programs, the investment in these programs is usually fa r too l i t t le to accomplish the ultimate potential of an effective program.

7. The combination of talents required to sell top business management on a Value Engineer­ing program, plus the ammunition in the f o r m of concrete evidence and results, are missing in many cases.

8. Without sufficient & capable talent in the f ie ld of Value Engineering, adequate results & documentation cannot be accomplished, and without this documentation, management cannot f u l l y be sold on making the necessary investment.

From these conditions that describe the situation surrounding Value Engineering today, one can see that there are many subproblems associated with the major problems, and i t is even diff icul t to deter­mine the major problem—what is really wrong with Value Engineering?

Probably i t is not directly connected with the tech­niques. These have been tr ied and proven to be ex­tremely effective as cost prevention and cost reduction tools when utilized by competent people. Probably, i t is not concerned with the mechanics of implementing a value program or even with the methods, procedures and functional responsibilities in carrying out this program.

More l ikely the basic problem centers around people, both within Value Engineering and within management. Within Value Engineering the problem is lack of people,

PRESENT SITUATION

Within management the problem is lack of allocating investment in the people who w i l l carry out the value program.

Value Engineering today needs people. To be specific,

i t needs people with a breadth of experience in a l l phases of industry. It needs people who have the technical competence to provide the documented facts, the information to sell the program and to develop the state of the art; people with the sales capabilities to convince business management that the return on investment would just ify the cost; people with the educational capabilities to teach people to teach Value Engineering; people to teach Value Engineering to a l l levels of decision-makers; people who have the management, administrative & technical capabilities to organize and carry out the. Value Engineering program; and people who are dedicated crusaders in a f ie ld that offers tremendous pioneering oppor­tunities and the r ich rewards of personal achievements; and the satisfaction of having played a key part in developing the capability of other people to produce the goods necessary fo r world and national, social and economic progress.

ONE POSSIBLE ANSWER

The people required fo r Value Engineering are avai l­able. Perhaps a l l the requirements w i l l not be em­bodied in one individual. Undoubtedly there w i l l be large variations of capabilities of people in the V.E. f ie ld . But what is important is that the Value Engi­neering profession attract into its ranks individuals who have the interest, desires and dedication to work toward the solution of the value problem. The profes­sion must learn to define its work scope in such terms that those with the capability w i l l be attracted to Value Engineering. It has inherent in the V. E. function sufficient variety and challenge that there should be larger numbers interested in pursuing this type of work.

The Society of Value Engineers w i l l have many areas where i t w i l l need to devote its attention. It w i l l have many people within its membership ranks who w i l l advocate one task or another, but I feel that i f we are to correct the key thing that is wrong with VE today—the lack of people—the solution to this problem should be the number one objective of the society. This w i l l not come easily and there w i l l be many roadblocks to its achievement, but i t w i l l be done and i t w i l l be done when those now in the f ie ld and dedicated to the work recognize the problem and take the steps to solve i t .

MOUSE

Built per Military Specifications.

12-62-2

S.A.V.E. ~ 1963 National Convention

APRIL 25 & 26, 1963 NEW YORK

Details on Inside Back Cover

S.A.V.E JOURNAL

Value Engineering

in

Paperwork Sheldon Simon, S.A.V.E. V.P. , Exec. Assistant to the President Lora l Electronics Corp. Bronx, New York

This art icle pertains to a practical application of Value Engineering to non-equipment items. It is one of the few examples of indirect overhead cost reductions.

I t i s generally assumed that Value Engineering has basic application only to the engineering or manufacture of a product or component i n order to achieve a reliable function at the lowest cost. This i s accomplished through a thorough understanding of the function to be realized.

What is not generally realized Is that the same basic approach can be applied to any task; an analysis of material control, review of material handling, generation of systems and procedures, or appraisal of cler ical paper forms should evoke the same analo­gous reasoning. What is the function to, be performed? What i s the simplest and cheapest way of achieving the result?

PAPERWORK ANALYSIS

This article w i l l illustrate the Value Engineering approach applied to an analysis of the paperwork generated subsequent to the issuance of a purchase order. We shall follow a complete working cycle of f o r m generation that commences with the preparation of the purchase order and continues with the receipt, inspection and disposition of the material, including subsequent issuance of a debit memorandum when required.

FUNCTION ANALYSIS

The f i r s t criteria used in the analysis was to de­termine the function of each i tem and whether each writ ten f o r m was necessary. If the deci­sion was i n the a f f i rma­tive, the next approach was to f ind a way of simplifying or combin­ing those forms that could npt be eliminated.

PURCHASE ORDER

The forms i n this study commenced with the Pur­chase Order (Exhibit I) which was typed on a spi r i t duplicating master and men run through the duplicator.

LORAL PURCHASE ORDER

aEcntomcs cobpobatioi

N? 102699

• tmtamTHMX.

PREPAY SHIPPING CHARGES

CONTRACT NO.

qOVT.APP. MO.

ADDITIONAL PROCESSING —

BILL 1H TRIPLICATE TO: SHIP TO ATT. OF:

PLEASE EMTEfi OUR ORDER FOR THE FOLLOWING - SUBJECT TO THE T «SANDCCHPIT1CKSAJPATTACHED RlDERSfJA, QB. Q C

LORAL PART MO. DESCRIPTION

NO PRICE INCREASE OR ENGINEERING CHANCES TO BE MADE UNLESS APPROVEO BY AUTHORS EDPURCHASIHC P E RSONKELj

DELIVERY SCHEDULE

!E AND APPEARING ON RIDERS Al ..1 TERMS AND COH-

„ „ , . , , „ „ , , „ c „ « ™ , ™ - r „ ™ » , „ . ™^™_..~JIED, AND MADE A MFC T HEREOF. SELLER CERTIFIES THAT NO GOVT OWNED FACJU Tl ESWILL BEUSED M THE PERFORMANCE OF THIS ORDER. IF GOVT FACILITIES WILL BEUSED, CHECK BOX TO 50 INDICATE. •

All ImmJcw m l tarry th# (olio-fog carttBam In oroar *» l» pauad for paywtt, "Sail* nfttmarl thot «Hih tmtpta to lha ptoaWkin of lha orttd** tnvV th* ptrfonaonu of *a xarrtcn CMrad br |W» tnwlc*. It hoi fully «ni>ll«l mi* section (o) ond (Khar prwtrisnt of tht Fair Lobar SnrKbrdi Act of 1936. a* o-

MENTS TO BE MADE BY PARCEL POST WHICH SHOULD BE INSURED FOR FULL VALUE OF MATERIAL SUPPED USING REGISTERED HAIL IF VALUE EXCEEDS S20O.

LORAL ELECTRONICS CORPORATION

MATERIAL MANAGER NOTE: l » a ^ W » ^ ^ l i i fc ? £ f „ _ ^

' ^ ^ ' p m M i HAVEXOS P-IOH t*f*sy inaxfemm ia end noo* pan of rhl» subcontract ot intaraalii ttfotr, wcffen I I naiind prior M iMpnvit from jour plant. Ityi>linll««ngd)> r. If practicable ten (10) dors in ttavonca irmnol, rotitf*- Cowm—nt R*p-

—» renaallr sarvices your plant. On ratdpl of iMi ordar, ptwupiV fvmljh a copy to tho Gwrn—nt RmManlolIva'ahorimolly unrlw yevr |jkinl, of, If rent, to W m H Arwy, Navy, or Air Fort* Inspection oHic* in your locality, tha rapraaantoHwor eint* OUB1 bm loratadoVEoyw should ba notlflad l»™J!of*]y. C«tl fleam of wplienco a* net occapfobla, Cmiflad t«ii narOt ihowino. ocnnl rtiulti of l o l l . tail neons, Insotc-aannKBrdj, vandor oyoliiy.iijio of inspection, or orhar variftobl* siutmmti at quelIf/ —y b»

] Sab|Kt <o ronegtalation in oecordtnea wi* SKiien 17 our n r . . ] PI MM nsto Saetion 21 tares if yog do not hoaa ffipltl of 3aflm*7undtr QMS Ras««=«™ J Sabjacl » our Standard

EXHIBIT-I

RECEIVING REPORT

Upon receipt of the material, a Receiving and I n ­coming Inspection Report (Exhibit II) was generated f r o m the packing slip accompanying the material and a copy of the purchase order against which the sup­pl ier shipped the material. The material, with copies of this f o r m , was then forwarded to the incoming Inspection Department who completed the Quality Control portion of the fo rm .

8 S .A.V.E JOURNAL 12-62-2

LORAL ELECTRONICS CORPORATION RECEIV ING AND

INCOMING INSPECTION R E P O R T No.C49899

BKBVH) FROM

" " • » • OHC • cornet —

OUR P. O NO.

OAK IO COWIETE MSfECIIOH

SOURCE WSPECTEDi Q YES • NO • NOT R£QUHt£D

R E M A R K S

TOTAL

• . • . VENDC* MMTtO NO.

riKCH KTUPJED TO VtMX* DATE ACCOUNTMG DtPT W/PACKMG SUP

DEBIT MEMO

If they decided that the rejected material was to be returned to the supplier, a Debit Memo (Exhibit TV) was prepared util izing as i ts source data the informa­tion contained in the Material Review Report.

EXHIBIT - H

MATERIAL REVIEW REPORT

IE the result bf inspection indicated that the ma­te r ia l was not produced in accordance with the specifications given to the supplier, a Material Review Report (Exhibit US) was generated. This is a spir i t duplicating master f o r m list ing the pertinent data r e ­quired f o r an intelligent disposition of the rejected material. The disposition is the result of a decision of a material review committee.

# B MATERIAL REVIEW REPORT

D m BgnOIICS CMMtfflQI

JtCEIVfctG w o n jruKHMEOKOcitHOL DATE RECEIVED QC [SOURCE KSFtCTIOK IJMNX DATE OF MSFECDON |DT-Cr*QN-B->t |

•COR PACK SLIP MOj QUAK JrECVU jSAMTU SZEjNOLtN SAMPLE BE QTT. ACC j QTY. BtL

PART OESOaPTKN J > . n J n « l | LORAL PMT HO. j j REVtSQH DATE REASON FOR REJECTOt

EMCMEXIMB DOT. EMDOKSCWEHT QACCE»T_ • *CCEPT_

APPROVED ST. ptJI

O RErU**l__ PIECES TO VENDOR TOR Rt?UCEMBtTO**£PM I a WTO* *0« CREDIT. 00 MOT REPLACE.

ONLY MATERIAL COMTRQL SUPERVISORS • VOC RED FOR THESE CATEGORIES Q It

IT LORAL. CHARGE VEMDO*

ENCMEEPiNG DEPT. EMDORSEMEMT REQDV •

fnjRCKASWG DEPT. EMDOBSEHEHT

MM teJVERr OATE OFj SOtATORE OF EUYER

EXHIBIT-IV

REWORK FORM

If the material review committee determined that the material was to be reworked in our own company because i t was urgently needed, Exhibit V, the Rework Advice and Authorization f o r m , was generated in order to authorize company rework of the material and to control the rework costs. Upon completion of the r e -

fwork, the Debit Memo (Exhibit TV) was prepared using the Rework Advise and Authorization f o r m as the source document.

EXHIBIT-JU EXHIBIT-V

12-62-2 S .A .V .E . JOURNAL

COMMON DATA ANALYSIS

The tabular analysis of each of the above forms Indicates that a minimum of 50% of common informa­tion was recopied into each fo rm. Also, in each i n ­stance, unless original documents had been used fo r the source of information, any er ror introduced into the f i r s t f o r m generated was perpetuated into a l l succeeding forms.

Data common to each of the f o r m s P.O. RIIR MRR D M RAA as indicated Ex I Ex I I Ex I I I Ex IV Ex V

Supplier 's name X X X X X Purchase Order No X X X X Contract No. X X Job No. X X X X X Quantity Ordered X Par t No. X X X X X Descr ipt ion X X X X X Unit Pr ice X X Source Inspection X X X Quantity Received X X X RIIR No. X Inspection Results X X X X % of common data per f o r m 75% 75% 75% 58% 50%

EXHIBIT-VI Our study indicated that each function accom­

plished through the use of the forms in the above exhibits was required. Therefore, the f i r s t phase of our work was to reduce the required number of copies of each f o r m since this would directly result in a reduction in f i l i n g time and f i l e space. Phase 2 involved creating a single f o r m which could be used fo r the generation of the in i t ia l Purchase Order with the resultant means of generating a subsequent f o r m whose function would be the same as those found in each of the individual exhibits outlined above. This would effect a 258-1/3% reduction (total of Exhibit n , UJ, IV, V) in common f o r m data generation after the ini t ia l Purchase Order was typed.

ALTERNATE APPROACH - PURCHASE ORDER

The result of the study evolved the following new system and approach:

A Purchase Order comprising a preprinted original and acknowledgement copy, is concurrently typed with a transparent Transafax master f r o m which spir i t duplicator masters are prepared. From one spiri t duplicator master, Purchase Order copies are made. The second spir i t duplicator master is used to dupli­cate a l l the common data into a new combination pre­printed f o r m comprising a l l the functional elements

of receiving, inspection, material review, rework advise and authorization, and debit memorandum issuance.

LORAL

& ] T T

PURCHASE ORDER N8| 00002

* CHANGE NO.l I

T

NOTE:*DENOTES ITEM INDICATES ACTUAL CHANOT~

EXHIBIT-VTI

ALTERNATE APPROACH - COMBINED FIVE (5) FUNCTION FORM

The new combination f o r m is sequentially sec­tioned according to the specific function to be per­formed. It was designed to require either insertion of a number or an "X" in an appropriate box. A l l unnecessary original wri t ing of general information or usual descriptive conclusions are eliminated since they are permanently imprinted on the f o r m and r e ­quire only a check-off notation.

The f o r m accompanies the material through each successive function so that a l l previous processing is known.

EXHIBIT - VTH

10 S .A.V.E . JOURNAL 12-62-2

RECEIVING DEPT. PROCESSING REWORK PROCESSING

Initially, upon receipt of material, the spir i t master is run on the combination f o r m where a l l pertinent data is automatically duplicated f r o m the original Purchase Order typing. This includes a l l the data in the following areas of the f o r m : From, Re, Reship to Loral Plant No., Item, Quantity, Part No., Description, Unit Price and Special Conditions.

The Receiving Department only inserts information relative to the date the receiving section was f i l l ed out; the packing slip number, the carriers name, FB no., and the quantity received.

QUALITY CONTROL PROCESSING

The material and f o r m is next forwarded to the - ' Quality Control Department who perform the inspec­tion work. They enter inspection data in the appropriate section of the fo rm . If the material is found acceptable, the f o r m is used as the move ticket into stock. Should the material be rejected, a Material Review Committee evaluates the inspection results and checks its dispo­sition in the Material Review section on the fo rm. If their decision is to return the material, the f o r m is checked with this notation.

DEBIT MEMO PROCESSING

The f o r m is then sent directly to the Accounting Department where the Debit Memorandum section of the f o r m is completed. Copies of the Debit Memoran­dum are mailed to the customer; one copy accompanies the material as the packing slip.

Should Rework Advise and Authorization be r e ­quired, that section of the f o r m is completed and the material routed fo r action. Provision is made for posting costs, estimated and actual, so that i t serves as the document f r o m which a Debit Memorandum is prepared.

CONCLUSION

The new combination f o r m is in reality a progres­sive f o r m that starts with ini t ial preprinted data. Subsequent information is sequentially added in the normal progress of events f r o m receipt of material through its f inal disposition. Li addition to eliminating a l l duplicated information, the f o r m has been designed fo r maximum utilization of check-off boxes for the majori ty of usual situations. Original wri t ing is r e ­duced to a minimum. This is the result of analyzing specific functions with regards to their immediate outcome in the sequence of successive events. Under­standing the function, the simplest combination f o r m was evolved to eliminate clerical recopying and m i n i ­mize writ ing.

This same approach can be applied wherever an end decision is the result of preceeding events, each of which, requires writ ten conclusions pr ior to a succeeding action. There is no multiple paper opera­tion which is not capable of being evaluated f r o m a Value Engineering vantage point.

ran

EXHIBIT-IX

12-62-2 S .A .V.E . JOURNAL 11

NEW I D E A S IN M A T E R I A L S M A N A G E M E N T

How Aluminum users cut costs with Ryerson ideas

D e c o r a t i v e s i d e p a n e l

i m p r o v e d o n d r i n k m i x e r

A manufacturer of soft drink dispensing machines was using soft temper fluted aluminum sheet .050" thick for decorative purposes. Scratching from han­dling in the shop caused some rej.ects. Ryerson suggested switching to a h ard temper sheet; and rejects by customer's con­trol department virtually dis­appeared. Added dividend: higher strength permitted use of lighter .040" gauge—saving 18% in material cost, 20% in weight. The section is now stronger and has a better finish.

On your next aluminum order

call Ryerson

I m p r o v e d d e s i g n m e a n s

s a v i n g s o f t h o u s a n d s

Cosmodyne is a manufacturer of cryogenic equipment. One of the designs previously included an extruded aluminum heat ex­changer of alloy 6063-T6. Each part was 6' long and weighed 47.94 lbs.

Ryerson and Cosmodyne engineers working together concluded that a change to aluminum alloy 6063-T5 would permit greater design flexibility. Ryerson also made design sug­gestions that resulted in a re­duction of weight. The part now weighs only 13.11 lbs., and costs 72% less than the original part. On the original order the cost would have been $5,850 with the old design. With the new design, the cost is only $1,600, giving a savings to the customer of $4,250.

" L o s t " o r d e r r e s c u e d

- b l a n k e t c o n t r a c t w o n

A metal stamping company was about to lose an order for heat sink sections because the price was too high. A Ryerson man examined the print and learned there was no particular need for the higher strength and fatigue properties of 5052-R32, the aluminum alloy specified. He recommended a change to less costly 3003-H14 alumi­num alloy. After a trial run, the stamping company re­ceived a contract to produce parts at the lower price.

R Y E R S O N JOSEPH T RYERSON & SON. INC . MEMBER OF THE STEEL FAMILY

P L U S V A L U E S I N S T E E L • A L U M I N U M • P L A S T I C S • M A C H I N E R Y

The Specialty

Supplier in

Value Engineering Arthur S. Winthrop, S.A.V.E. Member of Technical Staff Hughes Ai rc ra f t Co. Culver City, California

Sometimes the most obvious commonplace sources of value are overlooked in the scramble fo r sophistication in Value Engineering. This paper is intended as a reminder that specialty suppliers remain a fundamental feature of the V.E. repertory

Value is diff icul t to define. We generally think of value as a matter of comparison with other similar things, where esteem worth plays an unpredictable but i m ­portant part. Value engineers have yet to assign quantities to value, in the way that rel iabi l i ty engi­neers have embraced MTBF and statistical probability. The big breakthrough in value engineering w i l l come when a famil iar figure of meri t , such as MTBF, can be conveniently assigned to a specif ic unit of equipment or a process. Dollars alone are not a sufficient basis for determining value.

Companies spend a good portion of their budget on advertising which is intended to stimulate sales and goodwill. Goodwill has a definite dollar worth on the balance sheet, and i t is the raw material fo r the specialty supplier/customer relationship. Aside f r o m promotional gimmicks, suppliers are a valuable source of Ideas, Information, Opinions and Advice; not to mention the f ree samples that we use to build our engineering models. It is amazing how much free engineering, product improvement ideas, service and cost reduction angles can be gotten just fo r the asking.

WHAT IS A SPECIALTY SUPPLIER?

Almost any business you can think of is a specialty supplier; some just specialize more than others. For the purposes of this paper, we w i l l define a specialty supplier as one which can provide your f i r m with an item or offer a service quicker, better and/or more

economically than your own f i r m can; or, more fami l ia r ly , they are known as vendors and subcontractors.

WHY USE A SPE­CIALTY SUPPLIER?

The basis of good design is utilization of standard

parts, materials and components wherever possible. Within a company, a certain stock of tooling is ac­cumulated through years of doing business. The products fabricated in quantity f r o m this tooling can be considered as standard parts; however, in a much wider sense, a standard part is one which can be found in someone else's catalog, has a complete specification, and which can be bought with a minimum of delay. In large electronic and aero-space f i r m s , i t is common to f ind special spacers and brackets designed and fabricated to close tolerances where a search through the design room catalogs would turn up a satisfactory purchased substitute. Here is where a specialty supplier can save time, money and effort .

I recall a design review where the engineer actually designed two contacts fo r a wireless keyer. A local machine shop charged $2 each for these close tolerance parts. Af ter the meeting we phoned a local contact specialist who quoted a dime apiece, with immediate delivery, fo r an acceptable substitute f r o m his catalog. For the designer i t was easier to design these contacts than to search fo r a standard part; perhaps he never thought of i t , but the cumulative effect on a company or project level is enormous. Designers and engineers must be made aware of the high cost^of'designing and fabricating a piece of ordinary catalog hardware.

On the working level, three different activities of the typical company can take advantage of a l l this f ree information—the engineer, the manufacturing super­visor and the purchasing agent, or Materiel.

THE ENGINEER BENEFITS

The engineer grows professionally f r o m his contacts with suppliers. They contribute to his store of know­ledge and he becomes a more valuable employee. His decisions to make-or-buy are made in the con­ceptual stage of the design. Shall he use a standard cabinet or fabricate a special cabinet; use etched ci rcui t ry or hand wired terminal boards; hog out parts f r o m solid stock or cast them? In a l l these

12-62-2 S .A .V .E . JOURNAL 13

make-or-buy decisions he can be assisted by specialty suppliers—either through their catalogs, publications or by personal contact with representatives. Some specialty suppliers maintain progressive research programs in order to keep ahead of competition, and a l l this industrial research activity is available to the engineer for practically nothing. Technical people tend to get heavily involved in details and overlook the fact that most people are flattered when you ask their opinion or advice. Even i f you don't buy, a technical representative is usually eager to help you with your problem. The engineer must consult with suppliers and read as many of their publications as time permits in order to arr ive at the right decisions.

THE MANUFACTURING SUPERVISOR BENEFITS

When engineering drawings are released for manu­facturing, someone in the plant must decide whether to make-or-buy the individual detail parts and sub­assemblies. Castings and moldings generally go to specialty suppliers, but where extensive welding, anodizing, plating, and etched ci rcui t ry are involved, perhaps the "make internally" decision would involve purchase of additional machinery or equipment, and the temporary hire and training of more men fo r the duration of the production run. Circumstances w i l l often dictate that the best course would be to "buy* or subcontract the job to a specialty supplier.

Additionally, many parts and assemblies that theo­retically could be fabricated internally with existing plant facil i t ies and manpower have to be subcontracted in order to meet tight delivery schedules.

MATERIEL'S VIEWPOINT

The purchasing agent must treat the company's money as he would his own. He stands at the door of the company's safe and every order he places is i m ­portant. Just as the specialty supplier depends on buyers fo r his livelihood, the buyer derives much of his professional growth f r o m his relationship with specialty suppliers. In order fo r the buyer, or any other person in the Materiel organization, toprogress within his own f i r m , he must demonstrate that he understands not only how to analyze a l l purchases fo r the best advantage, but he must also be able to recommend alternatives to engineering and other activities with whom he deals.

A purchasing agent recently questioned the need for expensive gyro-type ball bearings in a low duty cycle application. On his own initiative he reviewed the prints in that subassembly and recommended to the cognizant engineer that oilless sintered bronze bearings, be substituted. The ini t ia l cost of the bronze bearings is a th i rd of the ball-type, but the cost of incoming inspection of the ball bearings to very tight specifications easily doubled the cost again. Of course the designer did not realize that these ball bearings

were inspected fo r use in gyros.

Returning to the example of the contacts on the keyer, the purchasing man had a good opportunity to question the custom designed contacts and suggest to the designer several sources of standard catalog contacts. This is a straightforward,' simple way to demonstrate diligence and initiative to supervision.

HOW DO YOU FIND THE RIGHT SUPPLIER?

Experience is an invaluable asset in an engineering company. Proposals f r o m electronics and aerospace companies play heavily on the experience theme, citing example after example of corporate and individual personnel's experience. Today's complex systems are actually being built in spite of inexperienced personnel. Fortunately, there is a large reserve of experience available inpublicationsandthe supplier industry. It is an education to leaf through a trade magazine. Progressive companies pride themselves on their ability to suggest novel as well as standard uses fo r their products. The advertising ethics of f i r m s dealing in electronic and mechanical parts and equipment are commendably high. Advertising in trade journals is prepared f o r an informed, cr i t ica l group of specialists. Most good designers, engineers, production men or purchasing men make a point of reading journals and magazines devoted to their specialty in order to keep pace with developments. The trade magazines, then, are an important source of information on specialty suppliers.

The engineering departments of most large f i r m s maintain a group of specialists in Materials, Proc­esses and Components. These specialists make up for a possible lack of experience on the part of the design group, as well as.keepingthe line organizations informed of latest developments. They know their suppliers and should be among the f i r s t people to be consulted during the ini t ial concept and design phase.

Working closely with the Materiels, Processes and Components people are the buyers. They should know how to f ind the right supplier to help solve a design or engineering problem. The Value Engineering oriented buyer w i l l usually ask engineering "Why do you want this part, or service"?, "what is its function"? Using this background information, he should be able to recommend a specialty supplier.

A trade show or convention, sponsored by a technical society or trade association, i s a very effective and pleasant means of bringing supplier and customer together. It is a market place where you not only can see and feel and price products of interest, but you can compare and evaluate your competitor's products, just as he is evaluating yours. A trade show serves to refresh your idea generator and re-ihtroduce you to the world of specialty suppliers.

14 S .A .V.E . JOURNAL 12-62-2

Many large engineering companies circulate New Product bulletins. These should be f i l ed away f o r reference, i f not of immediate interest. One bulletin i tem caught our assembly supervisor's eye in the recent past. It was a set of finger tip wrenches f o r a l l the common sizes of nuts used in electronic assembling. These are shaped like thimbles with a hexagonal cut-out on the side corresponding to the place you usually place a nut when starting a screw. This simple, low cost tool cuts assembly time when you consider a l l the fumbled and dropped nuts lost in inaccessible places.

A most common fault of inexperienced designers and engineers is that they roar off to the drawing board to* design a part that can be found in a catalog. The shorter the production run, the more horrible the crime, because tooling, planning, inspection, etc., can not be amortized. The experienced man starts the design with a thorough catalog search. When the designer has designed himself into a corner i t is generally too late to suggest standard purchased parts, especially after tooling is ordered. There is no substitute fo r a good catalog l ibrary and a telephone.

An interesting catalog service which uses mic ro f i lm technique is now available to industry. This is an organized approach at maintaining a complete and current catalog f i l e , a task which is vir tual ly i m ­possible, as we a l l know. This f i l e consists of a series of m i c r o - f i l m cartridges which can be selected by index and scanned on a viewer at any chosen speed. The entire catalog is updated and replaced quarterly. This new catalog technique is a significant step in eliminating the void created by missing and out of date catalogs, and can be an important aid to the technical man in finding the right supplier.

BETTER VALUE FROM IMPROVED SUPPLIER-CUSTOMER RELATIONS

A novel department in the drive towards greater cost effectiveness is the highly organized corporate appeal to the supplier. For example, cost reduction conferences and symposia have been held at Republic Aviation, Loral Electronics, Collins Radio, Autonetics Division of North American, Tapco Group of Thompson Products, Eclipse-Pioneer Division of Bendix, Fort Worth Division of General Dynamics and many other concerns. The conference is generally organized and conducted through the office of the director of Materiel who invites a l l the suppliers and sub-contractors on a specific project to discuss ways and means of cutting the cost of the parts that go into the f inal assembly.

Symposia can take place at several levels. Republic Aviation, a prime contractor has held one for the entire F-105 airplane; on the other hand, Collins Radio, a subcontractor fo r the F-105's Cummunication-Identification-Navigation systems has held a confer­ence f o r suppliers on only f ive relatively small "black boxes". Reviewing Value Engineering techniques, the conference usually lasts f o r one day, and selected speakers, including representatives f r o m the mil i tary , discuss the problems, goals and methods of reducing costs in each of their areas of interest.

The improvement of supplier understanding of cost reduction is not only desirable, i t is imperative be­cause the supplier prospers only when the customer prospers.

THE VALUE ENGINEER AND THE SUPPLIER

Since Value Engineering is an important member of the industrial management team, we would expect Value Engineers to maintain a close liaison with suppliers. This assumption is true, but must be qualified, since there may be problems of overlapping jurisdiction within a company or divisional organi­zation. Value Engineering functions best when i t stimulates, educates, innovates, trains, advises, as­sists, and encourages others, but its chief function is that of a catalyst. Contacts with specialty suppliers are best arranged with the approval of the Materiel organization. The Value Engineer may consider i n ­viting a supplier to give an in-plant demonstration of investment casting or a new type of fasteners. He w i l l accomplish his goal by acting as an inter­mediary, and suggest to Materiel that the supplier be invited by Materiel to demonstrate his product before a group of engineers and designers. Perhaps, the demonstration can take place in the Value Engi­neering office. Working through, and with, Materiel makes for the best human relations.

Value Engineering is built on a foundation of well known principles sometimes referred to as the Twenty Keys to Value. Making Better Use of Specialty Suppliers is one of these twenty foundation stones. No single Key outranks the other in importance. The understanding and appreciation of the role of the specialty supplier is essential to the successful implementation of a Value Engineering program.

Request For Articles - see page 44

12-62-2 S .A .V.E . JOURNAL 15

• s j P R O O F ! o f h o w t h e

s h o w s t h e w a y t o

h i g h e r v a l u e

o f s m a l l p a r t s . . .

S.A.V.E. 1963 National Convention

April 25-26,1963 New York

DETAILS ON INSIDE BACK COVER

Books & Manuals

WANT TO ECONOMIZE?

We can save you as much as

50% on typesetting costs.

Why not get our price fo r repro

copy, printing, binding?

The S.A.V.E. Journal is an

example Of our work. Modern,

speedy methods used in our

plant are eminently suitable

f o r the complete production of

manuals, price l ists, periodi­

cals, and catalogs.

Low Prices Speedy Delivery

K E N T A S S O C I A T E S , I N C .

<L>*^ Offset Printing P^_s

60 EAST llth STREET NEW YORK S. N.Y.

GRamercy 7-3133

16

Shown actual size

Take, for example,

this part which

previously had

been produced 3

different ways . . .

METHOD A.

ASSEMBLY OF 2 SCREW MACHINE

PARTS

Screw Machine Part

Mill Slot

Machined Extrusion

Assembly

4 Production Steps

METHOD B

CONVENTIONAL DIE CAST AND

MACHINED PART

As Cast

Machining for Undercut and

Sizing of Diameters

3 Production Steps

- f - 3 inspections 1 - f - 2 inspections

Now take a look at these comparative figures . . .

the G R C m e t h o d

AUTOMATICALLY DIE CAST

1Production Step

—only one inspection

Purchased Material Cost/M

Scrap Generation

Cost in 100 M

lots of 500 M

Method A Brass $30 30% $70/M $69/M

Method B Zinc Alloy $3.82 5% $30/M $28/M

GRC Method Zinc Alloy $3.64 None $15/M $11.50/M

Check the chart; you'll see clear proof of how GRC's DIE CASTING METHOD offers substantial savings on your small parts. The Gries Method delivers parts of high uniformity, with close tolerances . . . ready for use. Assembly and most other secondary operations are eliminated. Writ; wire, phone NOW for GRC's bulletin

"Small Die Castings Exclusively"; tend prints for quotation.

G R I E S R E P R O D U C E R Worlds Foremost Producer ot Small Die Castings

64 Second St., New Rochelle, New York * NEw Rochelle 3-8600

MAXIMUM SIZES: 2 " long, % oz. NO MINIMUM

An Evolution in Depth

I Los Angeles Chapter Society of American Value Engineers

The following important questions, answers and comments are part of the abstracts f r o m the proceedings of the L.A. Chapter's recent a l l day V. E. symposium. A l l material has been edited f o r publication space limitations and compilation of similar information

LIST OF SUBJECTS AND DISCUSSION LEADERS

A B C D E F

Contractual Aspects of Value Engineering Responsibilities of the Full Time V. E. Value Engineering Cost Target Programs Evaluating the Function Identification and Promotion of V. E. General Questions and Answers

V. M. Best, H. K. Davidson, E. A. Green, W. M . Thompson, R. L. Denig, A. R. Tocco, J. J. Riordan, R. S. Mandelkorn,

STL Norvair/Northrup Lockheed - Calif. Bendix-Pacific Aerojet General STL D.O.D. Sperry Gyroscope

A - Contractual Aspects of Value Engineering

QUESTION - GOVERNMENT ATTITUDES

A number of questions were asked about the mi l i t a ry attitude, requirements, incentives, enforce­ment, implementation, application, administration, measurement, effectivity, maintenance, obligations, and cost-sharing trade-offs of Value Engineering clauses in government contracts. Maj . W. O. Castle-berry, HQ BSD (BSKR) recommended the bracketing of a l l problems into three (3) types of mi l i ta ry con­tracts with consolidated replies to questions.

ANSWERS - CONTRACT CONSIDERATIONS

1. In Cost Plus Fixed Fee (CPFF) type contracts —normally the f i r s t type of contract received in the progression of a Weapon System. Value Engineering has been and probably w i l l continue to be a level of effort type program, in which the contractor w i l l expend effort , and in which the mi l i t a ry presumes the contractor is estab­lishing and adhering to good value engineering principles early in the weapon system program. The mi l i t a ry can judge whether or not the con­tractor is practicing value engineering p r i n ­ciples by reviewing his administrative func­tions. This then would be the best the Government could determine on this type of contract.

2. Cost Plus Incentive Fee (CPIF) contract — incentive type and a cost reimburseable type contract. This is where you get into the value engineering type problems that are mostly confronting the contractor and the Government today.

3. F i r m Fixed Price or Fixed Price Incentive (FFP or FPIF) Contracts. Here we are getting into the most complex value engineering con­tractual problems-cost saving sharings. Gen­eral concurrence f r o m the group -was that contractors do not have problems with CPFF type contracts but that the problems did lie in CPIF, FFP and FPIF type contracts.

Maj . Castleberry, of BSD, indicated that the AF Procurement Circular No. 16, which had been c i r ­culated by the A i r Force as a general guide concern­ing value engineering requirements, has formal ly been incorporated into AFPI this past week. This is a step in the direction of establishing f i r m value engineering requirements f o r A i r Force Contracting Officers and Buyers. The Major indicated that recent MMRB Contracts included sixteen VE clauses peculiar to MMRB.

He further stated that contracts over $100,000.00, but less than $500,000.00, were subject t-o review by the responsible A F Procurement Contracting Officer

12-62-2 S . A . V . E . JOURNAL 17

(PCO) to either include a value engineering clause or the PCO had to submit reasons why he was not including a value engineering clause. The PCO in the latter case is subject to veto by the Procurement Committee which includes Maj . Castleberry and others who are responsible fo r specific areas in the contract, hi the case of a $500,000.00 or larger con­tract, a value engineering clause must be included.

QUESTION - AFPC 16 COST SHARING

"On a f i r m fixed price (FFP) contract, i f a Con­tractor can achieve a cost savings, e.g. $1,000,000.00, through a new manufacturing process and this change in no way effects the performance, or interchange-ability, rel iabil i ty, etc. of the component in question, would the Contractor, in accordance with Section (6) of AFPC 16, have to share this cost savings with the government?"

ANSWER - AFPC 16 COSTS SHARED

Major Castleberry's reply was: "Yes." It was concluded that this type of occurence on a FFP Con­tract would be rare. By the time a Contractor and the Government entered into a FFP Contract, i n the normal chain of events e.g., CPFF, CPIF and then FFP, the Contractor should know his product so well that he would not be faced with this situation.

COMMENT - V.E. AND LETTER CONTRACTS

Major Castleberry stated that he fe l t that perhaps one of the biggest problems concerning Value Engi­neering was the fact that Value Engineering now comes into effect much too late in the present course of events in the acquisition of a weapon system. Hardly any letter contracts that he had reviewed made any re fer ­ence to Value Engineering. Normally the f i r s t mention of Value Engineering is made several years after the weapon system has been under development and has reached the definitive contract stage.

His solution was to implement Value Engineering clauses at the letter contract stage. This would cause the Contractor to make the decision then concerning Value Engineering. BSD recognizes that there is lack of definition at this point in time (letter contract stage) but the entire weapon system is indefinite at this t ime, therefore, Value Engineering shouldn't be given any less consideration than any other facet of the program. Major Castleberry concluded his remarks by stating that he personally was going to insist that every new letter contract crossing his desk have a Value Engi­neering clause incorporated in i t .

COMMENT - DEFINITIVE CONTRACT PROBLEM

Several members of industry then noted that at the letter contract stage, we cannot establish a f i r m cost platform f r o m which we can measure any cost savings. Particular attention was given to production type

contracts which start out as letter contracts, are then definitized and then encounter equipment changes. There is no f i r m cost platform until a definitive con­tract is signed. How do we t r y to initiate a cost savings proposal (VECP) or determine the extent of the Value Engineering savings at the letter contract stage? What incentive does a Contractor have on a letter contract to write a VECP without this f i r m cost platform?

We must press on to definitize contracts at an earlier point in time (and thereby establishing a f i r m cost platform) and i f there are exact value engineering principles at the outset of a weapon system program, the resultant dollar savings to the Government would in itself cause more funds to be available fo r further procurements, etc. Those Contractors who had demon­strated good fai th and sound Value Engineering policies would be in a more favorable position to partake in the expected increased procurement in the follow-on contracts.

COMMENT - U.S. ARMY CONTRACTS

Col. F. K. Whitborn of the U. S. Army Ordnance Distr ict , Los Angeles offered some remarks con­cerning the Army's experience in value engineering. The Army has been giving particular attention to VE/VA lately and has issued a directive that Army Value Engineering Clause 143 was to be incorporated in a l l Army Contracts. He went on to indicate that he had contracts with six f i r m s in the Los Angeles Pro­curement Distr ict who have value engineering clauses incorporated into their contracts.

QUESTION - ARMY V.E. REQUIREMENTS

Mr . V. Best asked Col. Whitborn whether or not the Army required their Contractors to have value engineering organizations, reports, procedures, etc. and did the Army require the Contractors to identify their value engineering organizations as to the types of people that would staff them, and the training they would receive?

ANSWER - CLAUSE 143 DEFINITION

Col. Whitborn replied that although Clause 143 did not require a definition of the Contractor's organiza­tion, etc., the Army had and does send letters to the Contractor's requesting this type of information in connection with the performance of their contracts.

COMMENT - NEED FOR V.E.

Mr . J , Adams of the Boeing Company stated he fe l t the Contractors didn't need value engineering clauses as such. The remainder of the members of Industry fe l t that i f the Government did away with value engineering clauses, i t would hurt the cost effectiveness drive more than help i t . A good t ie-off comment on this subject was: those companies that

18 S .A.V.E . JOURNAL 12-62-2

are in need of business would be pressing fo r value engineering clauses, and those companies that were fat with contracts would probably put up the hardest resistance to value engineering clauses.

COMMENT - V.E .CP. TIME DELAY

Another comment f r o m industry was to revive the argument that the Government couldn't apparently be very interested in value engineering because of their slow reaction time in processing VECP type changes, resulting in loss of incentive and failure to effect the cost savings. BSD countered fo r the Government and stipulated that this was a two-way street. The Con­tractors discount the time they expend in preparing a VECP or f i r m cost proposal, etc. dragging out letter contracts, making i t diff icul t to establish good basic cost platforms, and/or enhance orderly value engi­neering practices.

QUESTION - GOVERNMENT DEFINITION OF V.E. ORGANIZATION

Mr . Best asked contracts about requirements fo r establishing and defining V.E. organizations.

ANSWER - INCLUSION IN PROPOSALS

Major Castleberry stated that the Contractor should provide a checklist of value engineering r e ­quirements, methods of implementing these require­ments in his organization, etc., in the ini t ia l proposal stage of even CPFF type contracts. He also indicated that the inclusion of this information in a proposal would effect a more favorable outlook by the Govern­ment, especially in competitive proposals.

QUESTION - MILITARY WEIGHING OF V.E. CLAUSES IN PROPOSALS

Members of industry then questioned Major Castle­berry as to how much weight the mi l i t a ry was going to put on these value engineering clauses inproposals. He indicated they couldn't prescribe a percentage. Industry countered then that i t wasn't f a i r fo r the Government to expect value engineering consideration in proposals i f the Government didn't advertise their value engineering requirement and the weight factor i t carried in a proposal.

ANSWER - SPECIAL CONSIDERATION POINTS

Major Castleberry indicated as a point of c la r i f ica­tion, that the Government w i l l give special considera­tion to these three main points when considering future contracts i n their source selection process:

1. Contractor's past performance 2.. Value Engineering Clauses 3. Make or buy structure

COMMENT - MILITARY DELAY IN V.E. RESPONSE

The discussion then centered on the problem pre­sented by Industry on the lack of timely response by the Mi l i t a ry in reacting on Value Engineering require­ments. It was suggested that the customer accept a time l im i t of 30 to 60 days after receipt of a proposal f r o m Industry.

QUESTION - BSD EXHIBIT 62-21

Mr . J. Weber then brought up the point that he was famil iar with BSD Exhibit 62-21 which established a Value Engineering Program fo r MINUTE MAN Con­tracts. He wanted to know i f this Exhibit would be applicable to other contracts such as MMRBM.

ANSWER - BSD 62-21 APPLICATIONS

Major Castleberry commented that BSD 62-21 would not apply to MMRBM Contracts but that some separate Exhibit would be created and would apply to a l l MMRBM Contracts.

Major Castleberry listed the following significant points of the meeting:

1. "There seemed to be a general consensus of opinion on the part of the members of industry that in Incentive Type Contracts, that no special VE incentives sharing clauses need be added. They believed that the normal incentive features of this type of contract are sufficient motivation to enforce V.E. principles without having special clauses added.

2. "To be really effective, we need V.E. clauses at the very inception of a weapon system pro­gram in the ini t ial letter contracts.

3. "I t appears as i f in a CPFF Contract, V.E. doesn't pose any particular contractual prob­lems because the Contractor can be paid fo r his expenditure indicated as a level of effort rather than having to measure performance against a cost platform. Contractors should normally accept CPFF value engineering clauses without any problems.

4. Finally, the conclusions reached about incentive features of V.E. , (namely, the Contractor always share in cost savings by incentive arrange­ments,) implies that we appear to have no further road blocks lef t to implementing value engineering.

12-62-2 S .A .V.E . JOURNAL 19

B-Responsibilities of the Full Time Value Engineer

QUESTION - WHY ARE FULL TIME VALUE SPECIALISTS NECESSARY?

ANSWER - PRODUCT COMPLEXITY

The products manufactured today are very complex, and a design engineer needs and demands this help. He concentrates on design applications and does not have the time f o r a V E. function.

ANSWER - MANUFACTURING KNOWLEDGE

Design engineers do not understand (in many cases) machinery or manufacturing operations. On the other hand, we cannot expect a design engineer to know a l l this.

ANSWER - COMPETENT DESIGNERS

The one thing we t ry to rely upon is "competent" designers. With competency we need less specialists.

ANSWER - COSTS

The designer does not have the tools to know where the high cost areas are.

QUESTION - SHOULD THE V.E. BE A F U L L TIME JOB?

ANSWER - COST vs FUNCTION

It depends on the size of your operation. In one plant the activity is gaged around the cost of the opera­tion. You need to specifically analyze the value engi­neer's function to know how much time is needed.

QUESTION - DO WE NEED ONE OR MORE VALUE ENGINEERS IF THE OPERATION CAN SUPPORT IT?

ANSWER - MONITORING vs. AUTHORITY

A - It should be a monitoring function preferably at the layout stage. Monitoring is a continued surveillance of layouts in coordination with the engineer.

B - An objection was made to the monitoring role. The V.E, needs to take action and, i f he needs to, he should go a l l the way to the top,

QUESTION - DOES THE FUNCTION OF A V.E. END IN ENGINEERING?

ANSWER - NO

V.E. departments are equal and have as much to contribute as Engineering. Li fact - few engineers could make their product f r o m their own design.

QUESTION - WHAT ARE THE V.E. RESPONSIBILITIES IN MANUFACTURING AND TOOLING?

ANSWER - COORDINATOR TO A L L DEPARTMENTS

This results in a question of trying to get Pur­chasing in the act to feret out the vendors and eventu­ally get a l l the services at the board, f r o m all de­partments.

The duty of V.E. is to coordinate a l l the activities and specialists, and not stop at design. Tooling is important too. There are times when the design can best be made with a different tool than was planned.

QUESTION - DOES A VALUE SPECIALIST NEED TO BE A TRAINED MAN? OR, QANWESAY ANYONE IS A VALUE SPECIALIST WHO IS ASSIGNED TO THE FUNCTION?

ANSWER - NO

A Value Engineer or Value Analyst must be a trained individual. He must be a graduate so to speak, of some training program, seminar or some recog­nized training program. He must be mature with a good knowledge of his company and its product. He can only become a value specialist after full<;oncen-tration on the f ie ld of Value.

QUESTION - SHOULD A V.E. BE A SPECIALIST OR A GENERAL PRACTITIONER?

ANSWER - BOTH PLUS OTHER ATTRIBUTES

He should definitely be a specialist. The V.E. Administrator could be a general practitioner. The more rounded out knowledge he has the more efficient he may be.

He should be a salesman and an educator.

QUESTION - WHAT ARE THE DUTIES OF V.E. IN PURCHASING?

ANSWER - MULTIPLE DUTIES

In Purchasing the V.E. has the job to challenge Vendors. To get as much information f r o m them be­cause they are experts and Specialists in their respec­tive fields.

C - V . E . Cost Target Programs

Through ini t ial discussion a definition of 'Target Cost' was developed. A target is a level of performance established in the conceptual stage of a product or activity to strive fo r , e.g. a cost level. Further dis­cussion led to individual concepts such as product cost or bid cost being the targets.

20 S .A.V.E . JOURNAL 12-62-2

QUESTIONS - NEED AND IMPLEMENTATION OF TARGETS

The question was raised as to the need fo r Target Costs. Also questions as to when needed; how to es- ' tablish them, where does i t f i t into a company's organizational structure; and how is i t to be tracked? There was a division of thought as to whether Target Cost should be part of V.E. or part of management. Some questioned the relationship of Target Cost to V.E.

ANSWERS - GENERAL NEED FOR TARGETS

Target savings can be obtained in an existing de­sign or more can be obtained in the conceptional stage of a design. Consensus was for Target Cost in either situation.

QUESTION - TARGET BASE LINE

What is the base line for a Target Cost?

ANSWER - TARGETS CAN BE AIDS

A participant commented that "Target Cost Pro­grams'* (by other names) are old time. Concensus of the discussion was that Value Engineering could help management understand and fu l ly use Target Cost, and would provide the designer with a useful tool along with stress analysis, weight analysis, functional requirements, etc. Only a few companies are presently providing this tool to their design personnel.

QUESTIONS - STARTING POINTS

Where does a company start f r o m to establish a Target Cost Program? What data does each company have?

ANSWERS - USE OF DATA WITH ADEQUATE CONTROLS

Costs of material, tooling, planning, engineering, fabrication, processing, assembly, quality control, functional and qualification testing, inventory and G and A. are on hand but not readily available, de­pending upon company policy. Many agreed i t was possible (but few companies do it) fo r a designer to exercise control over these cost items (except G and A, overhead and prof i t ) . The point was also made that V.E. should influence a l l departments and branches to meet a Target Cost and not by virtue of the hard­ware alone but by application of Value Engineering techniques to a l l operations, directives and p ro ­cedures. QUESTION - TARGET MONITORING

When should design be evaluated to know i f the target w i l l be reached?

ANSWER - PERIODIC REVIEW

The concensus seemed to be that the evaluation should be done in preliminary design and periodic reviews afterwards depending upon peculiarities of individual companies. Monitoring or tracking can use several methods, e.g., cost data provided in design review and costs of design alternates by periodic estimates in some f o r m of chart.

SUMMARY

In Summary: A target is a level of performance established in the conceptual stage of a product or activity to strive for , in the VE case, a cost level. The Target Cost must be realistic and attainable with effort , but when reached i t may be lowered. Even with a Target Cost on the overall end product there is need to break i t down to sub-targets for the designer to use as a tool and a goal. With intensive V.E. par­ticipation both sub and overall end product Target Costs are achievable. A method of tracking or monitoring, adaptable to each company, is necessary to permit remedial or corrective action as design progresses to achieve the target before i t is too late.

D - Evaluating the Function

The Chairman introduced the discussion by ob­taining agreement regarding the basic concepts of the subject under discussion. This introduction included identification of the six types of value and the isolation of one of these types — economical — as the only one which may be directly measured in dollars. We f u r ­ther explored economical value and identified its four elements, namely; cost value, exchange value, esteem value, and use value. Following agreement on this point, these were condensed into a single definition fo r value paralleling Lar ry Miles in his book. The group then agreed upon a definition fo r function as i t relates to esteem and use value; i.e., "that quality which makes a product work or sell ."

IDENTIFYING THE FUNCTION

It was then established through discussion that no evaluation of function can be accomplished without f i r s t completing the process of identifying the function and establishing its condition as either pr imary or secondary. The discussion also brought out the i m ­portance of simplifying identification consisting of a verb and a noun, and further recommending that, i f possible, the noun be a measurable parameter. Other conditions for complete identification included asso­ciated factors such as quantity involved and the break­ing down of the item being identified into its smallest increments.

EFFECTIVE METHODS

With regard to the actual evaluation of function, the group agreed that the statistical and the com-

12-62-2 S.A.V.E . JOURNAL 21

parative approaches were the two methods most effective, and particularly indicated the comparison method as being the most desirable and efficient.

EXAMPLE OF FUNCTION

As a means of i l lustrating the relationship of added labor to function, a brief case study of a mouse trap was explored with the group identifying the function, establishing a value by comparison and adding work without adding functional value.

E - Identification and Promotion of V.E.

QUESTION

What subjects comprise a complete Value Engi­neering program?

DISCUSSION

It was apparent early in the discussion that most everyone present has a different idea as to the scope of Value Engineering. Some thought that i t should only be applied in the design phase, others to design and production while s t i l l others said that Value Engineer­ing applied only to hardware analysis. Some believed that paper work studies were not problems fo r Value Engineering but were subjects to be investigated by Industrial Engineers.

V.E.PROGRAM FACTORS

A. Develop a plan - This needed to reach stated objectives, namely to perform V/E on the companies products. Setting up and training an organization to accomplish the stated objec­tives. Providing the means of controlling the V/E operations: schedule; budget; reporting; etc.

B. Cover a l l areas of a company or organization where costs are incurred: Engineering p ro ­jects; Production or manufacturing; Procedures in purchasing, accounting, etc,.

C. Making the Plan, Management go-ahead ( in­cluding finance) and Working the plan.

D. Communications, Staffing and Promotion.

E. Use operation and technical personnel trained in V /E Techniques in areas of: Engineering, Materials, Quality Control, Production, F i ­nance, Education Services, and Tooling.

F. Operational Plan, Training and Promotion, Implementation of V / E Program and Measure­ment of the program.

G. Program a Plan, Organization, Training, and Implementation of Programs.

H. Education, Publicity and Contract requests.

I . Get active support f r o m Top Management-plan a f u l l V/E Program with design manuals and cost handbooks, then establish acceptable steps of application leading to f u l l utilization of V / E . Provide or support V /E training and education of key personnel f i r s t , then a l l affected per­sonnel.

J . Engineering product management and Support areas.

CONCLUSION

From the variety of comments and opinions ex­pressed i t can be stated that those present did not have a common definition of V /E nor did any one have a f u l l realization of what made up a complete V/E Program. In addition i t was brought out that V / E requires proper organizational placement as well as recognition by decision making personnel to be effective.

PROMOTING A V.E. PROGRAM

PROMOTION RECOMMENDATIONS

Advertising Publicity Education Recognition Achievement Awards Reporting Selection of Personnel Dramatize Past Publicize Problem Show Results Contractural Reqs.

DEVELOPING ACTIVITIES

Technical Society Dist. Literature Competition Target Costs Cash Incentives Lower Prof i ts Indoctrination Customer Participation Vendor Participation Prof i t Sharing Cost Manuals

The promotional methods listed above were dis­cussed and the following topics were selected as areas of activity to develop a program.

1. PUBLICITY - i t must reach "middle manage­ment" favorably to obtain their support,

2. EDUCATION - In-plant education directed to ­ward higher supervision and decision making personnel was given top importance. The cus­tomer and vendors should also receive training.

3. ACHIEVEMENT AND INCENTIVE AWARDS -Some f o r m of personal recognition should be given to the individual, i.e., "letter in personnel folder," as well as national recognition to groups and plants.

4. PERSONNEL - Selection is cr i t ica l , and ind iv i ­duals should possess tact as well as experience in many fields.

22 S .A .V.E . JOURNAL 12-62-2

5. PUBLICIZE PROBLEMS - Use means within plants to motivate a l l personnel to suggest and participate in V / E Programs.

6. PUBLICIZE RESULTS - Use newspapers and national publications (V/E Weekly - Purchasing, etc.) fo r favorable publicity.

7. CONTRACTUAL REQUIREMENTS - Wi l l force V/E acceptance in much of industry, w i l l supply dollar incentives and support t ru ly competitive bidding.

8. TECHNICAL SOCIETIES - S.A.V.E. shouldcor-relate with other socieities, exchange speakers and data, thus gain wider acceptance.

9. TARGET COSTS - Properly established and ' used, i t w i l l : Give Design Engineer costs; force Design Engineer to meet costs; provide a means of pointing out areas where V/E is needed; control tools and provide records.

CONCLUSION

Promotion methods employed must be able to motivate "middle management" into accepting and using V.E. , This "middle management" was defined as decision making personnel with responsibilities in one or more of the following: Budget, Task and Schedule.

F - General Questions and Answers

QUESTION - CONVINCING GOV'T AUDITORS

How do you convince the Government audit per­sonnel that value savings have been realized i f they, the Government auditors, have not been trained in value techniques?

ANSWER - DOD PLANS (A.R. TOCCO)

The individuals who audit your books have not been trained to recognize the value engineering dollar. However, there is a ray of hope. We have been i n ­formed that there w i l l be in the future, a DOD Value Engineering Training Program. This is something that is going to cut across, not only the more easily recognizable elements of the DOD, such as Army, Navy, and A i r Force, but also outside of the DOD there w i l l be people in the GAO and in the Renegotia­tion Board brought i n closer to the picture. We hope to have, within the next month or so, an off ic ia l policy statement f r o m the Renegotiation Board which says in effect that value engineering savings w i l l not be challenged in the manner that other profi ts are challenged in renegotiation procedures. They have given verbal approval to this already. Your question, however, is s t i l l valid. How w i l l they know a dollar that's a value engineering dollar when they see one?

This is something that is not going to be resolved overnight. I think the only hope we have is in the fact that a broad training and orientation program is on the threshold of being implemented and that these people w i l l be invited to sit in and learn what the difference is between the value engineering effort and other cost reduction efforts.

QUESTION - DEVELOPING DISCIPLINES

Mr. Riordan, just what do you mean when you make the ominous statement that techniques and dis­cipline must be developed'soon or the management of both Government and industry w i l l become dis­enchanted with value engineering? What recommenda­tions do you make to accomplish this task, what and how should i t be done?

ANSWER - EXPLANATION OF "VALUE ENGINEERING" (J. J, RIORDAN)

I think the quotation is correct that, in my opinion, management w i l l be disenchanted unless the techniques that support the objectives of value engineering are strong enough to do the job that value engineering holds as possible of accomplishment. Now, why do I say this? My answer f o r making this statement is two-fold. F i rs t , my own personal review of the literature of value engineering, what I would cal l some of the propaganda, i f you w i l l forgive that word; secondly, the reactions of people in respectable and highly paid levels of management who ask the same question. Everyone says that they want value engineering: "Tel l me exactly how you do value engineering" ?

Sometimes we end up by somebody saying, " I saw a paper this afternoon list ing certain things in value engineering, one of them was "Creative Thinking". In fact, there is a f i l m equating value engineering with creative thinking. Another f i l m we showed to the DOD last week, t i t led "Value Engineering" which had the sub-title of "Brainstorming." Now, brainstorming is , to my mind, something by which people sit down and f o r a moment concentrate on a problem and hopefully come up with something. But this is not, what the manager wants. What the manager wants is , "Tel l me exactly, procedurally, how you go about this job." So the question he is asking me is what am I asking for .

I am saying that the V.E. objectives outrun the V.E. methodology. The methodology exists in various fields of physics, chemistry, industrial engineering and rel iabi l i ty, but these techniques have to be tailored to f i t the cost objectives of the value engineers. This work has not been done. But i f this work were done, we could go to the managers and say, "Here is an objec­tive and in the area of testing (e.g.) here is the way we do i t . "

QUESTION - STANDARDS

Can you give some examples of the type of stand­ards you feel must be established?

12-62-2 S .A .V.E . JOURNAL 23

ANSWER - DEFINITION AND MEASUREMENT (R.S. MANDELKORN)

One type of standard which I think I made quite clear, as a requirement, is the standardization of definition. A second type of standard which is required certainly to meet Mr . Riordan's cr i ter ia , is some standard fo r measurement. To derive these, Ibelieve, w i l l take serious, concentrated, organized work on the part of people representing the various agencies i n ­volved. I mentioned that the American Standards Asso­ciation should be brought into this picture. I feel I can say f r o m my own communication with management people f r o m other companies is that this is a "gaposis" that bothers them very much. There is no calibration.

QUESTION - INADEQUATE TRAINING METHODS

Mr . Tocco, you implied that present training of methods are inadequate. By this, I assume you mean the workshop approach in conjunction with lectures, etc. What type improvement do you propose?

ANSWER - WORKSHOPS (A. R. TOCCO)

I think that the workshop approach is excellent. Where the programs are deficient, in my opinion, is that we have not developed anything new since the early days of the General Electric main approach to training. This is not to say that what was originally put together was inadequate fo r the purposes intended. I merely say that that training program, that formula, was not put together fo r training value engineers for the defense weapons system acquisition environment, and that we need to add to that body of knowledge some new training techniques and some new material. That is why we are pushing fo r these areas of mathematical models, quantitative assessment of design, an approach to the specifications problem in weapons systems de­sign, the establishment of target costs.

QUESTION - V.E. WEIGHT FACTORS IN PROPOSALS

Wil l the Defense Department stipulate a "weight" factor in the request fo r bids for evaluating the value engineering portion of proposals? Wi l l this be laid down as a "must" requirement fo r the various de­partments? Wi l l the Defense Department stipulate that value engineering shall be considered in evaluating proposals on new business contracts?

ANSWER - V.E. CAPABILITY AS A CONTRACT CONDITION (J. J. RIORDAN)

When I answer this question, actually I 'm answering i t f r o m a Department of Defense point of view, mean­ing fo r the whole Department of Defense. Therefore, what I say may not be true fo r any particular depart­ment or any particular command, as each of these commands or departments have considerable autono­my. It w i l l be a policy of the Department of Defense, as fa r as possible, to put value engineering require­ments into contracts but, in my opinion, I don't think i t would be correct to say, at the present time, that i t w i l l be a requirement for value engineering cap­ability as a condition fo r a contract.

QUESTION - ASPR RESTRICTIONS

Why not make the contractual clauses of ASPR more usable by imposing restrictions on the services, such as a time l im i t fo r reviewing value engineering change proposals? So much time is often lost that the total advantages are lost.

ANSWER - CHANGE PROCEDURE TIME LIMIT (J. J. RIORDAN)

I agree that the contract change procedures is in need of some action, and probably a time l im i t of 30 days or 60 days would be a desirable thing. The whole contract change procedure is under study by the OSD in cooperation with Logistics Management Institute. The problem of simplifying the contract change procedure is definitely under intensive review.

NEW SHRINKABLE PVC TUBING

SIMPLIFIES CABLE JACKETING

Alphlex® FIT-105 i s an easy-to-use irradiated PVC tubing that shrinks 50% upon application of heat (325°F), to provide a snug, yet flexible cable covering. Supplied in expanded form so that cable cores may easily be pulled through. Has all the qualities of the finest extruded plastic jackets. Available at your electronics distributor.

ALPHA WIRE CORPORATION 200 Varick Street, New York 14, N. Y.

VALUE

ENGINEERED

PRODUCT

24 S.A.V.E . JOURNAL 12-62-2

D.O.D. Comments at the S.A.V.E. Los Angeles V. E. Colloqium J.J. Riordan

Office of the Assistant Secretary of Defense (Installations and Logistics)

Mr . Riordan indicates the interests, attitudes, progress and endorsement of value engi­neering in D.O.D. His comments should be of special interest to management personnel in mi l i ta ry products companies.

Two or three years ago, I was under less obliga­tion to be restrained than I am this evening. At that t ime, value engineering had not had the vigorous and off ic ia l sanction of the Department of Defense that i t has today. Since that time, the Secretary of Defense, Mr . McNamara and the Assistant Secretary of De­fense, Mr . Morr i s have taken a personal interest in Value Engineering. Therefore, I think I would be well advised to speak more austerely and with less per­sonal opinion than back in 1960.

DOD INTEREST

It may be well , f i r s t , to say that my purpose in being here is to accept the invitation of Mr . Rensen and this organization to l i tera l ly participate in a critique, and I accept the definition of "critique" as a constructive analysis of a problem or group of problems. Secondly, I am here to indicate that the Department of Defense is seriously and aggressively interested in Value Engineering and to advise you on the current status of Value Engineering in the De­partment of Defense.

ASPR CONTRACTS

The environment in which value engineering exists is suggested by a few recent developments - even though these may not pertain specifically and ex­clusively to value engineering. The f i r s t of these is an important revision of "ASPR" pertaining to con­tracting. (Incidentally, I don't want to indulge in

Pentagon verbiage. Nonetheless, in meet­ings of this kind, i t is at times necessary to refer specifically to policies and documents with their proper iden­tifications.) The word "ASPR" means Armed Services Procurement Regulations. These are

the regulations that guide Government contracting of­fices in their relations with business. Revision4, Sec­tion 3 of ASPR is really an historic statement. The Department of Defense said therein that profi ts in i n ­dustry should be related to performances. It fur ther set up a hierarchy of preferred contractual arrange­ments. The most desirable contract is the f ixed-price type. The next most desirable type is of the incentive variety.

Those of you that are acquainted with the situation in the Department of Defense know that since the pub­lication of that ASPR provision there has been a per­ceptible change in contracting. More and more con­tracts are being written in terms other than the cost-plus-fixed-fee type. In the light of this fact, value engineering takes on increasing import. Pressure is definitely "on" to procure things less expensively without compromising rel iabi l i ty of quality. It would appear to me, therefore, that value engineering w i l l f ind acceptance more extensively in industry because i t has potential for making industry responsive to a more competitive and incentive-oriented kind of Government-industry relationship.

SECRETARY McNAMARA'S REPORT TO THE PRESIDENT

Another background consideration pertinent to this discussion is the report of Mr, McNamara to the President on 5 July 1962. This was a report of the progress of the Department of Defense during the previous six months. It was widely publicized. You w i l l recall that Mr . McNamara held out to the Pres i ­dent the possibility of reducing the defense costs by 3 bi l l ion dollars in 4 or 5 years.

$100 MILLION VIA E.E., ETC,

With respect to value engineering - no minor part to this report - Mr . McNamara stated that the De­partment of Defense would soon be reducing defense costs by 100 mi l l ion dollars a year by using value engineering techniques, disciplines and concepts.

12-62-2 S .A .V.E . JOURNAL 25

A th i rd background consideration - getting away f r o m the Department of Defense - is the President's radio trade message of last A p r i l . This was in con­nection with the President's request to Congress fo r the authority to adjust t a r i f f s to meet the new situation' in Europe regarding the Common Market. In that message, the President did say that he was confident that the U.S. could meet competition and could do this by reducing costs through more economical operations.

ROLES OF V.E.

In the technical area, value engineering has made considerable progress in the last two or three years. But i t would be misleading to claim that value engi­neering has adequately created or made available to industry and to Government the tools fo r achieving the objectives f o r which value engineering exists.

INADEQUATE V.E. CAPABILITY

It seems to me that, unless value engineering very quickly develops fundamental discipline and techniques there is going to be unhappy recrimination later on. We are dealing with a very serious situation because of the urgent need fo r cost reduction both in industry and in the Department of Defense, At present, value engineering does not have an adequate capability, technologically, administratively and conceptually, of f u l f i l l i n g the objectives that i t had set fo r itself. Con­sidering comments I made two or three years ago, my opinion tonight is that in the intervening years since I960,,progress in value engineering has been substantial. But management is not concerned with how much progress has been made. Management is concerned with what capability we have today. May I ask you, does value engineering have the capability of f u l f i l l i n g or satisfying the objectives, the hopes that i t is holding out fo r itself, to industry and the Depart­ment of Defense? I don't think so. Methodology is either inadequate or inadequately articulated.

Now, in the economic realm, let us look at value engineering. Incidentally, the economic, technical and social are itermixed. I am only using these categories fo r a neat and orderly discussion of a problem.

ECONOMIC ASPECTS OF V.E.

When I speak of the role of value engineering on the economic scene, what I 'm confronting here is the role of value engineering in motivating more eco­nomical production or, in the case of the Department of Defense, making possible more economical p ro ­curement. In the ordinary competitive environment, we would expect that value engineering would be adopted eagerly and applied enthusiastically. After a l l , competition has to do with making things as i n ­expensively as possible i n order to realize a reason­able prof i t on sales. Whether or not value engineering has been adopted eagerly in the civilian industry I cannot say. I would leave that question toother people

who are more informed. But in the Department of Defense that is , as reflected in the patterns of De­partment of Defense - industry relationships, value engineering has not developed techniques that motivate industry to cost reduction. We have not, for example, developed patterns of sharing between Government and industry so that i f industry moves ahead and does a good value engineering job i t w i l l be rewarded. The degree to which "sharing" is possible is determined by many considerations - one of which is methodology. It 's also conditioned by the broader environment of incentive contracting and the degree to which we can technically draft incentive contracts. But fo r purposes of this critique, I do want to say that I don't think, as of now, we have developed approaches by which indus­t r y can be motivated to move ahead aggressively in value engineering. In other words, VE is not supported by a strong conceptual structure of economic theory.

V.E. STATUS IN DOD

Now let 's look at where we stand in Value Engi­neering in the DOD. The Department of Defense has drafted provisions for inclusion in ASPR fo r sharing cost reductions with industry. This is a very involved subject, as you know. It is impractical to discuss a subject like this except in terms of the different kinds of contracts. Broadly, the Department of Defense is considering the idea that value engineering w i l l be supported or encouraged in two ways. One, by straight funding. In certain types of contracts, fo r example, cost-plus-fixed-fee contracts, there may be a funding arrangement - a certain amount of money set aside f o r a straight value engineering effort. The other type of arrangement w i l l be fo r sharing specific cost r e ­ductions on each of the various types of contracts. What the percentage of sharing w i l l be, I can't say. But very l ikely sharing w i l l be on a 50-50 basis. But i t may go up to as high as 75 percent. This is at least the present thinking. Later on, when we get questions f r o m the f loor , we might pursue this more exhaustively.

DOD F I LM AND MANUAL ON V.E.

The DOD is currently developing a f i l m to explain VE objectives and methods. This is being accomplished by the A i r Force fo r the Department of Defense, Most important, a manual is under preparation under the direction of the Bureau of Ships and in cooperation with the Army, A i r Force and Defense Supply Agency. Hopefully, this manual w i l l provide some of the needed substructure of economic theory and engineering meth­odology that appear to the essential prerequisites f o r the continued progress of VE.

I think i t would be well fo r me to terminate my comments at this point and hope that in the "give and take" later on, that specific topics can be developed more adequately. We can look ahead with confidence to progress provided the strong hopes held out f o r VE are matched with an equally robust structure of concepts and techniques.

26 S .A .V .E . JOURNAL 12-62-2

Commercial Products V. E. This issue of the Journal contains a comparison between Mi l i t a ry and Commercial

Products Value Engineering. The Mi l i t a ry counterpart of this article appears in the next section. Topics are:

MOTIVATION ORIGINATING THE PROGRAM PRESENTING & SELLING THE PROGRAM IMPLEMENTATION OF THE PROGRAM

MOTIVATION

The basic reason fo r a Value Engineering program in a commercial company is simple and uncomplicated - money. Whatever gains are made through the use of Value Engineering techniques accrue directly to the company. The basic techniques f o r reducing costs can reflect themselves in a number of ways:

a) Increased prof i t .

b) Lower selling price to meet domestic or foreign competition, or to increase volume and thereby provide a broader prof i t base.

c) Product improvement without cost increase f o r same reasons as (b) above.

These relatively simple statements do not, of course, t e l l the complete story, but they do give the key to why a company would, or should, install a VE program.

ORIGINATING THE PROGRAM

Usually a company looks fo r aid, or is counseled to look fo r aid f r o m VE i f i t is in an unfavorable posi­tion on any of the areas mentioned above. Here are some typical ways a company makes its f i r s t contact which leads i t to consider VE: Advice of Management Consultants, Cost Accountants, Interlocking Directors; personnel coming f r o m other companies; technical societies; publications; copying successful competi­tors; suggestions f r o m staff or middle management; employees; information f r o m vendors; help and pres­sure f r o m customers.

The means of bringing about the ini t ia l contact are unimportant, but i t should be borne in mind that a l ­most every one of these reflects a basic need within the company to attack existing problem areas. Once the existing problem area is recognized, the best means of attack follow quite logically. Since we are p r imar i ly concerned with the role of the Value Engi­neer and how he might best help get the program

COMPANY-WIDE PARTICIPATION HUMAN RELATIONS MEASUREMENTS OF EFFECTIVENESS LIST OF COMPANIES WITH V.E.

started, a few pointers are in order: Fi rs t , make sure that you know and understand f u l l y what the problem is i n your company. Second, be sure that you build your solution around the problem. If the company is enjoying good business on its existing product line but not making the right kind of prof i t , concentrate on attacking costs. On the other hand, i f the company is losing its market because a competitor's product is functionally superior, concentrate on improving func­tion. Usually, you w i l l f ind a mixture of the two, plus a need to reorganize and reorient the company's prod­uct line toward a more profitable overall operation.

PRESENTING AND SELLING THE PROGRAM

Assuming that you have now decided what i t is that the company needs, you now have to f ind the right audience and the right method of presentation. This must be the man who is responsible f o r seeing to i t that the company makes a profi t . His t i t le is un­important, but he is generally a line rather than a staff officer. He may be called Owner, President, Division Manager, General Manager, or Executive Vice President. His function is what counts and pre­sumably, we know how to evaluate function. Now that we have found our audience, we have to decide on how to present our material and what, we hope to accomplish by this presentation. The mechanics of the presentation must be tailored around the type of audience, the nature of the material you have, and your own capabilities. Don't t r y to make a dramatic personal appeal i f you are not the kind of person who can bring this off successfully. Don't t r y to present a wealth of dry statistics to a manager who is known to have no patience f o r this type of information. Here are some typical ways of dealing with the mechanisms of the presentation:

a) One man demonstration — reinforced by charts and slides.

b) Group demonstration.

c) Bring in known outside experts who can speak f r o m experience.

12-62-2 S .A .V .E . JOURNAL 27

d) Arrange f o r a visi t to a company that has a successful VE program.

Be sure you are well prepared, and include in your presentation the anticipated costs as well as the po­tential gains of the program.

After convincing your audience of the desirability of the program and i ts potential gain to the company, then present a solid proposal f o r implementation i n ­cluding a budget and a schedule fo r monitoring per­formance within the company. I t is most important that VE report directly to a high level of management so that i t w i l l be divorced f r o m inter-departmental r i ­valries. It is also important that VE be treated as a staff function rather than a line function, so that i t can operate as an advisory service to a l l affected depart­ments. Having now, f u l l management blessings f o r our program, we are now ready f o r the next step.

IMPLEMENTATION OF THE PROGRAM

Depending on the nature and scope of the program, we now have to consider the question of personnel. This may range f r o m a one man "group'', to a staff involving several hundred people. We have the choice of selecting in-plant personnel and training them f o r the specific job, or hir ing trained outsiders. Both approaches have advantages and disadvantages. Since we are starting something new and radical, some of our in-plant people may give us the kind of stumbling blocks we are t rying to avoid. They may also have existing departmental loyalties and/or animosities which w i l l interfere with good relations a l l around. The outsider, of course, w i l l be accused of under­mining existing company personnel, and often treated with scorn. The ideal situation would seem to be a mixture of the two. With notable exceptions, there seems to be a strong trend in favor of training r e ­latively young people with good academic backgrounds and f a i r l y broad experience. T r y to get the engineering oriented buyer, the cost oriented engineer, and the open minded enthusiast who is not so enthusiastic that he becomes tactless. There are several means of training available, depending upon your budget, i n ­cluding the use of outside consultants, internal and outside seminars and guidance f r o m S.A.V.E. Inaddi-tion to training your own staff, you w i l l have to con­sider informing, training, or indoctrinating the rest of the organization with just what you are trying to accomplish, both f r o m the point of view of getting their help or t rying to forestal l the inevitable resis­tance f r o m some quarters.

COMPANY-WIDE PARTICIPATION

You are going to have to work with, and through, just about every channel of command in the company so you w i l l need to establish. good relations in a l l Departments. F i rs t of .a l l , i n order to do an intelligent job on anything you undertake, you are going to need

true costs. This is often very dif f icul t . Many com­panies have arbi t rary and unrealistic methods of cost accounting, which are the result of either management preferences or outmoded practices. One well known national company uses the same average cost per pound f o r a l l items of steel, starting with structural f o r machine elements at a few cents a pound, a l l the way to specialty steels in odd sizes and shapes at dollars per pound. When you are given a report on cost f o r a specific i tem or product, be sure that the costs are real and not based on some arbi t rary formula. Check up on the factors used in arr iv ing at costs. What is the overhead percent on this product, and how does i t compare with overhead percent on other products? How does this compare with what you know the practice to be in other companies? If i t is radically different, f ind out why. You may think that this w i l l get you in trouble with the Cost Accounting Dept. Chances are that they are keenly aware of some of the anachronisms, and w i l l bend over backwards to help you because you w i l l be helping them in their battle f o r more realistic costings.

HUMAN RELATIONS

Sufficient material has been published on human failings, resistance to change, and a l l the other stumb­ling blocks which are i n the path of the Value Engineer. Suffice to say that diplomacy is one of the key a t t r i ­butes of your program.

MEASUREMENTS OF EFFECTIVENESS

In spite of a l l our problems, we have now reached a point where we know we have accomplished some­thing fo r the company; that is to say, we know but we have to prove i t i n order to just i fy continuing the p ro ­gram. The most effective method is a periodic report to management. Several parameters are applicable, and should be used:

a) Savings in relation to VE budget. This should be a quotient: so many dollars saved over so many dollars spent.

b) Percent savings realized on projects completed.

c) Total dollar saving per annum, both f o r ind iv i ­dual projects, and the company as a whole.

In addition, you w i l l want to report on intangibles, or things that are diff icul t to measure directly; such as, product improvement, service improvements, sales increases, etc.

C.L. CHASE T.H. REDMAN

28 S .A .V.E . JOURNAL 12-62-2

C O M M E R C I A L P R O D U C

ACME ELECTRIC CORP. AIRTEMP DIV., CHRYSLER CORP. ALSO PRODUCTS, INC. ALLIS CHALMERS CO.

•AMERICAN LAUNDRY & MACHINE AMERICAN SEALANTS CO. THE BABCOCK & WILCOX CO. BENDIX RADIO DIV.

•BRYANT MFG. CO. CARRIER CORP.

*COOPER-BESSMEN CORP. CROSBY VALVE & GAGE CO. DAY & NIGHT MFG. CO.

•DELCO REMY DIEHL MFG. CO.

•DUNCAN ELECTRIC E.L DUPONT DeNEMOURS & CO.

•ELECTRO MOTIVE •ELLIOTT CO. EMERSON ELECTRIC MFG. CO.

•FORD MOTORS •FREUHAUF TRAILER GENERAL ELECTRIC CO. GENERAL MOTORS CORP. GENERAL RADIO CO.

•THE GLEASON WORKS GREGORY IND., INC,

•GRAFLEX, INC. GRIES REPRODUCER CORP,

•HAMILTON WATCH •HENRY PRATT CO. •HYSTER CO.

I .B .M. •INGERSOLL RAND

ITT FEDERAL LABS, LINE MATERIAL IND. LIQUIDOME TER CORP.

S C O M P A N I E S W I T H V . E .

•MARLIN ROCKWELL • M . B . ELECTRONICS •McGRAW EDISON

METALS & CONTROLS, INC. M I L L POLISHING CORP. MINNEAPOLIS-HONEYWELL REGULATOR CO.

•MOTOROLA NATIONAL CASH REGISTER CO.

•NATIONAL ELECTRIC COIL •OVERHEAD DOOR CORP.

OWENS-CORNING FIBERGLAS CORP. •OZALID

THE PFAUDLER CO. PIONEER ENG. & MFG. CO.

*RCA ROBERTSHAW-FULTON CONTROLS RYERSON STELL & ALUM. SINGER MFG. SPAULDING FIBER CO., INC.

•SMITH & LOVELESS DIV. SOUTHERN CALIF. GAS CO. THE STANLEY WORKS SYLVANIA ELECTRIC SYSTEMS, INC. TYPEMASTER INC. WALTER KIDDE & CO. WESTERN GEAR CORP. WESTINGHOUSE AIR BRAKE CO. WESTINGHOUSE ELEC. CORP.

•WHITE ROGERS •WORTHINGTON

WHIRLPOOL CORP. UNION ASBESTOR & RUBBER CO. UNION SWITCH & SIGNAL US ELEC. MOTORS, INC. US RUBBER CO.

•Companies without S.A.V.E. Members.

S O C I E T Y O F A M E R I C A N V A L U E E N G I N E E R S

OBJECTIVES

To create, stimulate and promote interest in the advancement and diffusion of knowledge of value engineering and value analysis, and its application to the research, design, development,- test evalua­tion, engineering, production, purchasing and distribution phases in government, private industry and commerce.

For membership information please write to:

W.G. McMURRAY S.A.V.E. NATIONAL MEMBERSHIP CHAIRMAN

c/o MILITARY ELECTRONICS DIVISION MOTOROLA, WESTERN CENTER

SCOTTSDALE, ARIZONA

OR

The nearest S.A.V.E. Chapter listed on Pages 37-38 in this Journal issue.

12-62-2 S .A .V.E . JOURNAL 29

Military Products V. I

This issue of the Journal contains a comparison between mi l i t a ry and commercial products value engineering. The commercial counterpart of this article appears in the pre­ceding section. Topics are:

MOTIVATION ORIGINATING THE PROGRAM PRESENTING & SELLING THE PROGRAM IMPLEMENTATION OF THE PROGRAM

MOTIVATION

In the last decade the mi l i t a ry products f i e ld has experienced a period of tremendous change in both technology and corporate growth. This growth is the direct result of the need fo r more complex weapons systems and improved performance; coupled with the need f o r greater rel iabi l i ty, quality, maintainability and reduced f low time f r o m R&D phase to the produc­tion of operational hardware.

During this same time period defense expenditures have been mounting to unprecedented heights, creating a national concern fo r economy and closer govern­mental control in the area of defense expenditures.

Today the "cost dimension" is taking i ts r ightful place in mi l i t a ry contracting along with the multitude of other specifications and requirements.

Value Engineering is emerging as another dis­cipline thrust upon the mi l i t a ry contractor at a time when the company organization charts are not quite over the impact of such requirements as Reliability, Quality Assurance, and Operations Research. In addi­tion, every contractor in the mi l i t a ry products f i e ld has assumed that cost prevention and cost reduction were being adequately covered by existing techniques such as: Product Improvement, Methods Improvement, Tool Improvement, Producibility, Conservation, etc., and therefore, f ind i t dif f icul t to believe that Value Engineering is not in essence a redundant requirement which w i l l have the affect of adding more cost to mi l i t a ry systems and further complications organiza­tion-wise.

It i s , therefore, necessary to provide strongmedi-cine i n the f o r m of "incentives" to motivate the m i l i ­tary contractor to use Value Engineering, and thereby prove conclusively that V.E. is by f a r the most effec­tive tool available to produce weapons systems of proven value.

V.E. meets the demand fo r a well defined set of management disciplines which can be introduced at the conceptual stage of a weapons system and con-

COMPANY WIDE PARTICIPATION HUMAN RELATIONS MEASUREMENTS OF EFFECTIVENESS LIST OF COMPANIES WITH V.E.

tinually applied throughout development, design, test, production, and f ie ld maintenance phases in the l i fe cycle of a product.

Without the "profi t motive" which is the underlying principle behind our past economic growth, as well as that of the future, V.E. could very well stagnate, or be reduced to the status of a "l ip service" device to appease the mi l i t a ry . The D.O.D. is well aware of the need fo r V.E. incentives and is working constructively to establish such incentives to harness the prof i t motive.

The mi l i t a ry contractor is also motivated to reduce costs and thereby provide our national security with "More Defense fo r Less Dollars"; as such they are obligated to utilize any new management techniques which are introduced; however, the extent of the utilization of a technique is s t i l l dependent upon the individual contractor and the management who are assigned that functional and administrative responsi­bi l i ty .

Another motive which is gaining support f o r V.E. in the mi l i t a ry products f i e ld lies in the mounting pressure of competition; both f r o m this country and f r o m abroad. Managements are beginning to recognize that although a technological revolution exists, there is currently more capacity and capability i n the Aerospace industry than there is a demand f o r i t . Each company is competing with others who offer products and services that appear substantially alike in performance. Small differences in price, services, and in the customers image of you can make the d i f f e r ­ence. A company that has an established reputation f o r true cost effectiveness is bound to have a strong i n ­tangible factor on the plus side of his proposals.

The role played by Value Engineering in improving a company's competitive position has been proven by a number of large corporations who have introduced V.E. programs in a few of their autonomous divisions and have set up controls to measure the impact i n terms of cost reduction, prof i t improvement and the ability to obtain new business. These results could then be compared against similar cr i ter ia in other

30 S .A.V.E . JOURNAL 12-62-2

divisions within the corporation.

ORIGINATING A V.E. PROGRAM

In the mi l i t a ry products f i e ld the responsibility fo r originating a Value program rests with the company management. The basic problem area is one of recognition and association with the basic concept and effectiveness of Value Engineering as a manage­ment technique and subsequently to associate the technique with specific application towards ones own company and product line.

When we consider the amount of publicity that has been given to V.E. in recent years and the results which have been obtained and documented by the companies using V.E. techniques, we cannot help but wonder why V.E. has not gained wider acceptance. The answer basically lies i n the refusal of manage­ment people to fu l ly understand V.E. and to recognize that the need exists in their company as well . Manage­ment finds i t easier to shrug off V.E. and convince themselves and other members of their staff that V.E. does not have application within their company, or to their product line.

The question of whom to approach to gain accept­ance fo r a V.E. program is simply, top management. They are directly concerned with the ability of the company to produce systems of true value and a l l of the objectives of an effective V.E. program, which include: cost reduction, increased prof i t s , improved rel iabi l i ty and quality, and f inal ly the enhancement of a company's ability to compete effectively in world markets.

As to the question of "who is responsible fo r the preparation of such a proposal'', let me say that experi­ence has indicated that management people in such departments as Purchasing, Engineering, Sales, Manu­facturing Engineering, and Industrial Engineering, have a l l been effective in this area. There is no one individual within a company to pin down to this r e ­sponsibility, p r ima r i l y because V.E. is a discipline that has widespread application within a company and secondly, because there is rarely a "focal point* within a company for cost reduction, which is one of the pr imary goals of a V.E. program.

PRESENTING & SELLING THE PROGRAM

This phase in the introduction of a Value Program is perhaps the most cr i t ica l since i t requires a good knowledge of V.E. techniques and application, as well as a sales approach which indicates insight into the close relationship which must exist with a l l the r e ­lated functional areas within a company. Unless hu­man relations are carefully exercised during this phase, the V.E. program is doomed to fai lure f r o m the very beginning.

Using the "team approach" in the preparation and selling of a V.E. program w i l l help overcome many of the roadblocks which would exist i f one segment of the organization were to attempt to dictate a program without the knowledge of the other managers who w i l l be called upon to support the program on a daily basis.

The ini t ia l program approach must be directed to: Demonstrate the effectiveness of the V.E. discipline; Gain the support of a l l of management; Show the bene­f i t s which can be derived by use of the team approach; and finally; Help to point up the advisability of pro­viding a budget fo r the V.E. effort . The seminar approach is an excellent vehicle f o r the introduction of V.E. because i t provides management the oppor­tunity to evaluate the V.E. approach f i r s t hand in specific application to their own product line.

Another invaluable aid in selling your program is to obtain data regarding V.E. activity in companies working in your f ie ld . Perhaps your competition can effectively help you sell your program. In this area societies such as: S.A.V.E., E.LA. , N.A.P.A., etc. have periodically conducted surveys and published their findings to help promote the adoption of V.E. on a nationwide basis.

IMPLEMENTATION OF THE COMPANY PROGRAM

Regardless of the method used in getting a Value program underway, the mi l i t a ry contractor must target his program objectives to meet the requirements as specified by the customer. The basic objectives of a mi l i t a ry products V.E. program is to focus a propor­tionate amount of attention toward the simplification of design and the elimination of features which burden an items cost, but are not functionally necessary. To meet this objective requires the integration of V.E. in a l l functional areas within a company beginning with a major effor t within the engineering organization.

Educating the middle management people in the techniques, aims and objectives of V.E. i s ' a must. These are the management people who w i l l be called upon to support the program manpower-wise and ultimately to "buy off" Value Proposals effecting their specific area of responsibility. Even though your program has top management backing, program effectiveness w i l l re ly heavily on the proper applica­tion of human relations in working with the middle management.

In the area of selecting the personnel wno w i l l be working either f u l l time or part time in the V.E. f ie ld , care must be exercised to select high caliber per­sonnel. The nucleus of the various groups basically should include people f r o m Engineering, Manufacturing Engineering, and Tooling, Purchasing and Industrial Engineering. Other functional areas in the company

12-62-2 S .A .V.E . JOURNAL 31

should be trained to assist V.E. personnel on an "as required" basis.

The use of high caliber personnel in the V.E. f i e ld tends to keep the size of the group down. Such ind iv i ­duals working in the Value f i e ld stimulate greater efforts and achievements f r o m a l l the operating de­partments through their continual emphasis on the importance of lower cost, the promotion of Value techniques, and by demonstrating Value through ex­amples and case histories.

Br ie f ly , the personnel selected f o r V.E. work should possess the following qualifications: be tech­nically competent; be creative; be a self starter; be aggressive but not obnoxious, be diplomatic; be a good salesman; be a good listener, and evaluate in the ob­jective rather than the subjective.

The mi l i t a ry contractor is required to provide V.E. training fo r representatives f r o m a l l the areas within the company whose decisions affect the overall cost of the weapons system. The problems existing in this area are br ief ly; that of selling the seminar ap­proach; obtaining budget approval; finding competent instructors; selecting "key" personnel fo r training, and f inal ly , scheduling the seminar without widespread disruption to the organization. V E. training material developed to date has proven to be extremely effective in demonstrating V.E. techniques. For the mi l i t a ry contractor special emphasis must be placed on D.O.D. V.E. Spec. Requirements, Incentive Contracts, V.E. Change Proposals, and Periodic Progress and Status Reports.

The use of professional assistance has been found to be very effective in overcoming the problem areas I have pointed out by applying one of the twenty keys to Value, namely to "Obtain Information f r o m the Best Sources".

COMPANY-WIDE PARTICIPATION

V.E. is a total company effort , and as such, r e ­quires careful integration corporate-wise. This prob­lem area can be overcome by the establishment of: Organization Charts Showing Company V.E. Effort ; Operating Flow Plans and Procedures; Corporate Policies Relative to the Goals of the Company-wide Program, and to Establish Basic Ground Rules Which Wi l l A id in Making Decisions Affecting Costs.

AH these aids w i l l enhance the area of company communication and provide a focal point within the company fo r cost reduction activity.

One of the most vital links in an operating V.E. program is that of Economic Analysis, without this competence we would not be able to: "Evaluate the Function"; Establish Cost Targets to Assist the Engi­neer; Evaluate Alternative Designs, Processes, Plans,

Policies or Procedures. In effect, we could not do Value Engineering.

The problem of obtaining reliable cost information should be given special emphasis to provide personnel doing Value work with readily available costs and timely cost evaluations. Management can greatly aid in this area by the establishment of the necessary "ground rules" regarding such parameters as:

1. Production quantities and Projected Quantities 2. Policies concerning use of Forgings, Castings,

Weldments, etc.

3. Policies regarding Weight Increases or De­creases.

4. Etc.

Effective V.E. work w i l l show the need fo r change and, as such, is destined to be subjected to close scrutiny, resistance, and negative attitudes f r o m al l areas affected. To overcome these roadblocks r e ­quires that:

a) Management establish a proper climate within the company fo r the V E. effort and provide a place in the organization for resolving problem areas.

b) Care be exercised to select personnel who are skilled in the use of human relations in doing their everyday job in the Value f ie ld .

c) Value proposals are carefully documented with the necessary facts to dispel any problems which may arise of a technical nature and that the affected areas are cognizant of the proposed change and effectively are a part of i t .

d) Value proposals are properly presented, t imely in nature, and show the decision maker s u f f i ­cient evidence of the advantages, as well as i n ­sight into the disadvantages that may exist.

MEASUREMENTS OF EFFECTIVENESS

If Value Engineering is to exist and grow within the corporate f rame work, consideration must be given towards effectively measuring the results of the com­pany's effor t in this f i e ld of activity. Value Engineer­ing has prime responsibility regarding the necessary documentation, reports and activities, indicating:

a) Manhour expenditures and activities of a l l the personnel directly in the V.E. program.

b) Summaries of a l l Value proposals and the action taken f o r implementation. These summaries should be broken down to indicate categories such as: Spec, changes, contractual changes,

32 S .A .V .E . JOURNAL 12-62-2

company changes not affecting contracts or specifications, and f ina l ly summarize possible improvements in rel iabi l i ty, quality, maintain­abili ty, etc.

c) Records must be kept showing the savings which have resulted f r o m the various activities i n ­dicated in the summaries.

d) Finally, status reports must be maintained and distributed periodically to show company man­agement and the customer the status of work-in-process.

The problem area here is to keep the reporting and documentation f r o m growing into a time consuming and costly operation. The use of aids, such as: charts, graphs, etc. w i l l go a long way towards relieving this potential problem area.

hi instances where cost controls exist in the f o r m of the Pert/Cost or Cost Target System, the mi l i t a ry contractor is required to submit periodic reports indicating their activity against the programmed objectives.

SOL MENDELSOHN

M I L I T A R Y P R O D U C T S C O M P A N I E S W I T H V . E

AEROJET GENERAL CORP. AIRBORNE INSTRUMENT LAB. A IRE SEARCH MFG. CO. AIR TECHNOLOGY CORP. ALCO PRODUCTS, INC. AMERICAN STANDARDS ASSOC. AOMC ARIZONA STATE UNIVERSITY APOGEE ENG. SERVICES . ATOMICS INTERNATIONAL AUTONETICS AVONDALE SHIPYARDS, INC. BARRY WRIGHT CORP. B E L L AEROSPACE SYSTEMS B E L L HELICOPTER CO. BENDDX CORP & DIVISIONS BETHLEHEM STEEL CO. BESTWELL-CERTAIN-LEED

SALES CORP. BOEING CO. BOGART MFG. CO. BOLT BERANEK & NEWMAN, INC. BOSTON UNIVERSITY BURROUGHS CONTROL CORP. BULOVA RESEARCH & DEVEL. LABS. CALIF. GENERAL INC. CANNON ELEC. CO. CHANCE VOUGHT CORP. CHICAGO AERIAL IND. CONCORD CONTROLS, INC. COOPER-BESSEMEN CRAIG SYSTEMS, INC. CURTISS WRIGHT CORP. DAVID EHRENPREIS CONSULTING

ENG. DIAMOND ORD. DON CAFFERY GLASSIE CO. DORR-OLIVER INC. DOUGLAS AIRCRAFT CO., INC. DRESSER IND., INC. EMERSON RESEARCH LABS. EMERTRON, INC. ENG. RESEARCH & DEVEL LABS.

FAIR CHILD CAMERA & INSTRM. CORP.

GATES ENG. CO. GENERAL DYNAMICS GENERAL INSTRUMENT CORP. GENERAL PRECISION, INC. GIBBS CORP. GOODYEAR AIRCRAFT CORP. GRIBERSON CORP. HERCULES POWDER CO. HOFFMAN MILITARY PRODUCTS HUGHES AIRCRAFT CO. HUYCK SYSTEMS IND. ELECTRONICS DIST. IND. REPORTS, INC. JOHNS-MANVILLE KAMAN AIRCRAFT CORP. KINETICS CORP. LITTON SYSTEMS, INC. LOCKHEED AIRCRAFT CORP. LORAL ELECTRONICS CORP. LUNDY ELEC. & SYSTEMS INC. MacINTOSH & SHERIDAN, INC. MARQUARDT CO. MARTIN CO. MCDONNELL AIRCRAFT CO. MELABS NATIONAL INSTITUTES OF HEALTH NORTH AMERICAN AVIATION NORTHEASTERN UNIVERSITY NORTHROP CORP. RAYTHEON CO. REPUBLIC AVIATION CORP. REPUBLIC ELEC. IND., CORP. REMINGTON RAND UNIVAC ROCKETDYNE ROFRAN DESIGN ROHR CORP. RYAN AERONAUTICS CO. S.L.M. SALES CO. SAN DIEGO STATE COLLEGE SOLAR SOLID ROCKET PLANT

SPACE TECH. LABS., INC. SPERRY GYROSCOPE CO. SPERRY UTAH CO. SOUTHWESTERN ENG. CO. TAFFET E L E C , INC. TEXAS INST. THIOKOL CHEMICAL CORP. THOMPSON REMO

WOOLREDGE, INC. TODD SHIPYARDS, INC. UNITED AIRCRAFT CORP. US SCIENCE CORP. VALUE ANALYSIS, INC VITRO ELECTRONICS VALUE ENG. CO. VALUE PROGRAMS FOR

IND., INC. WARREN J. STEWART WATERS MFG. CO. WILLIAM UNDERWOOD CO.

S . A . V . E . 1963

NATIONAL CONVENTION

APRIL 25 & 26, 1963

NEW YORK

Details on Inside Back Cover

12-62-2 S .A .V .E . JOURNAL 33

Technical Notes And Reviews Proceedings of 1962 Third EIA Conference on Value Engineering, held October 1st and 2nd, 1962 at the Statler-Hilton Hotel, St. Louis, Missouri , published by Electronic Industries Association, 11 West 42nd Street, New York, N.Y., 173 pages, $4.00.

Because of the tremendous interest generated by the recent Thi rd National EIA Conference on Value Engineering, the column this issue is being devoted to some "capsule comments" on various papers pre­sented. This w i l l permit a painless perusal of the tremendous wealth of technical material available as an entree to a more detailed study of specific papers.

Selected papers, contained in the proceedings, have been grouped by session letter into three basic groups: A - Management, B - Advanced Techniques, and C - Education, with a fourth group containing additional papers which were not presented at the conference because of time restrictions.

A l l i n a l l the scope of the papers in the proceed­ings and the counterpoint supplied by presenting the industry and governmental concepts in tandem make fo r an interesting and informative group of papers which should be an asset to any V.E. l ibrary.

SESSION A - MANAGEMENT

1. "Definition of Value Engineering to Avoid Man­agement Confusion," H Newman, Autonetics, A Division of North American Aviation, Inc., Downey, California.

In f u l f i l l i n g the intent of the t i t le the author considers such aspects of V.E. as its scope in the management control effort , i ts relationship with other staff groups (such as Reliability) and the organizational position and qualifications of the professional V.E. These factors are a l l considered as part of an approach toward c l a r i ­fying the V.E. function f o r management.

2. "Total Value Improvement Program," E. Lesh­ner, RCA, Camden, N.J.

The author describes RCA's Defense Elec­tronic Products Value Improvement Program (VIP). The description of the V.E. organization is developed as answers to the following ques­tions:

a. What i s the function of the Value I m ­provement Program?

b. What makes a VTP? c. Who does the work? d. Why should they want to do the work? e. What do they do?

3. "Contractual Aspects of Value Engineering," L.J . Haugh, Navy Procurement Policy Mem­ber, ASPR Committee.

This paper discusses cost plus incentive fee (CPIF) vs. cost plus fixed fee (CPFF) contracts relative to V.E. and indicates the government's intention in this contractual area.

4. "A Hard Core Program f o r Value Engineering," E.L. Carrier , Aeronautical Systems Division, USAF, Wright-Patterson AFB.

The author presents the Aeronautical Sys­tems Division (USAF) approach to V.E. as part of the A i r Force's implementation of ASPR 3-407.3. This approach requires future con­tractors to establish and maintain organized V.E. programs, and emphasizes the application of V.E. principles during the conceptual phase of hardware development. Potential morale factors, manning ratios, organizational re la­tionships and substantiating documentation are recognized and discussed.

SESSION B - ADVANCED TECHNIQUES

1. "PERT & V.E. Integration - A Dynamic System fo r Program Efficiency and Prof i t Enhance­ment," A.F . Morance & R.D. Joyce, Operations Research, Inc., Santa Monica, California.

This paper examines the possibilities of i n ­tegrating the methods and effects of V.E. into PERT (Program Evaluation and Review Tech­niques) systems to create an even more power­f u l tool fo r management decision-making. Brief summaries are given fo r each technique before being considered in tandem.

2. "New Techniques of Cost Analysis," C P . Smith, Chance Vought Corporation, A Division of Ling-Temco-Vought, Inc., Dallas, Texas.

This paper discusses the dollars per pound method f o r making comparative cost studies of alternate configurations during the early stages of a new product program. The method p re ­sented is one that is tailored to meet the ac­celerated time requirements that are always present during preliminary design - the studies are quick and general in nature but do provide comparative cost figures on a scale thatisuse-

34 S .A .V .E . JOURNAL 12-62-2

f u l during this phase of a new design. A typical example is also presented il lustrating the tech­nique.

3. "Use of Target Cost Program," F.J. Sauter, Mart in Marietta Corporation, Baltimore, Md.

The author presents a Target Cost Program technique used by the Mart in Marietta Corp. to control the costs on a ballistic missile program. This approach resulted in a substantial reduc­tion in cost to the customer f r o m the original price established at contract negotiation. The objective is to prevent overruns through a closed loop system of budgetary control that demands rapid feedback of the actual cost of work per­formed fo r comparison with the ini t ia l target, cost.

4. "Some Ground Rules f o r Pricing & Appraising Engineering Change Proposals Proposed f o r Economic Reasons," R.H. Cohen, Lit ton Indus­tr ies , Inc., Woodland Hi l l s , Calif.

The author discusses a number of problems associated with deciding whether or not to make engineering product changes suggested by p ro ­posals f o r improvement in the "value" of the product. A detailed discussion of a breakdown technique is presented with particular attention given to the problem of incorporating estimates of purchased material costs. Also discussed are those elements which make up the implementa­tion costs of change and the all-important cost savings associated with the proposed change.

SESSION C - EDUCATION

1. "The Value Engineering Digest," M . Kaplan, Loral Electronics Corp., New York, N.Y.

The paper describes an inexpensive, unusual and widely distributed bi-monthly V.E. Digest used to disseminate V.E. information among the engineering, supervisory and administrative personnel of Loral . The information presented in this loose-leaf reference manual (which is ob­tained f r o m both internal and external sources) is grouped into four basic sections (materials, outside techniques, equipment and Loral tech­niques) within which are considered such factors as cost, advantages, disadvantages, availability; etc.

2. "A Comprehensive V.E. Training Program," J.W. Bryant, GE Company, Syracuse, N.Y.

The author discusses a comprehensive V.E. training program in terms of three basic areas of act ivi ty he feels they most encompass. These are:

a. Training the professional personnel of a department or company in the techniques of V.E.

b. Providing an orientation to management

and other departments (i.e., Q. C ) , cus­tomers and vendors on how they f i t into the VE program,

c. Industry-wide promotional efforts thru such organizations as S.A.V.E. and/or EIA and also working with educational i n ­stitutions to upgrade the level of V.E. training and indoctrination.

3. "Bridging the Gap," A.E. Mudge, Value Engi­neering, hie., Boston, Mass.

In this paper a parallel has been drawn be­tween the building of a VE organization and the construction of a bridge across a chasm f r o m no V.E. to a f u l l V.E. program. The author shows how to establish a f i r m foundation, build a good working platform and then cut, f i t and lay each conceptual stone until the bridge has been completed.

4. "Centralized Value Analysis Training f o r the Federal Government," W.S. Shallman, U. S. Army Ordnance Weapons, Command, Rock Island, Il l inois.

The pr imary purpose of the paper is to por­tray how one government organization, the Ordnance Management Engineering Training Agency (OMETA) met the challenge of centrally training potential Value Analysts, Managers and other related staff groups in the techniques, concepts and philosophy of Value Analysis. The results obtained in the past three years during which the agency trained 300 Value Analysts, and conducted orientation sessions f o r approxi­mately 1,000 managerial and technical person­nel, are also presented.

D - ADDITIONAL PAPERS

1. "Computation of Process Break Even Points," L.R. Sheppard, RCA, Camden, N.J.

The author presents a technique developed at RCA, Camden, fo r the computation of pro­cess "Break Even Points." It was found that using the traditionally accepted graphical solu­tion process, plotting calculated cumulative average unit costs f o r various quantities of each of the processes under consideration and con­necting them with a "smooth" curve fo r each process, made i t evident that discrepancies were possible i n the process of graphical solu­tion. The paper presents an algebraic approach which considerably simplifies and improves the process.

2. "Value Engineer Your Target Cost Program," J.M. Andrake, T.T. Tobin and J.F. Coulon, Lockheed-California Company, Burbank, Calif.

A target cost system ideally targets and monitors a l l elements that contribute to the total cost, of a product. However, the authors-

12-62-2 S .A .V.E . JOURNAL 35

point out that a detailed target cost program of this magnitude may cost more than management considers a wise investment. This depends on the complexity of the product and the nature of the company business. To help solve this prob-' lem the authors show how to reduce the price of a target cost program by applying the p r i n ­ciples of V.E.

3. "Experiences of a Project Leader in Value Engineering Educational Programs* by Y .M. Hoag, General Electric Company, Utica, N.Y.

In this relatively short paper, the author attempts to pass along some of the more salient points that have developed during his activity as a project leader i n Value Engineering educa­tional programs. The importance of the author's recommendations lies i n the fact that each of these points have been proven by his personal experiences over a period of time.

4. "Design Creativity Performance," R.J. Gil les­pie, Sylvania Electric Products, Inc., Waltham, Mass.

One of the basic problems in Value Engineer­ing is measuring creative ingenuity and intuition before and after V.E. training. In this paper the author presents several sets of "creativity* tests which have been used by Sylvania toprove that the tangible types of problems used in V.E. training offer an exceptionally good vehicle f o r the development of creativity which once de­veloped can be used i n any phase of Product Design and Development.

5. "Value Engineering and Product Evaluation as Management Controls," R.A. Murray, Goodyear Ai rc ra f t Corporation, Akron 15, Ohio.

The author discusses the possibility of the incorporation of V.E. and some other autono­mous elements of management (Reliability, Q. C , etc.) into a single staff product evaluation organization. The paper suggests how such a complete product evaluation program can attack product cost with both foresight and hindsight: the f i r s t , a Product Assurance effor t during de­sign conception, the second, a product improve­ment effor t with the rest of the organization to catch that which has been missed during design conceptions.

6. "Standardization and Value Engineering," W.S. Schoomer and David Fram, Sperry Gyroscope Company, Great Neck, N.Y.

In this paper the authors show the inter­relationship of standardization and V.E. and the importance of these techniques*ln centralizing product costs. Specifically, they discuss each of these functions separately and then show how standardization specialists have been activated in V.E. programs at Sperry Gyroscope Co.

7. "A Key to Successful Economic Competition," Arthur E. Harvey, Jr., U. S. Army Ordnance Missile Command, Redstone Arsenal, Alabama.

The author discusses various possible ap­proaches that could be used by the United States to compete with the current Sovient economic offensive. The discussion leads to the logical conclusion that Value Analysis is one of the most fe r t i l e fields fo r the creative activity that is so urgently needed to meet the challenge of competition both at home and abroad.

DAVID M . NATELSON

I N D U S T R I A L VALUE SERVICES, I N C . 1405 N O R T H E R N B L V D . , R O S L Y N , L . I . , N. Y . 516 OVerbrook 1-1617

VALUE ENGINEERING and

VALUE ANALYSIS

IMPLEMENTATION PROCEDURES ESTIMATING EDUCATION

FORMS

Sol Mendelsohn PRESIDENT

METROPOLITAN NEW YORK's ONLY V. E. CONSULTING S E R V I C E

36 S . A . V . E . J O U R N A L 12-62-2

5. A. V. f. Chapter News L I S T O F C U R R E N T C H A P T E R S

National Capital John B. Toomey, Chairman Value Engineering Co. 2320 Jefferson Davis Hwy., Alexandria, Va.

Mid New York State James E. Kushner, Chairman Light Mi l i ta ry Electronics Dept. General Electric Co. 901 Broad St., Utica, N.Y.

Metropolitan New York Arthur de la Parra, Chairman Staff Mgr. Mfg. Eng. Lora l Electronics Corp. 825 Bronx River Ave., New York, New York

Paul Revere Robert J. Gillespie, Chairman Div, V.E. Coordinator Sylvania Electronics System 40 Sylvan Rd,, Waltham, Mass.

Delaware Valley Robert J. Davidson, Jr., Chairman Chief Prod. Eng. Branch Hq. PAAFCMD, Att : REHPPE 1411 Walnut Str., Philadelphia, Pa.

MohawK Berkshire R.J. Spenard, Chairman V.A. Education & Training Watervliet Arsenal Ord,, Watervliet, N.Y.

Chicago Robert L . Bartlett , Chairman Mgr. Value Control G.E. Co., Hotpoint Div. 227 S. Seeley Ave., Chicago, m .

Dallas-Fort Worth Texas Harold I . Knight, Chairman Supervisor, V.E. Vought Aero., Chance Vought P.O. Box 5907, Dallas, Texas

Los Angeles Edward H. Simpson, Chairman Mgr. V.E. Hughes E l Segmido P.O. Box 90426, Los Angeles, Calif.

San Diego Howell P. Will iams, Chairman Mgr. Value Control General Dynamics/Convair 3302 Pacific Hwy., San Diego, Calif.

Salt Lake Area CS. Grey, Chairman Sperry Utah Eng. Labs. 322 North 21st. West., Salt Lake City, Utah

San Francisco Bay Area R.L. Deneg, Jr. , Vice Chairman Manager Value Engineering Solid Rocket Plant Aerojet-General P.O. Box 1947, Sacramento, Calif.

L I S T O F C H A P T E R S B E I N G F O R M E D

Atlanta Frank J. Johnson, Chairman Mgr. V.A. Lockheed Ai rc ra f t Co. Georgia Div., Marietta, Ga.

Buffalo/Roche ster Merton E. Davis, Jr., Chairman V.A. Specialist Spaulding Fibre Co. 310 Wheeler St., Tonawanda, N.Y.

Cleveland Dr. C,C. Van Vechten, Chairman Tapco Group, Eng. Div. Thompson Ramo Wooldridge, hie. 23555 Euclid Ave., Cleveland, Ohio

Detroit Michael Pinto, Chairman Pioneer Eng. & Mfg. Co. 19669 John R. St., Detroit, Mich.

Grand Rapids Edward H. Hutton, Chairman Chief Prod. Eng. Lear, Inc. 110 Ionia N.W., Grand Rapids, Mich.

Minneapolis Robert L . Crouse, Chairman Mgr. V.E. , Aero. Div. Minneapolis-Honeywell 2600 Ridgway Rd., Minneapolis, Minn.

12-62-2 S .A .V.E . JOURNAL

North Jersey or Newark Arthur Wojtowicz, Chairman V.E. Coord. The Bendix Corp., Eclipse-Pioneer Div. Williams Ave. & Route 46, Teterboro, N.J.

Orlando, Florida Robert L . Bidwell, Chairman Mgr. V.A. Administration Martin-Marietta Corp. P.O. Box 5837, Sand Lake Rd., Orlando, Fla.

Pittsburg G.C. Wilburn, Chairman Westinghouse Electric Corp. 469 Sharpsville Ave., Sharon, Pa.

Portland Area L . James Levisee, Chairman Corporate Director of Procurement Hyster Co. P.O. Box 4318, Portland, Oregon

Redstone Arsenal Arthur E. Harvey, Chairman Chief, V.A. Office Army Ballistic Missile Agency Attn: ORDAB-IV, Redstone Arsenal, Ala.

Mount Vernon Donald W. Summerhayes, Chairman Cooper-Bessemer Corp., Mount Vernon, Ohio

New Orleans Wil l iam F. Smith, Chairman Avondale Shipyards, Inc. P.O. Box 1030, New Orleans, La.

Sacramento R.L. Denig, Jr. , Chairman Mgr. V.E. Solid Rocket Plant Aerojet General Corp. P.O. Box 1947, Sacramento, Calif.

Seattle Charles E. Brewster, Chairman V.E. Staff, The Boeing Co. * P.O. Box 3707 (MS 15-53), Seattle, Wash.

Tucson/Phoenix/Scottsdale W.G. McMurray, Chairman Mi l i t a ry Electronics Div. Motorola, Western Center, Scottsdale, A r i z .

C H A P T E R A C T I V I T I E S

The Dallas Fort Worth Chapter This Chapter's future plans include: Jan. 10 Installation of Officers Feb. 7 VE in Procurement - J. Edwards of Guiberson

Corp. Mar. 7 VE atABMA - A. Harvey, Chief Value Analyst

Los Angeles At the Dec, 11 meeting, Target Cost Programs w i l l be discussed. Speakers w i l l include: E.D. Heller, Value Control Coordinator, General

Dynamics E.A. Breen, Division Manager, VE Division,

Lockheed, Calif. J.F. Fisher, Management Consultant; Cresap,

McCormick & Paget This meeting w i l l be held at the Brown Bottle, Joseph Schlitz Brewery, Van Nuys, Calif.

Salt Lake This Chapter has now been formed and is holding monthly meetings.

New York The planned programs fo r this Chapter are as follows: Jan. 8 The IRE is being invited to a "Presentation

of Value Engineering in the Commercial Electronics Industry".

Feb. 13 The AIIE has been invited to a presentation on "The Relationship Between Value Engi­neering and IndustrialEngineering". Speak­er A.W. Dover, Industrial Eng. Div. Re­public Aviation Corp.

Mar. 12 The Standards Engineering Society is i n ­vited to a presentation on "The Role of Value Engineering in the Field of Stand­ards and Specification Reviews".

Boston Dec. 6 Small Business Night Jan. 3 Top Management Night Feb. 7 IRE Product and Production Eng. Profes­

sional Group Night Mar. 7 VE Commercial Products Night Apr. 4 ASME Visitation Night

38 S . A . V . E . J O U R N A L 12-62-2

V A L U E J P R O O R A J V E S F O R I l S r j D X J S T R Y , I N C .

PROFESSIONAL VALUE ENGINEERING TRAINING - and -

CONSULTING SERVICES

... #

SERVING GOVERNMENT AND INDUSTRY

• • Selected by the military to conduct specialized value training services

• 12 80-hour value workshops for research and devel­opment personnel

• 13 16-hour value orientation c l in i c s for technical management

• 2 40-hour advance practices seminars • • Selected by industry for specialized value training in

broad product and process areas*

• Boilers Chemicals Dairy equipment Tires Launchers Fabricated assemblies Strainers Locomotives Power hand tools Drones Paperwork Metal products Rockets Processing Vacuum cleaners Sinks Electronics Rocket motors Motors Compressors Cash registers Castings Packaging Rubber products Plast ics Doppler radar Transformers Turbines Procedures Diesel engines Missiles Industrial TV Vibration equipment Footwear Sewing machines Business bachines Airplanes Battery chargers Ejection equipment

VA LU E ^ > r o S r a m s f01" tod"**1!'

""Complete l i s t of cl ients, with references, available upon request

R. E . Fountain, President J , F . Prendergast, Vice President

Treasurer > tmt

12 Jay Street • Schenectady, N.Y.

Te lephone 372-5671

Are a Code 518

12-62-2 S . A . V . E . J O U R N A L 39

S. 4. V. E. National News S.A.V.E. CHAPTER/STATE REGIONS

Northeast Maine Vermont New Hampshire

•New York •Massachusetts

Connecticut Rhode Island New Jersey

•Pennsylvania Delaware

Southeast •Washington, D. C West Virginia Virginia Kentucky Tennessee North Carolina South Carolina Georgia Mississippi Alabama Florida Maryland

North Central North Dakota South Dakota Nebraska Colorado Kansas Minnesota Iowa Missouri

• I l l inois Indiana Michigan Ohio Wisconsin

South Central New Mexico

•Texas Oklahoma Arkansas Louisiana

Northwest Washington Oregon Idaho Montana » Wyoming Alaska

Southwest •California Nevada

•Utah Arizona Hawaii

•Present Chapter in these areas

LIST OF NATIONAL COMMITTEES WITH CHAIRMEN

Auditing J.J. Kaufman Aerospace Div. , Martin-Marietta Co. Baltimore, Md.

Chapter Development Robert L . Crouse Mgr. V.E. , Aero. Div. , Minneapolis-Honeywell 2600 Ridgway Rd., Minneapolis, Minn.

•Commercial Products T.H. Redman Director, V.E. Rochester Prod. Div. , G.M. 1000 Lexington Ave., Rochester, N.Y.

Rules & By-Laws E.T. O'Connell V.E. Weekly 1327 F St., N.W., Washington, D.C.

Education B.P. Schroeder Mgr. Education Services General Dynamics/Pomono, Calif.

Historical (Ad Hoc) H.K. Davidson Head, V.A. Serivces Northrop Corp., Norair Div. Hawthorne, Calif.

Membership & Chapter Development W.G. McMurray Mi l i t a ry Electronics Div. Motorola, Western Center Scottsdale, Ar iz ,

C.W. Doyle Value Control Coordinator General Dynamics Corp. Ft. Worth, Texas

Publicity & Publications Marvin Kaplan Mgr. of Industrial Engineering Loral Electronics Corp. 825 Bronx River Ave., Bronx, N.Y.

40 S . A . V . E . J O U R N A L 12-62-2

V. f . Calender Events Dec.

Salt Lake Area Chapter meeting

Dec. 6

Paul Revere Chapter meeting

Dec. 11 Rochester Reliability Engineers Rochester, New York

T.H. Redman of Rochester Products, Div. of G.M., w i l l speak on "Value Related Product Abil i t ies" . Dec. 11

Los Angeles Chapter meeting

Jan.

Salt Lake Area Chapter meeting

Jan. Paul Revere Chapter 36 Hour - Specialist and Instructors Inst. 36 Hour - V.E. "Blast, Create and Refine" Technique

Course Jan. 3

Paul Revere Chapter meeting

Jan. 8

Metropolitan New York Chapter meeting

Jan. 10

The Dallas Fort Worth Chapter meeting

Feb. Salt Lake Area Chapter meeting

Feb. Boston University 40 Hour - Systems Management Seminar 40 Hour - Value Engineering Product Design and Dev.

Seminar - Chairman-R. Gillespie

Feb. 7 The Dallas Forth Worth Chapter meeting

E N G I N E E R S IMPRESSION of a V A L U E ENGINEER

CONTRIBUTED BY: H.Hortgl<ns a M.GImn

Feb. 7

Paul Revere Chapter meeting

Feb. 13

Metropolitan New York Chapter meeting

Feb. 24 (week of)

Seminar to be held at Southern Methodist

Mar.

Salt Lake Area Chapter meeting

Mar. 7

The Dallas Fort Worth Chapter meeting

Mar. 7

Paul Revere Chapter meeting

Mar. 12

Metropolitan New York Chapter meeting

A p r i l

Salt Lake Area Chapter meeting

Apr. 4

Paul Revere Chapter meeting

Apr. 24-25 S.A.V.E. National Convention Americana Hotel New York, N.Y.

S.A.V.E. « 1963 National Convention April 25 & 26, 1963

New York 12-62-2 S . A . V . E . JOURNAL 41

Seminars, Workshops & Training Aids Institute of Human Science 333 North Michigan Avenue Chicago 1, I l l inois

The Institute has developed a Human Engineering Program which endeavors to teach the art of know­ing how to predict, move and control people.

Northeastern University Boston 15, Mass.

The present course f o r Value Engineering and Analysis being given at the Northeastern Univer­sity's Center f o r Continuing Education has become a regular program, with two eighteen-week courses offered each year. The f a l l semester begins in late September and the spring semester in early February.

UCLA'S Business Administration Extension UCLA'S Business Administration Extension w i l l offer a course, "Principles and Applications of Value Analysis and Engineering, X 445 2AB" at f ive locations in California in 1963.

The courses w i l l consist of 15 meetings, with a credit of 2 units being given. The cost w i l l be $35.00.

Further information about the courses may be had f r o m Jean M . Cooper, Business Administration Extension, UCLA, 813 South H i l l Street, Los Angeles 14, Calif.

Sperry Utah Engineering Laboratory Salt Lake City 16, Utah

A Value-Engineering two-week training seminar has been planned and is scheduled fo r A p r i l 1963.

Southern Methodist University A Value Analysis Seminar, is to be held at Southern Methodist University the week of February 24,1963. The faci l i t ies of Dallas College of Southern Method­ist University in downtown Dallas, w i l l be utilized. The Seminar w i l l be sponsored by Southern Method­ist University in cooperation with the Value Analysis Standardization Committee, of the National Associa­tion of Purchasing Agents.

Mr . C.W. Doyle, Value Control Administrator, General Dynamics, Fort Worth, Texas, w i l l act as Workshop Coordinator. ^

The Seminar w i l l be designed not only f o r purchasing people, but alsof or engineers, accountants, financial off icers, and other executives who wish to know more about the subject.

Registration blanks may be obtained directly by writ ing:

Dr. John M . Claunch, Dean of Dallas College, Southern Methodist University, Dallas, Texas

Industrial Education Films, Inc. "The Search For Savings" is a newfi lm released by the Industrial Education Fi lms, Inc. It was written under the technical supervision of E.D. Heller, Value Control Coordinator, General Dynamics/ Pomona. It was reviewed by L.D. Miles, Manager, Value Analysis Services, General Electric Co., author of "Techniques of Value Analysis and Engi­neering", and originator of the concept of system­atic value analysis.

The f i l m explains the step-by-step procedures in searching fo r alternate materials, manufacturing processes, or components that w i l l adequately per­f o r m a function at less cost.

JOURNAL BINDERS Mail Checks To:

Sturdy gold printed blue plastics r ing binders MARVIN KAPLAN, Executive Editor with a 3 year Journal storage cabability. S.A.V.E. JOURNAL

LORAL ELECTRONICS CORP. 825 BRONX RIVER AVENUE

Cost - $3.00 Delivery - 2 weeks BRONX 72, NEW YORK

42 S . A . V . E . J O U R N A L 12-62-2

Engineer's Corner RECURRING/NON-RECURRING TRADE-OFF

Engineering design requires a series of decisions based upon a choice of al ter­natives involved with performance, physical characteristics, effectiveness, and cost. In studies involving expected costs, fo r example, the choice of alternatives w i l l depend upon a given set of conditions.

With the right "financial facts* the point where the two alternatives are equally economical can be found. This is known as the break-even point.

Following is an il lustration of such an engineering decision: An original selection of an off-the-shelf i tem costs $7.00 per unit in quantities

of less than 1,000 units. 1

On the other hand, there are two special designs that can be manufactured to perform the same function.

Here are the three choices:

1. Original-cost . . . $7.00 per unit 2. Alternative Number 1 - recurring cost . . . $5.00 per unit;

non-recurring cost . . . $500.00 3. Alternative Number 2 - recurring cost . . . $1.00 per unit;

non-recurring cost . . . $700.00 (Recurring cost includes unit material and manufacturing cost; non-recurring cost includes tooling and engineering.)

The curves below are plots on log-log paper of cost per unit against quantity of units, with non-recurring cost amortized over the quantity indicated. Curves f o r the alternatives clearly show the points of equivalency with the original selection. In this case, any requirement of more than 116 units w i l l be met more economi­cally by use of alternative number 2.

Cost of each unit f o r a specified number of units may be expressed as follows:

C = recurring cost+ non-recurring cost number of units

The number of units at the break-even point fo r any alternative is found when C of one alternative is made equal to C of the other alternative.

The break-even point f o r each combina-of alternatives can also be directly computed by use of the relationship:

Break-even point ANR AR

where ANR-non-recurring cost d i f f e r -AR = recurring cost difference. For this example, the break-even points are:

Alternative number 1 vs. original

selection — 250 units

Alternative number 2 vs. original

selection - 116 units

Alternative number 1 vs. alternative number 2 - 5 0 units

A.C. FLACKBERT

ORlCiMAL 5ELECTI0H1

ALTERNATIVE -1

ALTERNATIVE -2

100 116 250 1000

QUANTITY

COURTESY OF HUGHES AIRCRAFT COMPANY

S . A . V . E . J O U R N A L 43

Journal Advertising

SIZE

1/3 Page

1/2 »

2/3 "

Ful l "

Cover

Colors

DIMENSIONS

7-1/2" x 3-5/16" or 2-1/2" x 10"

3-3/4" x 10" or 7-1/2" x 5"

5" x 10" or 7-1/2" x 6-5/8"

7-1/2" x 10"

(Each color)

RATE

$ 75

$110

$140

$200 ; $275

$ 60

Submission Deadline Dates — Feb. 5, May 5, Aug, 5 & Nov. 5

Circulation — 2000 (including members & subscriptions)

Mechanical > Copy or Line Illustrations —Black on White Requirements I Half-tones—Glossy Photos or Negatives

ERNEST YURMAN, Advertising Editor

L I S T OF A D V E R T I S E R S

Alpha Wire Corp

Gries Reproducer

Industrial Value Services, Inc.

Kent Associates

Loral Electronics Corp.

Ryerson, Joseph T., Inc.

Value Programs fo r Industry, Inc.

Page 24

16

36

16

12

39

Request for Articles

Subjects: V.E. techniques relative to materials, organization, cost, procurement, rel iabil i ty and quality control.

Format: Typewritten with approximately 1000-2000 words. Photographs and illustrations must be photographically reproducible. (Glossy photos preferred). Author's photograph shall be head view and under 2" x 2".

Authorization: Written approval must be supplied f o r the use of a l l material.

NEXT ISSUE DEADLINE: February 5, 1963

44 S . A . V . E . J O U R N A L 12-62-2

1963 ANNUAL CONVENTION Society of American Value Engineers

APRIL 25 & 26, 1963 (THURS. & FRI.) AMERICANA HOTEL, NEW YORK CITY

Technical Presentations

The 1963 Convention shall include the( most current and complete Value Engineering information with areas of:

Military Products Manufacturing Commercial Products Purchasing Military Contracts Education Design Systems & Procedures Quality Control Reliability

Location

Convention headquarters, located in the heart of New York's entertainment and cultural center, shall provide an interesting and relaxing atmosphere for members, wives and guests. The Americana of New York, 50 stories tall, is one of the newest and most modern hotels in the world. Special blocks of rooms and suites have been set aside for out-of-town attendees.

Speakers

The country's foremost authorities on Value Engineering, and key representatives from Industry and the Government, shall comprise the impressive growing list of speakers and guests.

For the Women

Special events will be scheduled for wives and friends, depending upon the interest shown in the next few months. Tentative plans include television shows, luncheons, theater and fashion shows. The weekdays and weekend should provide an attractive vacation for all.

Call for Papers

The importance of the meeting is second only to the need for original papers on all phases of Value Engineering. All members of S.A.V.E,, Industry and the Government are urged to start preparation of these necessary and valuable contributions to our field.

Details for papers shall be mailed to all members in the near future. For the present, 500 word abstracts, relative to one of the above listed "Technical Presentations" should be for­warded to MARVIN KAPLAN, c/o LORAL ELECTRONICS CORP., BRONX 72, NEW YORK.

Additional Convention Details Will Be Mailed To All Members

THE PURPOSES OF THE SOCIETY SHALL B E :

To create, stimulate and promote interest in the advancement and diffusion of knowledge of value engineering and value analysis, and its application to the research, design, development, test, evaluation, engineering, production, purchasing and distri­bution phases in government, private industry and commerce.

/

OFFICIAL PUBLICATION OF THE

S O C I E T Y AMERICAN V A L U E E N G I N E E R S

c/o LORAL ELECTRONICS CORP., 825 BRONX RIVER AVE. , BRONX 72, N.Y.