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Value engineering began at GE during WWII due to shortages and looked for acceptable substitutes, often reducing costs and improving products. It became a systematic process called value analysis. Value engineering is a methodology that focuses on a product's function to improve value without sacrificing quality by assembling a cross-functional team. It relies on team building, communication, and efficient decision making. Value engineering follows a multi-stage job plan including information gathering, alternative generation, evaluation, and presentation to determine the best alternative. Benefits include lowering costs, improving efficiency and competitiveness.
10a_req
- 1. VALUE RE-ENGINEERING Introduction Value engineering began at General Electric Co. during World War II. Because of the war, there were shortages of skilled labor, raw materials, and component parts. Lawrence Miles, Jerry Leftow, and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique ―value analysis‖. Definition Value Engineering (VE) is a methodology that focuses on the function of a product or service to improve value without sacrificing quality or reliability. VE involves assembling a cross section of multi-disciplined professionals and enabling them to work together, each bringing a unique perspective and expertise to the assignment. VE relies heavily on team-building principles, and focuses on effective communicating, careful listening and understanding, the generation of creative solutions, and efficient decision making. Value Job Analysis Plan Value engineering is often done by systematically following a multi-stage job plan. Others have varied the job plan to fit their constraints. Depending on the application, there may be four, five, six, or more stages. One modern version has the following eight steps: 1. Preparation 2. Information
- 2. 3. Analysis 4. Creation 5. Evaluation 6. Development 7. Presentation 8. Follow-up Four basic steps in the job plan are: Information gathering - This asks what the requirements are for the object. Function analysis, an important technique in value engineering, is usually done in this initial stage. It tries to determine what functions or performance characteristics are important. It asks questions like; What does the object do? What must it do? What should it do? What could it do? What must it not do? Alternative generation (creation) - In this stage value engineers ask; What are the various alternative ways of meeting requirements? What else will perform the desired function? Evaluation - In this stage all the alternatives are assessed by evaluating how well they meet the required functions and how great will the cost savings be. Presentation - In the final stage, the best alternative will be chosen and presented to the client for final decision Benefits Lowering Overhead & Material costs Improving quality management Improving resource efficiency Simplifying procedures Minimizing paperwork Lowering staff costs Increasing procedural efficiency Optimizing construction expenditures Developing value attitudes in staff Competing more successfully in marketplace
- 3. TOTAL QUALITY MANAGEMENT Introduction After World War II, the U.S. was the only major power with an intact economy. Deming and Juran found their quality improvement theories irrelevant to U.S. business leaders. They were interested in quantity, not quality. Deming found a more appreciative audience in Japan, where he was conducting postwar census work. He was invited to speak about his views during a now-famous dinner in the early 1950's. Shortly after, Dr. Deming predicted in the early 1950's that the Japanese industry would become a world-class force equal to any other country. Everyone around the world laughed. The Japanese didn't laugh . They worked hard to apply the lessons learned. Henry Ford's book on manufacturing (written decades earlier) became a Japanese best seller. There was a weekly radio program that trained workers, lead hands, supervisors, and managers on statistics and Dr. Deming's methods. It became a national hit in most Japanese homes. Drs. Deming and Juran because celebrities in constant demand as speakers and consultants. Decades later, the Emperor of Japan awarded Dr. Deming with the highest Japanese award for a civilian in recognition for his decades of hard work and leadership he gave to the Japanese people and their government. The Japanese business leaders listened, the rest is history. Definition A holistic approach to long-term success that views continuous improvement in all aspects of an organization as a process and not as a short-term goal. It aims to radically transform the organization through progressive changes in the attitudes, practices, structures, and systems. Total quality management transcends the product quality approach, involves everyone in the organization, and encompasses its every function: administration, communications, distribution, manufacturing, marketing, planning, training, etc. The continuous process of reducing or eliminating errors in manufacturing, streamlining supply chain management, improving the customer experience and ensuring that employees are up-to-speed with their training. Total quality management aims to hold all parties involved in the production process as accountable for the overall quality of the final product or service.
- 4. Elements Customer-focused. The customer ultimately determines the level of quality. No matter what an organization does to foster quality improvement—training employees, integrating quality into the design process, upgrading computers or software, or buying new measuring tools—the customer determines whether the efforts were worthwhile. Total employee involvement. All employees participate in working toward common goals. Total employee commitment can only be obtained after fear has been driven from the workplace, when empowerment has occurred, and management has provided the proper environment. High-performance work systems integrate continuous improvement efforts with normal business operations. Self-managed work teams are one form of empowerment. Process-centered. A fundamental part of TQM is a focus on process thinking. A process is a series of steps that take inputs from suppliers (internal or external) and transforms them into outputs that are delivered to customers (again, either internal or external). The steps required to carry out the process are defined, and performance measures are continuously monitored in order to detect unexpected variation. Integrated system. Although an organization may consist of many different functional specialties often organized into vertically structured departments, it is the horizontal processes interconnecting these functions that are the focus of TQM. Micro-processes add up to larger processes, and all processes aggregate into the business processes required for defining and implementing strategy. Everyone must understand the vision, mission, and guiding principles as well as the quality policies, objectives, and critical processes of the organization. Business performance must be monitored and communicated continuously. Every organization has a unique work culture, and it is virtually impossible to achieve excellence in its products and services unless a good quality culture has been fostered. Thus, an integrated system connects business improvement elements in an attempt to continually improve and exceed the expectations of customers, employees, and other stakeholders. Strategic and systematic approach. A critical part of the management of quality is the strategic and systematic approach to achieving an organization’s vision, mission, and goals. This process, called strategic planning or strategic management, includes the formulation of a strategic plan that integrates quality as a core component. Continual improvement. A major thrust of TQM is continual process improvement. Continual improvement drives an organization to be both analytical and creative in finding ways to become more competitive and more effective at meeting stakeholder expectations.
- 5. Fact-based decision making. In order to know how well an organization is performing, data on performance measures are necessary. TQM requires that an organization continually collect and analyze data in order to improve decision making accuracy, achieve consensus, and allow prediction based on past history. Communications. During times of organizational change, as well as part of day- to-day operation, effective communications plays a large part in maintaining morale and in motivating employees at all levels. Communications involve strategies, method, and timeliness. Objectives Process improvement Defect prevention Priority of effort Developing cause-effect relationships Measuring system capacity Developing improvement checklist and check forms Helping teams make better decisions Developing operational definitions Separating trivial from significant needs Observing behaviour changes over a period of time
- 6. THEORY OF CONSTRAINTS Introduction Theory Of Constraints (TOC) adopts the common idiom "a chain is no stronger than its weakest link". This means that processes, organizations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome. It was created by Dr. Eli Goldratt and was published in his 1984 book "The Goal." According to Goldratt, organizational performance is dictated by constraints. These are where bottlenecks occur that prevent an organization from maximizing its performance and reaching its goals. Constraints can involve people, supplies, information, equipment, or even policies, and they can be internal or external to an organization. Definition The theory says that every system, no matter how well it performs, has at least one constraint that limits its performance – this is the system's "weakest link." The theory also says that a system can have only one constraint at a time, and that other areas of weakness are "non-constraints" until they become the weakest link. The theory was originally used successfully in manufacturing, but it can be used in a variety of situations. It's most useful with important or frequently-used processes within your organization. STEPS IN APPLYING THE THEORY Exploit the Constraint The first step is to identify your weakest link – this is the factor that's holding you back the most. Start by looking at the processes that you use regularly. It can help to use tools like Flow Charts, Swim Lane Diagrams, Storyboarding, and
- 7. Failure Modes and Effects Analysis to map out processes and identify what's causing issues. Remember that constraints may not just be physical. They can also include intangible factors such as ineffective communication, restrictive company policies, or even poor team morale. Also bear in mind that, according to the theory, a system can only have one constraint at a time. So, you need to decide which factor is your weakest link, and focus on that. Subordinate and Synchronize to the Constraint ―Subordinate everything to the constraint." This means that all other organizational processes should also focus on eliminating the constraint. Solutions will vary depending on the team, your goals, and the constraint you're trying to overcome. Evaluate Performance of the Constraint Review how the system is performing with the simple fixes you've put into place. Repeat the Process Once you've eliminated the constraint, you can move back to step 1 and identify another constraint.
- 8. LIFE-CYCLE COSTING Introduction Life-cycle cost analysis (LCCA) is a method for assessing the total cost of facility ownership. It takes into account all costs of acquiring, owning, and disposing of a building or building system. LCCA is especially useful when project alternatives that fulfil the same performance requirements, but differ with respect to initial costs and operating costs, have to be compared in order to select the one that maximizes net savings. Lowest life-cycle cost (LCC) is the most straightforward and easy-to-interpret measure of economic evaluation. Definition Procurement and production costing technique that considers all life cycle costs. In procurement, it aims to determine the lowest cost of ownership of a fixed asset during the asset's economic life. In manufacturing, it aims to estimate not only the production costs but also how much revenue a product will generate and what expenses will be incurred at each stage of the value chain during the product's estimated life cycle duration. The purpose of an LCCA is to estimate the overall costs of project alternatives and to select the design that ensures the facility will provide the lowest overall cost of ownership consistent with its quality and function. The LCCA should be performed early in the design process while there is still a chance to refine the design to ensure a reduction in life-cycle costs (LCC). The first and most challenging task of an LCCA, or any economic evaluation method, is to determine the economic effects of alternative designs of buildings and building systems and to quantify these effects and express them in dollar amounts. There are numerous costs associated with acquiring, operating, maintaining, and disposing of a building or building system. Building-related costs usually fall into the following categories: Initial Costs; Purchase, Acquisition, Construction Costs Fuel Costs Operation, Maintenance, and Repair Costs Replacement Costs
- 9. Residual Values; Resale or Salvage Values or Disposal Costs Finance Charges; Loan Interest Payments Non-Monetary Benefits or Costs Only those costs within each category that are relevant to the decision and significant in amount are needed to make a valid investment decision. Costs are relevant when they are different for one alternative compared with another; costs are significant when they are large enough to make a credible difference in the LCC of a project alternative. Life-Cycle Cost Calculation LCC = I + Repl — Res + E + W + OM&R + O LCC = Total LCC in present-value (PV) dollars of a given alternative I = PV investment costs Repl = PV capital replacement costs Res = PV residual value (resale value, salvage value) less disposal costs E = PV of energy costs W = PV of water costs OM&R = PV of non-fuel operating, maintenance and repair costs O = PV of other costs
- 10. In Partial Completion of the Requirements for COST MANAGEMENT (Acc10a) ―FOCUS NOTES‖ Submitted to: Mr. Ricardo Marcellones, CPA Submitted by: Kristine Joyce Tinga March 21, 2013
- 12. REFERENCES Value re-engineering http://www.ncs.com.sg/html/Brochures/Services/Business_Application_Services/Proc ess_Re-engineering_for_Value.pdf www.invest-in.org/invest/ve/index.php Total Quality Management http://asq.org/learn-about-quality/total-quality-management/overview/overview.html www.economist.com/node/14301657 www.wiley.com/college/sc/reid/chap5.pdf Life-Cycle Costing www.businessdictionary.com/definition/life-cycle-costing.html www.barringer1.com/pdf/LifeCycleCostSummary.pdf Theory of Constraints www.scholarpedia.org/article/Theory_of_Constraints www.mindtools.com › Strategy Tools www.focusedperformance.com/toc01.html