the JOURNAL of Value Engineering

message from the president AMONG T H E GOALS and objectives of the Society for 19691970 is our aim to double our membership and add 25 percent to the number of active, local chapters. Our num-ber one objective, however, is to encourage and assist members in successfully applying specific Value Engineer-ing efforts to more diverse kinds of problems. I n our operations back at the ranch, we are making this effort. We are particularly going into more indirect areas, into areas that now have no specific and finite improvement plan or measurement. Occasionally, we fail . More often we get at least a partial improvement, and we learn a little more about how to introduce Value Engineering into new and different environments.

A l l of us associated with Value Engineering can cite numerous cases where application of the technique has been instrumental in reducing pro-duction costs and improving products in various degrees-ranging from satisfactory to the near-miraculous. We believe in Value Engineering's powers, and for this reason it's very easy for us to slide into the smug attitude that the theory, philosophy, teaching, and publicity of Value Engineering are solely responsible for its suc-cess. For those of us in this blissful state of euphoria I want to repeat what I've said before: the real key to success in our field is i n the application of the techniques of Value Engineer-ing to specific problems in order to provide the best solutions, all of which lends special signifi-cance to a recent John Steinmetz proposal.

After years of listening to my harangue con-cerning actual in-depth application (i.e., the total, maximum benefit, end use of the tech-niques of Value Engineering), John, a Twin City Chapter member, has decided that I have never really defined the ultimate and proper point of technique application. To correct this he has suggested a new committee for the Society and has volunteered to serve as its director. Subsequently, this action was ap-proved by your Board of Directors in August. This committee's aim wi l l be to produce "easy" ways for consumers to use Value Engineering. (An article, "Consumer Value," by John, ap-pears in this issue on page 29.)

With varying degrees of success, all of us in Value Engineering have applied VE techniques and methodology to the cost of the products we produce, to the services we render, and to the

functions our customers desire. John proposes to go a step beyond this. He points out that the ultimate need and success of "value" en-gineering is in the hands of the buyer, that the buyer is the customer, and the customer is the consumer. I f we, aided and abetted by John and his committee, can devise means for con-sumersboth public and privateto use Value Engineering tools, we wi l l have taken a great step towards our ultimate professional goal: the application, recognition, and complete accept-ance of Value Engineering by the business community.

Question: How do we put Value Engi-neering in the hands of the consumer in a form he can easily use? How can we pass its benefits on to the small businessman, to the housewife, to "Henry Homeowner," or to the rest of the country's potential users, buyers, and consumers? What pocket slide rule can we generate that wi l l give consumers quick use of the Value Engineering tools to acquire best value? (Just imagine what Value Engineering efforts this wi l l force on us, the suppliers!!)

Would not such a tool solve many problems in these high-priced times? This assist might actually result in effective lowering of the in-terest rates by multiplying the usefulness of capital. I f you think i t is worth a try and have suggestions, send your ideas on "How the consumer can use Value Engineering to acquire better values" to: Mr . John Steinmetz, Univac FSD, Univac Park, P. O. Box 3525, St. Paul, Minnesota 55116.

R . L . CROUSE

the JOURNAL of Value Engineering

Editorial Staff W . B . D E A N

Editor

P A T B E N N Associate Editor

R I C H A R D M E R C U R E AND W I L L O L S O N Art

C O D Y P U B L I C A T I O N S , I N C . Production

Editorial Board Chairman

R O B E R T B I D W E L L

Northeast Region W I L L I A M G U L D E N

Southeast Region D O N A L D E . R E D M O N

North Central Region J O S E P H T R U M A N

South Central Region V I N C E N T J . C O P P O L A

Northwest Region W I L L D E A R B O R N

Southwest Region C O R W I N G R A Y

International J O H N J . B E N N E T T

Contents Message from the President 2

Authors and Articles 4

Esteem Value in Consumer Products by Carlos Fallon 7

Value Engineering in Commercial Industry by Walter N. Herold 9

Letters to the Editor 11 VE Hits the Alps

by John E. Reichen 13 Quantitative Decision-Making Applied to Project Selection

by R. E. Manelis 17

Value Engineering Illustrated Realizations of an Appliance Manufacturer

by James Maclntyre 21

Value Engineering is Alive, Well, and Moving into Marketing

by Thomas J. Snodgrass 25

Consumer Value by John Steinmetz 29

The JOURNAL needs you! 20

from the Editor 31

Cover The montage of consumer goods on our cover illustrates the theme of this issue: Value Engineering and Commercial Industry. Not quite 20 million people wi l l produce 400 billion dollars' worth of manufactured goods this year; but only 1 i n 7,000 of these 20 million (less than 3,000) is a Value Engineer. What a challenge to expand the V E profession! And what a boon to the consumer if this challenge is met! Cover design by Richard Mercure.

t h e J O U R N A L o f V a l u e E n g i n e e r i n g

is published quarterly by the Society of American Value Engineers, Inc., 410 West Verona Street, Kissimmee, Florida 32741.

1969, by Society of American Value Engineers, Inc.

Subscription: Members of the Society of American Value Engi-neers automatically receive The Journal. Other subscriptions may be placed wi th the National Business Office at the following rates: Domestic $25 a year. Foreign Postage $2.00 additional. Single issues $6.25 plus postage. Forward address changes to SAVE National Business Office, Windy H i l l , Suite A - l , 1741 Roswell Street, Smyrna, Ga. 30080. Second class postage paid at Kissimmee, Florida 32741.

Authors and

Articles

7 Esteem Value in Consumer Products by Carlos Fallon

Esteem value affects the exchange and market value of con-sumer products, according to Mr. Fallon. He feels that Value Analysis is the 1970's will create opportunities to make prod-ucts more marketable, useful, and beautiful for the consumer. In the eyes of the nation's Value Engineers, Mr. Fallon him-self epitomizes Esteem value.

CARLOS F A L L O N is RCA's corporate manager of value analysis. I n addition to his work at RCA plants in the United States and Europe, he conducts lectures on value analysis in England, Norway, Sweden, and Denmark. In 1968, he gave the key-note address at the International meeting of SCANVAVE, the Scandinavian Society of Value Analysis. Mr . Fallon has con-tributed chapters to the American Management Association's and ASTME's books and technical papers to publications such as I E E E Transactions and the Naval Engineers Journal. He is Vice-President for professional development of the So-ciety of American Value Engineers and a member of the Amer-ican Society of Mechanical Engineers, American Society of Naval Engineers, Mathematical Association of America, and the Canadian Mathematical Congress.

9 A Challenge . . . Value Engineering in Commercial Industry by Walter N. Herold

Value Engineering's greatest opportunity lies in commercial industry, according to this author. For every dollar's worth of defense hardware we produce, we produce at least ten dollar's worth of commercial hardware; in fact, at least 90 percent of all goods are manufactured by commercial industry. Almost 20 million people produce these goods, but not 1 in 7,000 is a Value Engineer . . . a distinct challenge to Value Engineering.

M R . H E R O L D is President of the Connecticut Yankee Chapter of SAVE. He was born and educated in Germany, coming to the United States in 1940. I n 1941 he joined Homelite, a manufacturer of gasoline-powered, lightweight equipment, leaving to join U . S. Forces in World War I I . Three years later he returned to Homelite as Field Service Representative at the company's headquarters. He is presently Director of Quality Control and head of Value Engineering for Homelite. Mr . Herold also teaches courses in Value Engineering at the Bridgeport Engineering Institute.

V E HitS the Alps by John E. Reichen 13 Although admitting some interest in cost reduction and indus-trial engineering, the Swiss feel that Value Engineering per se is unnecessary in their frugal country. However, the author, during a stay in Switzerland, did talk one firm into a fling at VE with interestingif not lastingresults.

M R . R E I C H E N is a Designer at Tektronix, Inc., Beaverton, Ore-gon, and does free-lance technical translating. A native of Switzerland, he has a certificate of Horology from the Techni-cum Neuchatelois, Switzerland, and an Associate of Science in E E from Multnomah College, Portland, Oregon. Mr. Reichen is a charter member of the Portland Chapter of the Society of American Value Engineers. He is also a member of Toastmasters International.

Quantitative Decision-Making Applied to Project Selection byR. E. Manelis

What constitutes a good VE project is determined by several factors, each important in its own right but of different rela-tive importance in the total consideration. This article des-cribes a quantitative approach whereby all factors are weighed and each potential project graded to determine its relative desirability.

RICHARD E . M A N E L I S is the Value Engineering Administrator for Raytheon's Missile Systems Division. He holds degrees from the University of Massachusetts ( B S E E 1 9 5 7 ) , the Uni-versity of California (MS 1 9 6 2 ) , and Suffolk University Law School (J.D. 1 9 6 8 ) . He is Secretary for the Governor's Exec-utive Council for Value Analysis in Massachusetts, National S A V E Conference Chairman for 1972, and a Registered Pro-fessional Engineer. As an instructor in management for Northeastern University, he has used local community projects for V E workshop classes. He is a member of the Creative Education Foundation, the Massachusetts Bar Association, the Boston Bar Association, and his local town committee.

17

Value Engineering Illustrated... Realizations of an Appliance Manufacturer by James D. Macintyre 21

Commercial industry in general, and the appliance industry in particular, require Value Engineeringor programs like it to remain competitive domestically * and internationally, ac-cording to Mr. Maclntyre. He discusses managements con-cern with cost improvement of a Whirlpool product and demonstrates how acceptance of VE as a legitimate tool by a product engineering group can improve the competitive posi-tion of a company. J A M E S D. M A C I N T Y R E is a Value Analyst for Whirlpool Cor-poration, St. Paul Division, St. Paul, Minnesota, responsible for initiating and implementing all Value Analysis activities for the division. He is a graduate of the University of Minne-sota, with a B. A. in Business. In addition to conducting Whirlpool V E seminars, he has lectured and contributed to TCC-SAVE-sponsored courses. Mr. Maclntyre has served as chairman for Twin Cities S A V E committees on a state govern-ment project, and is Vice-President of the Twin Cities chapter.

25 Value Engineering is Alive, Well, and Moving into Marketing by Thomas J. Snodgrass

This article traces the movement of the original value concept from a purchasing-oriented activity into its present major area of influence, engineering. Although the closely guarded information on value research does not appear in the literature, it is important to know that value research techniques are available and being used, with impressive results.

T H O M A S J . SNODGRASS is founder and President of Value Standards, Inc., a Chicago-based consulting firm. Previously, he was Manager of Engineering, Hotpoint Division, General Electric Company, accumulating fifteen years' experience in various General Electric Company departments. He is a graduate of the University of Wisconsin and Illinois Institute of Technology, with degrees in Chemistry and Metallurgical Engineering respectively. He conducts annual Value Engi-neering seminars for the University of Wisconsin and partici-pates in a variety of American Management Society seminars relating to Value Engineering.

29 Consumer Value by John R. Steinmetz

Mr. Steinmetz believes that the "secrets" of being an expert consumer are contained in the organized and systematic tech-niques of our Value Engineering methodology. National SAVE has formed a group assigned to this taskthe author will tell you about progress to date.

J O H N R. STEINMETZ is Manager of Value Assurance at the Federal Systems Division, Univac (Division of Sperry Rand Corporation), St. Paul, Minnesota. He has worked over 15 years in Value Engineering and Cost Improvement, with prior assignments in various manufacturing engineering capacities. Mr. Steinmetz earned a B S I E degree from Stout University and has taught many courses on V E and other subjects. He has held all Twin Cities S A V E offices and is now a Board member and responsible for Education, Professional Develop-ment, and Intersociety Relations.

Honorary Vice Presidents 1962

William M. Allen Chairman of the Board The Boeing Company Seattle, Washington

1962 Albert E. Everett

Dean, Northeastern University Boston, Mass.

1962 Marion L. Hicks

Vice President, tegal & Procurement -General Dynamics Fort Worth, Texas

1962 Charles F. Home

President General Dynamics Pomona, California

1962 Honorable Thomas D. Morris

Assistant Secretary of Defense The Pentagon

Washington, D. C. 1962

George T. Willey Vice President and

General Manager (Retired) Martin-Marietta Corporation

Orlando, Florida 1965

James A. Drain Chairman of the Board

Joy Manufacturing Company Pittsburgh, Penna.

1966 Thomas R. May

President Lockheed-Georgia Company

Marietta, Georgia

1966 Honorable George E. Fouch

Deputy Assistant Secretary of Defense The Pentagon

Washington, D. C. 1967

Honorable John A. Volpe Secretary of Transportation

Washington, D. C.

1968 T. A. Wilton

President The Boeing Company Seattle, Washington

1969 Lee E. Sheehan

Vice-President and General Manager Honeywell Inc., Ordnance Division

Minneapolis, Minn. 55343

Esteem Value in Consumer Products by CARLOS F A L L O N *

"The heart has its reasons which reason does not understand," said Blaise Pascal. These reasons of the heart, governed by emotion and judged by in-tuition, determine esteem value, which, in part, af-fects the exchange value and market value of con-sumer products. Therefore, if people want a little beauty in their lives, and they want it in living color, that is what we have to give them.

T H E GOOD, The True, The Beautiful, all represent human values. Of these, The Beautiful is the most nearly universal. Men have argued and shed much blood over good and evil and over what is true or not true, but even during an artillery duel, as the sun rises to herald a beautiful day, gunfire slackens, and enemies pause to admire the dawn.

The Beautiful is an intuitive, nonverbal measure of both truthfulness and goodness.

Farfetched? Let me use some down-to-earth examples. Color

T V is prettier than black-and-white. Why? Be-cause it is more true to life. It conveys more in-formationbrings us closer to the real world. Un-like black-and-white, it tells us that the peaches are ripe and that the girl picking them has blue eyes.

The turquoise-blue sea between Florida and the Bahamas is particularly beautiful in January and February. Its white caps progress gently under a clear, blue sky. At this season, far to the north, the weather is ugly. Skies are overcast, and sullen, dark-gray swells remind the seaman that he is sail-ing in the WNA (Winter North Atlantic), a region dreaded by marine underwriters.

Nobody is afraid of dark-gray water, but we are afraid of deception, of wrecking the ship on a sub-merged rock hidden by the ugly sea. The beauti-ful Caribbean, on the other hand, tells us the truth, shows us the shoals in light green and the clear channel in deep blue.

What is truth? I F BEAUTY provides an intuitive measure of truth, truth itself is a measure of the quality of informa-tion. Truthful information provides safety, and safety is good.

We could say, therefore, that The Beautiful re

* All rights reserved by the author.

veals The True, and The True reveals The Good, but intuition is more of a flash than a roundabout process. The Beautiful reveals The Good directly.

From beautiful to good B E A U T I F U L WEATHER is good weather, good for our health and spirit; ugly weather is bad weather, bad for the lungs, bad for our aches and pains, and downright depressing. It brings to mind a turbu-lent sea hurling flotsam on a lonely shore, while beautiful weather evokes a picture of happy people playing on the beach. There is something good about a pretty girl running along the beach. The balance and proportion of her healthy body, the smoothly flowing lines, the perfect harmony among all the parts, all fill us with a sense of approval, and if she is smiling, she is even more beautiful.

Aspects of value I N CONSIDERING BEAUTY as an intuitive measure of truth and of good, we cannot help but perceive that beauty, truth, and good are like the three strands of the cord of value, each supporting the others and all pulling together.

It is misleading, therefore, to separate values too arbitrarily, yet the human urge to classifyin order to understandhas led men to define vari-ous "kinds" of value. But classification seldom changes the nature of whatever is being classified.

Use value and exchange value T H E F I R S T F O R M A L classification of values, which we owe to Aristotle, was colored by the Classical Greek's love of individuality and by Greek contempt for trade, hence the use of a sandal to be put on the foot was more proper than the use of a sandal to be given in exchange.

But if the sandal cannot be put on the foot, it has no exchange value. If it can be put on the foot, but has little esteem value because it looks ugly and smells bad, it also has little exchange value. If it can be put on the foot, looks good, and smells like rich leather, but the town is in-undated with such sandals, it only has exchange value in another market.

Exchange value, therefore, is affected by use

T H E J O U R N A L O F V A L U E E N G I N E E R I N G 7

value, esteem value, and market value. All these interact, as Alfred Marshall put it, "Like a number of balls resting against one another in a basin."

Cost!... value? I L I K E TO T H I N K that one of the gods, at whose feet I worship, got drunk one night, and put Correa Moylan Walsh's Four Kinds of Economic Value into a value analysis reading list. It could be, however, that Satan himself introduced the book. The prickly concept of "cost value", though rare on this earth, is probably the dominant value in hell. It is neither a good nor useful example of any of the values we try to enhance in value analy-sis. When we break a pencil in front of an audi-ence to show that adding to the cost need not add to the value, we are not only demolishing the pencil, we are also demolishing Walsh's theory of "cost value".

From the value analysis standpoint, the aspect of economic value can be advantageously classified as:

Use value Esteem value Exchange value Market value

But we should not assume that by thus classifying them we are separating them from each other in real life. Analysis takes things apart to under-stand them. To function, they have to go back together.

Esteem value ISOLATING and condemning esteem value is per-haps the biggest trap in this respect. The right feel and appearance of military equipment contri-butes to the morale of the men and is a desirable form of esteem value. In American industry, the backbone of defense supply, esteem value serves two purposes: it provides competitive advantage a beautiful product is often less costly to make and easier, to sell than an ugly productand it guides the customer in selection of functionally better products because, in good design as in nature, form follows function.

Such principles of aesthetics as unity of de-

sign, simplicity, and economy also improve per-formance and reliability. The lucid formulation which the scientist calls mathematical elegance stems from the same source as the efficient de-sign of the inspired engineer. Both use their sense of aesthetics to let nature help them do what must be done in the cleanest, simplest, most economical manner.

Market value UNDERSTANDING market value helps avoid another trap, reducing cost at the expense of customer ac-ceptance. The customers speak through the mar-ket, as James M. Roche, General Motor's chair-man of the board, said at the 1968 stockholder's meeting. "In the dynamic and changing market for new cars, our customers through their pur-chases tell us what they want." r

Use value and esteem value are related to the physical properties which make a product satisfy the customer. Market and exchange value are related to its economic characteristics. The task of value analysis, with respect to consumer pro-ducts, used to be to improve such economic charac-teristics as cost and delivery, without detracting from the physical properties that make the cus-tomer want the product. The idea was to provide the same function for less cost.

But neither the same functions nor the same products can hold a market these days, much less break into a new one.

Fortunately, a scientific allocation of costs of-ten results, quite by accident, in a better product. Why not plan it that way? Improving the pro-duct at every opportunity is what it takes to stay abreast of competition. To move ahead calls for new ways to improve the product.

By bringing people from Marketing and Styl-ing into the value task groups, value analysis to-day is putting market-timing and appearance among such customer benefits as performance and dependability. It would be a gross waste of skills to tell such a blue-ribbon team, "Your job is to reduce cost, not improve the product."

By fully utilizing all the resources of its task groups, value analysis in the 1970's will create opportunities to make products not only more mar-ketable, but also more useful and beautiful.

8 T H E J O U R N A L

A C H A L L E N G E . . .

Value Engineering in Commercial Industry

by WALTER N . HEROLD

As T H E READER will no doubt have noticed, most of this issue of the JOURNAL is devoted to "Value Engineering in Commercial Industry." Recent expressions of the national S A V E officers (see the fall issue of the JOURNAL and the August issue of Production), as well as the advice of so prominent a practitioner as Larry Miles himself, all lend emphasis to the notion that the greatest opportunity for Value Engineering lies in commercial industry.

The question may be asked why we should separate commercial industry from other industry. The answer is simple: There is more of it! A lot more, let's say, than government- or defense-oriented industry. How much more can readily be seen by a few rough figures rounded off to make it easy for the reader.

Gross national product T H E GROSS NATIONAL PRODUCT will reach an esti-mated $942 or so billion in the year 1969. Not all of the gross national product is composed of man-ufactured goods. So, to keep things simple, let's just say that the value of the total manufactured goods for this year will be approximately $400 billion.

"For every dollar's worth of defense hardware we produce, we produce at least ten dollars' worth of commercial hardware. There are not quite 20 million people employed to produce all these goods. Not one in 7,000 is a Value Engineer! There are in this country only enough known (by that I mean; members of S A V E ) Value Engineers to have one Value Engineer available for about 300 business firms. Most of these Value Engineers are concen-trating their efforts in plants where defense con-tracts having Value Engineering clauses enforce ap-plication of Value Engineering. Yet, even if we dis-regard this gross maldistribution and would apply our available Value Engineers uniformly across the board to the available products, we would give each Value Engineer the opportunity to work on about $200 million worth of goods per year. If, on the the average, Value Engineers were only 1 percent effective, each would help to save $2 million during

that same year. Value Engineering asks us to "go where the

dollars are". I have presented this little exercise in numbers simply to show you where a vast op-portunity exists and to stimulate your imagina-tion to ask some questions, questions to which we must develop answers!

Almost everything ever said or written about Value Engineering, especially in presentations to management, has been hardware-oriented. No one has escaped the examples where one dozen screws have been replaced by a single spring; everyone by now "knows that a pencil makes a mark", and everyone knows that the function "make mark" is worth about a penny; every Value Engineer knows how to use a job plan, define functions, find alternatives, compare costs; and most man-agers have read about it. Most of us feel sorry for the poor managers who simply haven't realized yet what they are missing by not using Value Engi-neering to the fullest extent possible in their enter-prise. And that is, and has been, the story right along.

But have we really used our imagination, have we really used and applied what we have learned as Value Engineers to help further Value Engineer-ing in the area where the greatest opportunity exists?

VE 22 years old V A L U E ENGINEERING is now 22 years old. Value Engineering can no longer qualify as an infant-growth ought to be apparent! Growth means change, the very change we advocate, and yet, change in our presentations is lacking almost as badly as change is lacking in every other situation.

What do I mean by "change"? In this con-text, I mean that change is necessary in our atti-tude, a change in the orientation of our presenta-tion, a change in approach. I feel that it is no longer necessary to tell the world that Value E n -gineering exists. The business world knows it. I can no longer feel it necessaryor even useful to show our "before" and "after" mousetrap.

O F V A L U E E N G I N E E R I N G 9

Managers' problems TODAY'S MANAGER and today's management tech-niques have changed. Today's Manager is tuned to "return on investment, profit contribution, cost reduction, and value improvement."

And while they are thinking of cost reduction, we spend time explaining that Value Engineering is not cost reduction. At this point, we are tuned out because we are no longer addressing ourselves to the manager's problems.

So the useful presentation will of necessity be one which addresses itself directly to needs of man-agement, and, in order to make these presentations effective, we have to get answers to this question: "What are management's problems?"

Then, because we are Value Engineers, we must use all the techniques at our disposal to determine what produced these problems. We must find ways of solving them, and what the cost impact of the alternatives is if we want to learn where and how Value Engineering can best be fitted into an organization.

Some of this work is being done, with effective-ness, by consultants in Value Engineering. But even the most high-powered consultants will go through the information phase by using the knowl-edge of the people inside the organization. What I am suggesting is that all information necessary to develop answers to our question is already at hand. It lends itself to complete analysis by people trained in value work.

My personal experience, though limited to a small region of the country, would make me be-lieve that, at least in good times, companies are willing to spend the time and money to allow their employees to take part in various courses, work-shops, and seminars offered to teach people how to do Value Engineering ( I am not making any dis-tinction here between Value Engineering and Value Analysis. I feel that the distinction is one that may lead to semantic arguments, thereby masking the real purpose of this discussion).

When interest rates rise and profits are squeezed, there occurs a rote reaction which tends to reduce the enthusiasm with which firms spend money for activities whose immediate results are not mea-surable in added profit. And to the timid, the great publicity which currently surrounds the Ad-ministration's efforts to cool the economy might well be a signal to stand back while citing a com-mon road block, "Yes, but not right now!"

Now is the time W E V A L U E ENGINEERS, in particular, know that there has never been a more important time than the present to put our special talents to work. The

change in attitude for success in this endeavor is one that looks at a situation from the broader view-point of the Manager to whom we have to make our application.

Value Engineering is a technique for providing good value; it is a technique for improving prof-its; it can improve reliability; it can pinpoint new opportunities; it can lower costs and, in addi-tion, Value Engineering can be applied at all levels of a system and at all levels in a business.

Implementation at one level IDENTIFYING to determine where the level of im-plementation should be in each firm involves deter-mining where failure is most common. The func-tion, "Install V E " requires full support of the one person or agency who makes the program policy in the firm. It doesn't matter whether you find the opportunity in the Engineering Department, Man-ufacturing, or in Purchasing, or as a Staff Assistant to a General Manager. In your case, you must determine if the person to whom you make a pre-sentation is, in fact, the person who is able to in-stall a program. Once that determination is made, once that one person has been located, it becomes necessary to think yourself into his shoes. What is it he is trying to do, and how can you be most helpful?

At this point you will find many alternatives and several solutions. If you are addressing a Purchasing Manager you may have several ways to reduce cost of inventories, to save by standardi-zation, or to help in evaluation and selection of vendors. If you are addressing an Engineering Manager you may, in fact, have found a better, lower-cost mousetrap; if you are working with Manufacturing you may have found a lower-cost way of assembling pieces, some new material easier to machine. In each case you will be strongly tempted to make your presentation, emphasizing the specific item or activity which you have se-lected for a job that can be done better at lower cost.

Prime objective lost I F Y O U HAVE done your job well there is no reason why your proposal should not be accepted, and you will, in fact, help reduce inventories, find a better vendor, build a better mousetrap, or reduce assembly time from 7 to 6 minutes, but you will have missed the job you set out to do. You will have lost your prime objective because in all likeli-hood you have failed to "Install Value Engineer-ing" as an on-going action.

Many techniques can reduce inventory, help

1 0 T H E J O U R N A L

letters to the editor

To the Editor: Congratulations on the September issue of

the JOURNAL. Y O U and your staff are to be commended. I just hope the rest of the So-ciety provides the support you so well deserve.

I am still looking for a location with a company. In the meantime I am doing con-tract work for the Office of Economic Oppor-tunity. If it is successful I will have an article for you.

Yours for better value, W I L L GARISS, Seattle

Thank you, Will! The only reward any SAVE officer, local or national, asks is that his ef-forts help members and affiliates grow in sta-ture and recognition.

To the Editor: I've been reading over and over again the

announcement in S A V E Communications that you plan to feature for each issue of the J O U R N A L a theme as follows:

Fal l : V E in Defense Winter: Commercial Applications of V E Spring: V E in the Building Trades I find myself engulfed with particularly

negative emotions that come out as follows: 1. Since I'm in only one of these fields of

industry, perhaps I should get only one issue of the JOURNAL.

2. If I should wish to contribute to the JOURNAL, I'd better watch my timing or my issue may already have gone to press.

3. I guess this is an attempt to get broader coverage of more industrial areas in the JOUR-NAL, but it is likely I'll read only one issue and merely skim the others.

There must be other reasons for this

seemingly peculiar theme arrangement. Can '

t you give a clue? Best regards,

R A L P H I . M O R S E Rochester, New York

A theme does not constitute an entire issue and no issue will limit itelf to a single subject. However, some of our best know-how in VE comes from cross-fertilization. Try this issue and let's hear from you again.

To the Editor: Communcations is defined by Webster as

the giving and receiving of messages. If any message could be clearer than the number of members downgrading to affiliate, it would have to be outright resignation. These people are trying to tell S A V E that it should use its own principles in its own organization and not join in "me-too" activities in imitation of other technical societies. Our members make their livings by showing their employers how to reduce costsHow can you seriously expect them to support frivolities such as the J O U R N A L ?

Our best efforts at presenting V E material should be published in other societies' techni-cal journals and not buried under our own private publication. Only in this way can we make our story known to the rest of the technical press.

R O B E R T H . BOWERMAN Middletown, R . I . 02840 Affiliate

We encourage Value Engineers to publish wherever possible, but I don't believe that other technical societies gained their stature by only publishing their works in still other Society's publications. Lets hear some other members' responses.

O F V A L U E E N G I N E E R I N G 11

select vendors, improve reliability, or even reduce costs. To install Value Engineering your pre-sentation must show not the cost of a piece of hardwarenot even the profit which might be de-rived from changing this piece of hardwarebut instead the organization cost and return expected from a Value Engineering group. The presenta-tion must describe the planned activities of such a group. I t must outline the goals and the proba-bility of success, and i t must describe quite pre-cisely what support is required from the Manager to whom you make the presentation. I t must also define the authority and publicity needed to assure success of the program.

I am quite aware that some readers may think that such an approach is outside the prerogative of the average Value Engineer. Let me remind you then that the principle of deferred criticism should also apply to the presenter. In my contact with Value Engineers, and especially with those who are Value Engineers in name only without a f i rm base of responsibility, i t has become quite apparent that those who hope to work in commercial in-dustry are frequently frustrated by a lack of recog-nition of this very point. I t is not reasonable to wait unt i l Value Engineering is "discovered" by management. I t is more reasonable to use our skills to the best advantage for the f i rm with which we have chosen to associate ourselves. I f

our attitude is one of confidence, backed by skill and knowledge, and reinforced by a well-planned and "Value-Engineered" presentation, we can hard-ly fai l to make the impression necessary to further Value Engineering in commercial industry, pro-vided it is made at the proper level.

Let's return once more to the numbers I men-tioned in the beginning of this article. Five hundred billion dollars' worth of goods are pro-duced by somewhat over 300 thousand operating manufacturing establishments, each of which em-ploys an average of approximately 60 workers. The fact that there are only enough Value Engineers in the country to put one into one out of every 100 plants hardly constitutes a massive breakthrough. Sti l l , each of the 300,000 plus establishments is in business to try to show the very best per-formance possible. Only we Value Engineers can see to i t , by our own efforts, that Value Engi-neering wi l l be one of the useful tools helping each of these establishments reach its goals. I f we are successful in having Value Engineering accepted by commercial industry i t follows naturally that the goals of Value Engineering represented by SAVE wil l also be reached.

The president of SAVE closed his message in the fal l issue of the Journal with these words, " I t is a challenge to us a l l . " There is no way of describing the task ahead more succinctly.

Publications now available

2. (a)

(b)

3.

4 .

"App l i ca t i on of Va lue Ana lys i s / Engineer ing Sk i l ls " (A pro-g rammed instruction) $ 9.75 ea By: John W. Blyth, PhD/R. Glenn W o o d w a r d "Va lue Eng ineer ing /Ana lys is Bib-l i og raphy (Revised 1969 Edit ion inc lud ing Addendum) 8.50 ea. 1969 A d d e n d u m only . . . for those w h o have a l ready pur-chased 1967 Edit ion 3.50 ea. " H o w to Plan & Organ ize a V.E. Seminar " (A SAVE technical man-ual) 3.50 ea. "The Contractual Aspects of Va lue Eng ineer ing " 8.50 ea.. By:Nathan Kanton (Ava i lab le November 1969

5. "Va lue Engineer ing in Hospital A d m i n i s t r a t i o n " By: George R. W e e k s / D a v i d M. Cooper Ava i l ab le November 1969

6. Va lue Engineer ing Programmed Study Record (V.E. workbook )

7. Na t iona l Conference Proceedings 1969 (Two volumes . . paperback edi t ion . . . l imi ted quant i ty )

Member Cost Non-Member Cost

1966 (Hardback edi t ion) Member Cost Non-Member Cost

1 967 (Hardback edi t ion) Member Cost Non-Member Cost

1 968 (Hardback edit ion) Member Cost Non-Member Cost

1969 (Hardback edi t ion) Member Cost Non-Member Cost

8.50 ea

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10.00 ea. 8.50 ea.

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Items stocked at National Business Office 1. Member Button (Screwback) $2.00 ea 2. Member Tie Tac 2.00 ea 3. Past President (Chapter) 10k Gold 5.00 ea 4. Nat iona l O f f i c e r 1 0 k Gold 5.00 5. Member C h a r m 1 4 k Gold 7.50 ea, 6. Member Charm on 1 " Gold Disc 7.50 ea, 7. Cuf f Links 6.95 pr. 8. Tie Bar (grip) 6.95 ea.

9. Tie Chain 6.95 ea. 10. Money Cl ip 6.95 ea. 1 1 . Scripto Vu-Lighter w i t h SAVE Emblem 1.95 ea. 12. SAVE LogoGlossy Print 13. SAVE Decals

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(Send your order wi th check to SAVE National Business Office, Windy H i l l , Suite A - l 1741 Roswell Street, Smyrna, Ga. 30080.)

12 T H E J O U R N A L

VE Hits the MP*

by J O H N E . REICHEN

Following are some excerpts from two presenta-tions made at meetings of the Portland, Oregon SAVE Chapter, 4-10-69 and 5-15-69. The sub-ject was "Selling Value to Management".

ABOUT TWO YEARS ago I planned to introduce V E into Switzerland, mainly to gain V E experience under foreign conditions. The following won't be a blow-by-blow description of what took place but wi l l highlight my more interesting experiences.

No VE for Swiss? A T T H E OUTSET , a management consultant in Zu-rich declared flatly, in a very lively dialogue, that ^ Switzerland and V E were incompatible. His rea- x yj^Qfr/Qt sons, in addition to the usual roadblocks, were:

Change is unnatural.

To the Swiss, criticism, no matter how con-structive and subdued, appears unethical.

Without high costs, there can be no quality.

The Swiss are, after all, world-famous for being the savingest, Americans, the most wasteful:

O F V A L U E E N G I N E E R I N G 13

Logical conclusionU.S. needs V E , Switzer-land does not.

Here was a challenge! Also, I noticed a course advertised at the Swiss Federal Institute of Technology, "Economic Design Practice by Value Analysis". Since the consultant had just claimed V E could not possibly be used in Switzerland, I promptly signed up for the course to check this enigma firsthand.

The course started with this premise: In order to minimize costs of items, you must know the parts' essential functional requirements. That sounded fair enough. "Function" was used in about every other sentence, but the instructors used it to imply how inexact a part could be and still function. It all amounted, really, to a functional dimensioning course, introducing geometrical and statistical tolerancing methods. These instructors insisted that was the only way V E could be taught. The course was excellent on cost-con-

scious electromechanical design, but it was not cost-oriented.

Going to work A B O U T 30 interviews with 14 prospects resulted in my going into design for a maker and distri-butor of audio-electronic instruments. His pro-duct had the reputation for being well-engineered and of top quality. The firm, with about 500 em-ployees and workers, was strictly a one-man show the chiefs. Actually, he didn't particularly react in favor of V E either, so I hoped to gain his con-fidence by working out a tailor-made program, and looking for the psychological moment to bring up V E .

Three months later, a newly hired general manager concluded a technical meeting with: "We're not trying to put you (a vendor) down; we want to reduce costs here with value analytic techniques." Minutes after the meeting I cornered the Manager. Of course, his idea about V E still focussed on cost reduction and industrial engineer-ing, holding the attitude, "We're doing it already." After a "Fine, I hope to fit right into the program," from me, I was told there was no program. For-tunately, his interest was aroused at the meeting by my talk about potentials of Cost Avoidance.

Our conference ended with an order to come up with a Cost Avoidance Plan for the firm in one month. The manager liked my outline, except that he wanted about 10 variations of training methods proposed for selection. He must have seen the handwriting on the wall for he spelled out some limits: Involve only the technical area, don't touch existing organization, and don't emphasize change.

My regular designing, and my cost-conscious-ness, met with the chiefs approval, however, many ticklish points remained. A program out-line, now in 10 variations, was examined, but still brought no official green light.

The news at that time was full of the latest advances in Japan: Fastest GNP rise, first in shipbuilding, second in electronics in the world, etc. I interpreted this to the manager as, in part, an effect of the Japanese putting V E in high gear. Also, at this time a S A V E Newsletter mentioned increased V E activity. This, coupled with some more overkill on my part, finally produced action. Management specified a limited program of one team, no seminar, and training on workshop pro-jects at least one day (but not necessarily more) per week. The program was to start in three months. Meanwhile, we would work our details of funding, facilities, project selection, preparation of a manual, etc.

14 T H E J O U E N A L

Particle analysis O F COURSE, I keep looking out all the time for any new ideas and techniques either originated, modi-fied, or applied differently in Europe. One thing new to me was Particle Analysis. This technique is used to identify and eliminate all unnecessary material particles, if I may take license with the definition.

The basic procedure of Particle Analysis is quite primitive: One draws the views (usually three) in orthographic projection of the existing item on mm-graph paper, then makes a red "x" in all squares within the part outline which are not essential to the parts function. All unmarked squares within the original outline approximate the shape of the new part. The result is drawn as an isometric figure from which one decides on the optimum material and process combination to get an economically feasible item.

As I understand it, the two-word function defi-nition is one prime tool and distinctive feature of V E . In all the literature I scanned over there, and from talking to V E instructors, I found little evidence of this. For an electrical wire, for in-stance, our definition would be "conduct current"; theirs, "conduction of x amps of electrical current". (The German language allows the two-word defini-tion just as easily as English.) My mentioning these points brought quite a few sneers for the overly simple and illogical American.

Also there was this three-phase job plan. To

O F V A L U E E N G I N E E R I N G

give a thumbnail sketch: It starts without an Information phase, but with a Function Analysis phase. The purpose of this phase is to reduce the number of parts in an assembly to a minimum by questioning each element, and eliminating it or combining it with another one fulfilling the same function. An example called out two different primary functions and several unspecified second-ary functions. This was followed by the Particle Analysis as phase two. The final phase, called Model and Proposal, asked for a prototype of the results from the previous work to be sub-mitted along' with a change request to manage-ment for approval. According to their story, that is all there was to V E .

VE manual I T TOOK three attempts to generate a manual for the new V E activity. The final version is a partial translation of H i l l into German, omitting all references to the military, as well as to anything not essential for immediate use. When editing the manual, I added a few special chapters and standarized the nomenclature of the Job Plan to have the names' initials in alphabetical sequence:

Phase German American

A Anfangsarbeiten Information B Beschaffung von

Moeglichkeiten Speculation C Charakterisierung Analysis D Durchfuehrung Implementation E Endarbeiten Reporting

The original reason for my doing this, to make teaching easier, became secondary in the end; the main advantage gained was in the numbering of worksheets: Project No.PhaseSheet No., etc. This automatically sequenced our filing jobs, co-ordinated status control, and references to earlier work were considerably simplified.

Operations begin As OPERATIONS started, the manager said, "We're really none too keen for new proposals. We have a big backlog of perfectly good value-improvement change proposals. If these cannot be implemented, more will be worse!'' The first thing on the agenda, then, was to get action on" these changes. This change implementation had more benefits than ex-pected. Examples were:

The change proposal stack was lowered, creat-ing a vacuum.

Management was shown how much was or was not saved.

15

Other departments got a little taste of working with us.

I t gave the team pretraining since a f u l l sem-inar was out.

Savings from the change implementation were not credited to the V E program, but neither was our time charged to i t . Hence, we trained for free as far as the books showed.

In more than half the cases, our VE projects came about for one reasonexisting items costs had gone completely out of proportion when an engineer added features for a new-generation in-strument. Figure 1 shows such a device. I t

is the cross section through the upper portion of a special turntable which was then to be "VE'd" .

Originally, the rotor was stopped, as desired, by a manually actuated detent in one of two locations. Costs for this were predicted Kn= 18,000 in the coming year (the money unit is Swiss franc, equivalent to about $.25). One reason for the re-design was that i t must be stoppable and releasable directly from the electronic circuitry at any location.

The new design (figure 1) consisted of 32 parts and its costs were estimated at K i =50,000. Figure 2 shows the device after an engineer gave i t a going over by the just-mentioned three-phase VE method. This version now had 26 parts and the estimated savings amounted to 17,880, or a

reduction of 35 percent from the original item. With costs still at K 2 = 32,320, our team was per-

mitted to work at i t . We chose to work mainly on the "prevent turning" function since this func-tional area contributed the highest costs. For simpli-city's sake, we assigned as its worth the original cost of K = 18,000.

From several possible alternatives, we picked two: one to submit and one as backup. Figure 3 shows the one approved by management for imple-mentation. The number of parts was down to 20 and the estimated costs K : i = 24,480. This meant additional savings of 26 percent beyond the three-phase "VE 'd" units, or 51 percent saved overall from the first design proposal (figure 1) . This " V E ' d " device was, incidentally, easier to assemble and performed better and more reliably than any previous unit, while retaining all necessary features expected of the new design.

Our team finished 18 projects in half a year, saving 528,705 net or 43 percent (on individual projects the minimum was 19 percent, the high 90 percent). The effort had a return ratio of 12:1; that is, 12 francs saved for one invested.

After this kind of start, management was very enthusiastic about VE. Also, we got the red

carpet treatment from nontechnical people and nonparticipating departments such as Purchasing, and, of course from vendors. As the program progressed, something happened which caught me by surprise. Lower echelon people in Production, Quality Control, etc., who were very skeptical at first, warmed up to VE's activity and came forth increasingly with suggestion and help. I felt we were really getting through with unusual ease. But the more active these became, the more man-agement cooled off. Creative thinking, i t ap-peared, was in some places the exclusive domain of chiefs.

Aside from the just-cited turn of events, I feel my foreign VE experimentation was an unquali-fied success. This particular program wi l l proba-bly not remain permanent in its conceived form, if at all. But the initial success, at least, should assure us that VE can be sold to management, even under difficult situations.

16 T H E J O U R N A L

Quantitative Decision - Making Applied to Project Selection by R . E . MANELIS

Selection of projects often is done solely on the basis of cost. What constitutes a "good project", however, is determined by several factors, each im-portant in its own right but of different relative importance in the total consideration. This arti-cle describes a quantitative approach whereby all factors are weighted and each potential project graded to determine its relative desirability. The factor weights and grading scale are determined ob-jectively and examples are used to demonstrate the process.

Selectionchance or choice? P R O J E C T SELECTION has long been a critical area for value engineers. Choosing the right project can mean the difference between failure and im-pressive savings. This article proposes a method which, while not a guarantee for success, provides for objective selection of Value Engineering pro-jects.

There are many factors bearing on the selection of suitable projects. I t is virtually impossible for one person, or even a group, to evaluate project potential through composite perception. Only a quantitative approach provides for examination of projects against each of many factors. This ap-proach incorporates a weighing process whereby each factor considered is examined in the light of its relative savings potential.

The quantitative process can be compared to grade-point averaging in college, where each course carries a weight expressed in credit hours indica-tive of its importance. Each student is evaluated in each course and his total grade points deter-mine his relative class standing. By applying this concept to project selection, each potential project can be evaluated against a set of weighted factors and its overall desirability as a project determined. The quantitative process, demon-strated here, follows the following sequence:

a> Determine all factors bearing on project se-lection.

b) Define all factors specifically to avoid over-lap.

c) Determine relative merit (weight) for all factors.

d) Establish grading scale for each factor. e) Determine for each project its grade for each

factor. f ) Compute score for each project.

Factors and definitions T W E L V E FACTORS and their definitions are pre-sented in Table 1. The reader wi l l note that the list is hardware-oriented but can be changed to

7 )

8 !

io:

I D

COST - THE DOLLAR EXPENSE OF THE ITEM FOR TOTAL QUANTITY; EXPRESSED AS DOLLARS PER YEAR OR DOLLARS PER CONTRACT.

COST-TO-VALUE RATIO - THE RATIO OF UNIT COST TO UNIT VALUE (AN INDICATION OF DOLLAR SAVINGS POTENTIAL) .

PROBABILITY OF IMPLEMENTATION - THE REASONABLENESS OF THE EXPECTATION THAT A SOUND PROPOSAL WILL BE IMPLEMENTED (POLIT ICS, SCHEDULE, E T C . ) .

STATE-OF-THE-ART - THE EXTENT TO WHICH A PROPOSED PROJECT APPROACHES OR SURPASSES THE EXISTING S T A T E - O F - T H E - A R T . (BEFORE PRODUCTION R E L E A S E . )

VARIETY OF DISCIPLINES - THE NUMBER OF TECHNICAL AND NONTECHNICAL DISCIPLINES INVOLVED IN THE DESIGN ( E L E C T R I C A L , MECHANICAL, CHEMICAL, E T C . ) .

AVAILABILITY OF NEEDED TALENT - THE EXTENT TO WHICH THE NECESSARY TALENTS FOR PROJECT STUDY WILL BE AVAILABLEINTERNALLY OR EXTERNALLY.

NUMBER OF PARTS - NUMBER OF PARTS INVOLVED, INCIDENTAL HARDWARE.

COMPLETE FUNCTIONAL A S S E M B L Y - T H E EXTENT TO WHICH THE PROPOSED PROJECT REPRESENTS A COMPLETE FUNCTIONAL ASSEMBLY.

NUMBER OF MANUFACTURING OPERATIONS - NUMBER OF PROCESSES INVOLVED IN THE MANUFACTURE ( E . G . , DRILLING, MACHINING, MILLING, E T C . ) .

NUMBER OF MATERIALS - E . G . , BRASS, ALUMINUM, E T C .

PROBLEM CHILD - THE EXTENT TO WHICH THE EXISTING DESIGN IS AN ACKNOWLEDGED PROBLEM ( E . G . , WEIGHT, S I Z E , LOGISTICS, SCRAP, REWORK, PERFORMANCE, COST, SINGLE SOURCE, F IELD S E R V I C E , SCHEDULE, E T C . ) .

COOPERATION AND INFORMATION - THE EXTENT TO WHICH NEEDED INFORMATION AND DATA ARE AVAILABLE.

TABLE I. PROJECT SELECTION FACTORS

O F V A L U E E N G I N E E R I N G 17

1 2 3 4 5 6 7 8 9 10 1 1 12 TOTAL

1 . COST X 0 0 2 2 1 2 1 2 2 0 0 12

2 . COST-TO-VALUE 2 X 1 2 2 2 2 2 2 2 1 1 19

3 . IMPLEMENTATION 2 1 X 2 2 2 2 2 2 1 1 19 4 . S T A T E - O F - T H E - A R T 0 0 0 X 1 0 0 0 0 0 0 0 1

5 . DISCIPLINES 0 0 0 1 X 0 0 0 0 0 0 0 1

6 . TALENT A V A I L A B L E 1 0 0 2 2 X 2 1 1 1 0 1 1 1

7 . NO . OF PARTS 0 0 0 2 2 0 X 0 0 0 0 0 4

8. FUNCTIONAL ASSEMBLY 1 0 0 2 2 1 2 X 2 2 0 0 12

9 . OPERATIONS 0 0 0 2 2 1 2 0 X 1 0 0 8

1 0 . MATERIALS 0 0 2 2 1 2 0 1 X 0 0 8 1 1 . PROBLEM 2 1 1 2 2 2 2 2 2 2 X 2 20

1 2 . COOPERATION AND INFORMATION 2 1 1 2 2 1 2 2 2 2 0 X 17

T A B L E I I . DETERMINATION OF RELATIVE MERIT

reflect other types of projects or industries being considered.

I t should be pointed out that factor definitions are extremely critical and should not overlap. I f a given criteria is covered by two or more defini-tions, i t wi l l have an unrealistic additional weight in the final computations.

COLLEGE GRADING ANALOGY:

AVERAGE

GRADE

7 0 _ 8 0 _ 9.0 100

2 I 3 4 CREDITS

EXAMPLE 1: COST

SCALE $

GRADE PTS.

10K 350

~7"TT~

PROJECT INVOLVES S350K; THEREFORE GRADE = 7 . 1

EXAMPLE 2: PROBABILITY OF IMPLEMENTATION

0 8 PROBABILITY

GRADE PTS.

80% PROBABILITY OF IMPLEMENTATION; THEREFORE GRADE = 8.0

EXAMPLE 3: DISCIPLINES INVOLVED

1 3 _

Relative merit O B J E C T I V E RATING of the relative merit of factors can be done with the type of chart shown in Table I I . Each factor is compared for importance with every other factor and a weight of two points allo-cated with each comparison. Again, allocation wil l

depend upon the situation of the user. The objective is to deter-mine the relative importance of various factors so that evaluation of a project becomes less subjective, less intuitive and more scientific. Re-ferring to Table I I for an example: where factor three (probability of implementation) and ten (number of materials) are compared, i t was felt that number three was of greater im-portance in project selection. Three was given two points and factor ten, no points, as shown in the circles. Because the weights are added hori-zontally, the two points are placed in the row of factor three and in the column of factor ten. The zero is placed in the row for factor ten. When all comparisons are made, the weight for each factor is simply the total of all points in that row.

500K

10

QUANTITY

GRADE 10

IF 2 DISCIPLINES INVOLVED, THEREFORE GRADE = 5

IF 4 DISCIPLINES INVOLVED, THEREFORE GRADE = 10

Grading scale

FIGURE 1 . SCORING LINEAR EXAMPLES

I N T H E C O L L E G E GRADE POINT SYSTEM, each course has a grade scale of from 0 to 100. Each student is given a grade (4-credit A, 3-credit B , etc.), depend-ing upon where in that scale his abil-ities fal l . Similarly, for quantita-tive decision-making, i t is necessary

18 T H E J O U R N A L

A L T E R N A T I V E S : FACTORS (WEIGHT)

PROJECT A

PROJECT B

1 (12 ) _ 3 - ^ ^ ^ 9 6

2 ( 1 9 )

3 ( 1 9 ) 3 ^ ^ - ^

57 7 "

1 3 3

4 ( 1)

5 ( 1) 5 "

5

6 ( 1 1 ) 10 - "

7 ( 4 )

8 (12 )

9 ( 8 ) s

64 J L - ""~40 10 ( 8)

""""""sg -

11 (20) 0 "

_ - 0

12 ( 1 7 ) _ J ^ T l 9 ^ ^ 1 9 "

TOTAL 808 757

F A C T O R L O W TTIGH

C O M M E N T S

1 . C O S T S 1 0 K 5 0 0 K AND U P

P R O J E C T S UNDER 1 0 K G E N E R A L L Y NOT P R A C T I C A L

2 . C O S T - T O - V A L U E 5 TO 1 1 0 0 TO 1 AND U P

IF UNDER 5 TO 1 P O T E N T I A L IS POOR

3 . I M P L E M E N T A T I O N 0 1

IN T E R M S O F P R O B A B I L I T Y

4 . S T A T E - O F - T H E - A R T 0 1 0

0 = R O U T I N E , U N C R E A T I V E , D E S I G N 1 0 P R O P O S E D A D V A N C E IN S T A T E - O F - T H E - A R T

5 . D I S C I P L I N E V A R I E T Y 1 3 AND O V E R

Q U A N T I T Y T E R M

6 . T A L E N T A V A I L A B I L I T Y 0 1 0 0

E X P R E S S E D AS A P E R C E N T A G E

7 . N U M B E R O F P A R T S '.

B E L L - S H A P E D R E L A T I O N S H I P - S E E D I S C U S S I O N N E X T S E C T I O N

8 . F U N C T I O N A L A S S E M B L Y 0 1 0 0

E X P R E S S E D AS A P E R C E N T A G E

9 . M A N U F A C T U R I N G O P E R A T I O N S 1 10 AND O V E R

Q U A N T I T Y T E R M

1 0 . M A T E R I A L S 1 5 AND O V E R

Q U A N T I T Y T E R M

1 1 . P R O B L E M 0 . 5 E I T H E R Y E S OR NO

1 2 . C O O P E R A T I O N / INFORMATION 0 1 0 0

E X P R E S S E D A S A P E R C E N T A G E

T A B L E IV. DECISION MATRIX T A B L E I I I . GRADING S C A L E S

to establish a grade scale for each factor. Once this has been done, a project can then receive a grade indicative of its place on the particular factor grade scale. This grade wi l l then be multiplied by the factor weight. To establish grade scales for fac-tors not generally measurable is diff icult at best. The scales which have been selected (Table I I I ) are for purposes of demonstration and should be changed to reflect a particular situation.

Grade determination To DETERMINE a grade for each project as against each factor, an arbitrary maximum of 10 has been selected. Each factor which can be expressed by a linear measure can be set off against the 10-point scale, and projects graded appropriately. Figure 1 shows this for linear examples.

As the number of parts in an item increases, its potential as a Value Engineering project also in-creases. However, a point of diminishing returns is reached where i t becomes more practical to di-vide the item into several "subprojects" for appli-cation of VE techniques. Therefore, when measur-

NUMBER OF PARTS

5 10 15 2 3

PROPOSED PROJECT HAS 2 3 P A R T S ; GRADE THEREFORE IS 8

FIGURE 2 . SCORING - B E L L CURVE

ing the potential of a particular item for Value Engineering, this relationship of parts to score is best represented by a bell-shaped curve. Figure 2 shows the application to bell-shaped relation-ships.

Resulting grades can then be placed in the upper left portion of a decision matrix, as shown in Table I V . The individual products of grade and factor weight are entered in the other half of the square. These products are then added verti-cally to give the total score for the proposed project.

Many who use quantitative methods prefer to normalize the factor weights so that they total 1, 10, or 100. The rationale behind this is that the maximum total score then becomes 10 or 100, depending upon the grading scale used. This ap-pears to provide no practical advantage and adds another step to the process.

Conclusion T H E DECISION MATRIX can be used for any quan-t i ty of projects. When the total project weights have been established, the best potential project wi l l have the highest total. After one works the quantitive process on several projects and analyzes prior successful and unsuccessful projects, an appro-priate allocation of weights and grade scale values can be made. With experience, a threshold value can be established and a single project can then be evaluated against this figure. I t is also suggested that some industrious reader prepare a set of nomo-graphs for project selection, which would, carry this quantitative method one step further.

I t could be argued that this organized method-ology is no stronger than the experience of the individual using it. However, i t does serve as a forcing technique to require consideration of all elements bearing on project selection and is at least one step removed from complete subjectivity.

O F V A L U E E N G I N E E R I N G 19

The JOURNAL needs you! The following editorial first appeared in the Sep-tember issue of the JOURNAL. This issue reflects a part of your response which has been wonderful. It is repeated in the hope that with an even greater input from an ever widening field of interest and concern, we can fulfill our goal of a larger and more useful publication. We hope soon to be able to publish monthly and to reach many outside the Society's membership with the expanding benefits of applied Value Engineering. Thank you for your contributions! Keep them coming! Route your copy of this issue to concerned people in your or-ganization. Urge your library to be a subscriber. B I L L D E A N , Editor

T H E JOURNAL O F V A L U E ENGINEERING is the tech-nical spokesman of the Society of American Value Engineers and its members. It also wishes to serve and reflect the ideas of those interested in the V E technology who are not now members of the so-ciety. It is Value Engineering methodology, appli-cation and benefits in all facets of business, indus-try, service organization and Government.

Both the Society and the V E methodology are currently in a state of dynamic growth. Most practicing value engineers recognize the urgent importance of achieving maximum utilization of our invested resources. The elimination of waste is critical to a healthy economy. Knowing the po-tential of applied Value Engineering, the society feels responsible for the continued development and greater utilization of V E in behalf of the fullest pos-sible achievement of its economic benefits.

To fully exploit the advantages and benefits of V E requires an outreach to building trades, raw material manufacturers, institutions, and the entire complex of commercial and industrial enterprise as well as expanded Government and defense usage. New horizons also exist for application of Value Engineering to systems, software.

It is the purpose of the journal to report current advancements experienced by our readers, and to capture the interest of personnel and organizations outside our society as well as within. Only through the sharing of ideas can each of us experience in-creased benefits for ourselves and extend these ben-efits in a competent and professional manner to the many potential users.

Your JOURNAL, therefore, solicits your articles, short subjects, and experiences on all facets of value

engineering from all practicing value engineers. We are particularly desirous of receiving articles, pro or con, about value application or related fields, and problems and solutions from those out-side the society membership. For those who would like to submit material for publication, an author's guide and instructions on preparation is available on request. Members of the Editorial Review Board are located throughout the nation for your convenience and assistance. Direct your articles, short subjects or inquiries to:

Robert Bidwell, Chairman Editorial Review Board DOD Value Engineering Services Office-DEVO 8D 376 Cameron Sta., Alexandria, Va. 22314

or:

W. B. Dean, Vice President-Communications 5204 Benton Avenue, Edina, Minnesota 55436

Poga 1 STATEMENT O F OWNERSHIP,

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1. DATE Of NUNC 11 TITLE Of PUBLICATION '; -J.-9/24/69 | The J o u r n a l o f V a l u e E n g i n e e r i n g ' ''.

J. FMOUfHCY OF ISSUE Q u a r t e r l y . ' y ^

4. ICKATION Of INOWH OFFICE Of PUWICATIOM (Slrttl. lily, catmtj. 11*11. ZIP tcji) 410 W. V e r o n a S t r e e t , K i s s i ramee , F l o r i d a 32741 ( O s c e o l a c o u n t y )

i. LOCATION Of THE HEADOUARTERS CM GtMRAi IIISMIU OtfKti Of THE FUMISHEtS /Kef prittml

7715 W i s c o n s i n Avenue , Wash ington , D . C . 2O014 6. NAMES AND ADDRESSES OF PU WISH EH. EDITOR. AND MANAGING EDITOR ruusHE ff-u-, .JJrcu) s o c i e t y o f Americ

Windy H i l l , S u i t e A - l , 1741 E an v a l u e o s w e l l S t

l e , & 3 i n a ,

E n g i n e e r s , I n c . , N a t i o n a l B u s i n e s s O f f i c e , r e e t . Smyrna; G e o r g i a 30080

W. B . Dean , 5204 Benton Avem

an v a l u e o s w e l l S t

l e , & 3 i n a , M i n n e s o t a 55436 MANAGING EDITOR (HaKt and aJirni)

P a t Benn .

7. OWNER (If owned by a corporation, its name and address- mast be staled and also immediately thereunder the names and ad-dresses of stockholders owning or holding I ptritnl or more of Mat amount of stock. If not owned by a corporation, the names and addresses of the individual owners must be given. If owned by a partnership or other unincorporated firm, its name and address, as well at that of each individual must be given.)

NAME AMMESS 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 : 7315 W i s c o n s i n A v e . , W a s h i n s t o n , C . 20014

8. KNOWN BONDHOLDERS. MORTGAGEES. AND OTH Of BONDS. MORTGAGES OR OTHER SECURITIES (If there

R SECURITY HOTOERS OWNING OR HOLDING 1 PERCENT OR MORE OF TOTAl AMOUNT

NAME

None

9. FOR COMPIETION BY NONPROFIT ORGAMZAT1ONS AUTHORIZED TO MAIL AT SPECIAL RATES (Section 132.122, Postal Manual) {Check tni)

Th pwpoie, function, onrf nonpiofil ilolut of thii or- [1 Hov net rhgng.d || Have changfd dgr.na (If changed, publisher must gonJzoiion ond th. lempi itah.. Iw FTerol incom. ta* 11 d u f i n a p,K.tlinS 12 11 pending 1 2 moniht submit explanation of change pwpo> monlhi wlb this statement.)

10. EXTENT AND NATURE Of OSCULATION "Zu"s "K.1?",o ZS?ZL

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G. TOTAL (Sum aj E & f-4wU tquol net prrst mm lisirw m A) 3 , 0 1 1 2 , 8 8 2 .

J ^ (Sigma/are c/ eJilor. prilirber. m*..g,r. or I certify rfijt the ititcmcnts midc by me above are comet

20 T H E J O U R N A L

Value Engineering Illustrated:

Realization of an Appliance Manufacturer

by JAMES MACINTYKE

The author first comments on the need for Value Engineering in the appliance industry, discusses briefly Value Engineering's relationship to other cost improvement programs, and then proceeds to relate the circumstances behind managements con-cern over cost improvement of a product manu-factured by the St. Paul Division of Whirlpool Corporation. The four projects used as examples are intended not only to demonstrate Value En-gineering's contribution towards product profita-bility, but also to serve as a testimonial to the progressive attitude of a product engineering group that has accepted Value Engineering as a legiti-mate tool helping to improve the competitive posi-tion of its company.

The need COMMERCIAL, INDUSTRY in general, and the ap-pliance industry in particular, require Value E n -gineering or programs like it to remain competi-tivenot only domestically but also international-ly. Mr. Glenn Evans, President of Warwick Cor-poration, speaking before a meeting of Cost Im-provement people had this to say: "In the last ten years, the growing flood of well-made, low-cost imports from Europe and Japan have presented a serious challenge to U.S. industryeven putting the future of some in doubt.

At the present 20 percent of U.S. black and white T.V. sets, 68 percent or 25 million radios, and 75 percent or over 33 million tape recorders are produced in the far east. Several American manufacturers have surrendered to the point of having parts or entire radio sets made in Japan under their own brand names. Add to this the Common Market influence in Europe, and we are faced with an ever-increasing flow of foreign goods into our market. As always, competition rears its formidable head.

Programs that help M O S T COMPANIES today have programs directed at getting the costs cut of their products. Indus-trial Engineering, Work Simplification, suggestion boxes, Cost Reduction, Zero Defects, and Value Engineering are, to varying degrees, utilized to meet this end. The questions are: Why the need for all these separate programs? Are they at cross-purposes with one another? Without compiling a dissertation on the objectives, scopes, and values of the previously mentioned programs, let us brief-ly pinpoint their respective relationship within the Cost Improvement family.

Industrial Engineering and Work Simplifica-tion can be considered as primarily concerned with feeds, speeds, and work movement, the most effi-cient method of performing the task. This can be down on the production line or it can be con-cerned with the flow of office paper work. Zero Defects, as the name implies, is a function of the Quality Control department, orientated towards sustaining or building customer confidence, with Cost Improvement occurring only as a by-product through decreased rejects and rework.

VE and cost reduction A SUGGESTION BOX system generally yields that which we define as Cost Reduction. Tradition-ally, Cost Reduction efforts start with the known costs of parts such as production components, and reduces their cost of manufacture. Practi-tioners of Value Engineering have claimed that true V E goes beyond ordinary Cost Reduction by attempting to achieve a component's function most economically. In fact, it may accurately be said that through the V E methodology not only func-tions but all facets of Cost Reduction are ex-ploited.

O F V A L U E E N G I N E E R I N G 21

Value Engineering then provides us with a much broader base and much wider spectrum for realization of savings. Paradoxically, it should now become evident that while all Value Engi-neering efforts are directed at Cost Reduction, most Cost Reduction attempts may not be con-sidered as true Value Engineering. This seems to be the case in the vast majority of V E representa-tions by trade journals which seem limited to material or process changes. All would have been arrived at through Value Engineering, but were probably generated by conscientious efforts of en-gineering or procurement department in reevalu-ating requirements. Examples of in-depth V E have generally been found in the ordinance field and made known in related publications.

Commercial VE W H A T T H E N has been Value Engineering's con-tribution to commercial industry? Unfortunately, company proprieties and the absence of a central monitoring authority, such as the Department of Defense provides, make it difficult, if not impos-sible, to measure Value Engineering's total worth to commercial industry. It is possible, however, to discuss how Value Engineering has assisted a specific company to improve its profitability. For this purpose, let's review the recent history of a product manufactured by the St. Paul Division of Whirlpool Corporation.

In terms of different types of products engi-neered and built, St. Paul is the Company's most diversified and complex operation. Through the years, products developed by the Division have later required phase-over to a facility with greater production capacity. Thus the maintenance of sales and employment levels requires one of two

actions: either a new product must be developed, or an existing one made more attractive to the consumer. The second could be accomplished by adding features, aesthetics, convenience, etc., but probably would have a faster market reaction through decreased cost to the consumer. This is where Value Egineering can best enter the pic-ture. (A paper covering the first alternative is in process for presentation at the S A V E National Convention;. therefore it will not be further de-veloped here.) The second, which has historically had the attention of Value Engineers, can best be appreciated by use of examples.

Developing a VE story T H E PHASE-OVER transition of an Ice Maker was in process last year at the time a Value Engineering seminar was to commence. Looking to the future, Mr. L . G. (Bit) Holder, General Manager, pro-posed that instead of working on diverse products during the seminar, the workshop be devoted to "value-engineering" the Ice Maker product. He, along with others, thought that this line could well be a sought-for product replacement.

I suspect that having read thus far many of you might feel that a shift in emphasis from training to results had compromised the seminar's primary function. In a sense this could be correct; yet in a more positive sense, the situation might better be viewed in light of presenting an oppor-tunity to practice the V E methodology in an area which would be of most benefit.

Project selection resolved I N A L L TRUTHFULNESS, the Value Engineering department was not especially enthusiastic about

Larry Miehal, Project Draftsman for the Ice Maker manufactured by Whirlpool Corporation Doints to the Value Engineering wire form used to support the cutter-grid and evaporator. In his left'hand he holds the old sheet metal support assembly.

Jackie Callanan, Engineering Steno at Whirlpool, removes the false bottom which Value Engineering has shown to be no longer required on the Ice Maker.

corrimitting themselves to a product with limited production volume in comparison to products with hundreds of thousands of units available else-where. It is obviously a great deal easier to achieve a $25,000 savings by reducing costs 50 on 500,000 units than it is to cut costs $5.00 on 5,000. Production remains a legitimate criterion for project justification, yet it is not the only one. What marketing manager can know when a new product or a heavily promoted older one will really take off? Think, for example, of the Edsel's failure and the Mustang's success.

The Ice Maker situation was interesting in that not one, but two, prerequisites for successful Value Engineering were present. The studies had the support of top management, and there existed a definite and defined need for cost improvement. The first contributed the manpower, resources, and commitment, while the latter provided project evaluators with the sustaining motivation to make ideas work and get them installed.

Within five months after the seminar, a new model Ice Maker incorporating four V E proposals was released for production. Of these four pro-posals, two originated in the seminar, and two outside the seminar. (Notefive projects were assigned to workshop participants: the remain-ing three are currently undergoing further engi-neering evaluation.)

Two examples from seminar O N E O F the assigned projects was the front sup-port assembly for a cutter grid and evaporator plate used on the 220-pound Slope Front Ice Maker. The assembly was constructed of three major stainless steel channels plus various studs and brackets. The current design was costly and

it was difficult to achieve acceptable alignment of the components. Three proposals providing four variations were proposed by the V E team. It was felt that seven recommendations were required be-cause of other contemplated design changes. The primary recommendation was to provide support with a single, stainless steel wire form plus the necessary studs and brackets. As a result of this proposal, 20 parts were eliminated, and costs re-duced by 43 percent.

It goes without saying that all rookie Value Engineers are cautioned to practice good human relations throughout their studies and in their presentations. Because of circumstances, one seminar team found itself in a position to carry this philosophy almost to an extreme. Their pro-ject had been the float and valve assembly used to control the water level in the Ice Maker water pan. After investigating several alternate sys-tems for controlling water, they determined that a float assembly was the most economical means of accomplishing the basic function. I n pre-senting their project to the General Manager, his staff, and other concerned individuals, they in-dicated that the present engineering design pre-sented the best value and that they could suggest no ideas for significant cost improvement. They commended Engineering for their design choice. This team's contribution towards improved V E relations with Design Engineering can best be summed by relating the comments of the Engineer-ing Project Manager: "The supporting point made to management by the V E adviser that savings are not always produced was appreciated. It makes our reactions to these and future proposals far more positive." Although the team was unsuccessful in suggesting a better method of controlling water, they did propose modifying the mounting for the assembly. This was immediately accepted; con-

O F V A L U E E N G I N E E R I N G 2 3

sequently, parts were reduced from ten to four, with a resulting savings of 45 percent per assembly.

Forming a VE Team I N EXCEPTIONAL CASES, where a particularly open-minded Engineering group is not concerned with whether an idea was "first invented here," it is possible to deviate from the V E axiom that pro-ject teams should be composed of individuals divorced from the subject under evaluation. It is also necessary that these individuals believe in V E , and be willing to follow the job plan. If you are fortunate enough to have access to such people, your function as a Value Engineer is greatly facili-tated. The obvious advantages are that 70-90 percent of idea salesmanship has taken place dur-ing Phase I I (Speculation) rather than Phase V (Presentation) of the V E job plan, and that you have within your V E group people in a position to implement the proposals.

Two examples outside the seminar A STORAGE BIN false bottom used in commercial, self-contained ice makers was the subject of an investigatory study. Six functional areas were represented on this study: Planning, Process Development, Manufactaring, Design, Industrial and Value Engineering. Two of these areas, In-dustrial and Product Engineering, had direct pro-duct affiliation. Investigation into the design background of the plastic false bottom revealed that it was part of an original design for a 220-pound-per-day model; its primary purpose was to provide a smooth, continuous scooping service to facilitate ice removal.

When a 450-pound-per-day model was designed, the same specification was applied; however, when a smaller 110-pound model came along, changes in bin configuration and door location eliminated the need for a scooping surface. The plastic bottom was retained for the secondary pur-pose of separating ice from water in the bin bottom. Subsequent redesigns of the 220-pound and 450-pound models brought about similar bin and door changes, but the plastic bottoms re-mained. In effect, what had occurred was that a previously secondary function (separate ice from water) had attained primary function status.

Applying Value Engineering methodology, zero worth was assigned the false bottom as a scoop-ing surface was eliminated from the design. It can be argued that the part still had a primary function of separating ice from water, but this was originally secondary. Remember also that the product design engineer responsible for this product was a V E team member and was conceding

that this part was not required. This, in effect, turned out to be the case as further investigation determined that water in the bin bottom was no real problem due to the built-in slope of the bin to the drain. Also most of the water remaining was held by surface tension of the cubes them-selves. There were other roadblocks to overcome, such as aesthetics, but it is interesting to note that one of the strongest advocates for change was the product engineer who also contributed the test data and field opinions that eventually sold the change. Put yourself in his position and try to appreciate the unprejudiced attitude of this en-gineer. As a result of this recommendation, a part was eliminated on the Ice Maker that saved over $3.00 per cabinet.

The last example did not have the benefit of a formal team study. For that ^matter, Value E n -gineering played no formal part in finalizing a design or developing costs. This was carried out entirely by Engineering and the Cost departments. The circumstances that led to this change started with Value Engineering questioning the neces-sity of a rather bulky hinge located on the back of an Ice Maker. The hinge apparently existed to facilitate entry into the cuber top for service. In gathering facts as to why the hinge was necessary, the question was asked: "Must we even provide a removable top?" The front panel also provides an entry for service.

As it turned out, the answer was no, and with obvious cost advantages present, Engineering un-dertook the design of a solid top. It did not prove feasible to use a completely fixed top, however, because of process problems. A semifixed design was accepted, reducing parts from 29 to 13, which resulted in savings of almost $1.00 each. Some-times all that is needed is an idea presented to the right person to get the "looked for" results.

In perspective T H E CUMULATIVE E F F E C T of the four changes dis-cussed was a total reduction in parts from 92 to 41, and a cost improvement of close to $6.00 per Ice Maker.

Justification for a commercial commitment to Value Engineering will not be found in a govern-ment incentive sharing program, or, for that mat-ter, in unspendable dollars of recorded savings.

The stimulant to a continuing investment in a Value Engineering program is competition, the need to produce goods at a price the market will sustain, while allowing a reasonable percentage of profit.

The appliance industry, having first served as the cradle for Value Engineering, now continues to evidence its effectiveness through price stability in the face of accelerating inflation.

2 4 T H E J O U R N A L

V A L U E E N G I N E E R I N G is Alive, Well and Moving into Marketing

by THOMAS J . SNODGRASS The article, "Value Engineering is Alive, Well, and Moving Into Marketing," traces the movement of the original value concept from a purchasing- -oriented activity into its present major area of in- " fluence, engineering. The article then outlines a next step which orients Value Engineering tech-niques more closely to marketing. A comparison is made between a technically oriented function analysis of a stove and a customer-oriented func-tion analysis. An example concerning user criti-cism of two competitive makes is analyzed. Cer-tain faults are tolerated, others are not. The term, "value research," is used to describe the overall system, but the confidential nature of cus-tomer attitudes and cost information prohibits ex-tensive publication of value research studies.

T H E MOVEMENT of value activity from its origin to the present state-of-the-art is interesting. The term, "value analysis," was first used in the Material Services Department, Manufacturing Services Division, General Electric Company, in the late 1940's. It was a purchasing tool used for more accurate comparison in make-or-buy deci-sions. Next, was the realization that costs pre-vention could mean as much, or more, than elimi-nation of existing costs. This necessitated mov-ing into engineering.

There are common elements in the method of practicing either Value Engineering or value anal-ysis. The Value Engineering effort is often re-stricted to hardware components such as a group of parts or assemblies, and a prejudgment has been made that they represent a potential cost reduction area. One or more items are selected for comparable study. It is a rare study that does not indicate significant areas of potential cost re-duction, and often these areas are more easily identified when similar competitive parts and as-semblies are selected for comparative study.

In 1960 a research project was set up in the Kitchen Appliance Department, Hotpoint Divi-sion, General Electric Company, to expand Value Engineering techniques to include the function cost analysis of a total product compared to similar

competitive products. The basic concept of this experimental unit was to determine what a group of specialists, permanently assigned to the job and with complementing backgrounds, could accom-plish in establishing the lowest acceptable cost for the product, the Value Standard.

In spite of the competence developed by this organizational unit, several obstacles arose. The first was that of obtaining competitive costs. Pro-cedures used for cost-estimating of new designs were too involved, costly, and time-consuniing to be used to determine the function costs. The second obstacle became apparent as the va