Tuesday, December 2, 2014

Value Engineering

Value engineering aims to reduce nonvalue-added costs by reducing the quantity of cost drivers of nonvalue-added activities. Means  to reduce rework costs. The company  or entity must reduce rework-hours.

Value engineering find their target by reduceing value added cost by achieving greater efficiency in value added activities. Means  to reduce direct manufacturing labor costs.

Value engineering is a systematic evaluation of all aspects of the cost structure  of a service or  product , including research & development, design of products & processes, marketing production, distribution & customer service with objective of reducing costs while satisfying customer needs.

A Value Added Cost is a cost that if eliminated would reduce the actual or perceived value or utility (usefulness) customers obtain from using the product or service.

Value engineering works  on improving those qualities that the customer desire while reducing or eliminating unnecessary moves, queses, setup & other activities that the customer will not pay for.

A Nonvalue added cost is a cost that if eliminated would not reduce the actual or perceived value or utility(usefulness) customers obtain from using the product or service. It is a cost that the customer is unwilling to pay for Example,  nonvalue-added costs are reworking & repairing products.

Value engineering  is different  from traditional approaches to cost reduction & cost control in that its focus is on the elimination of non value added activities(e.g. waste) from the process.

The process is re-engineered to reduce  non-value added work & thereby enhance the value of the process to the customer.

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