International Journal of Scientific & Engineering Research Volume 9, Issue 2, February-2018 527

ISSN 2229-5518

An Analytical Way to Reduce Cost of a Product

Through Value Engineering Employment (Case
Study: Walton)
Tasminur Mannan Adnan1, Sajid Hasan2, Mohammad Shakilur Rahman3, Amit Das4

Abstract: Value engineering is considered as an important and powerful approach for cost cutting and quality management for
organizations. Value engineering not only reduces cost or increase economic efficiency, but also provides environmental positivity. Value
engineering is a systematic approach to find out the cost reduction opportunity without compromising the quality. However, this paper
represents a case study with the implementation of value engineering through completing some certain analysis in a product component.
The goal of this paper is to analyze the reality of value engineering in a case organization. The results of the analysis and calculation then
be compared to select the best option and result will define the best solution amongst all solution. The result will largely depend on the cost
savings that is calculated in Bangladeshi Taka (BDT). This paper aims to utilize the uses and application of value engineering and
implement VE in products and projects.

Keywords: value engineering, cost cutting, value analysis, value management.

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management for Total Quality Management and Business

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1. INTRODUCTION Process Reengineering. The concept of value engineering

V alue Engineering is simply a method that calls for several steps of project planning. But the key steps
simultaneously reduces the cost with adding value are accomplished through the development of performance
and improve the quality of the product or services. Today’s criteria measures and ranking performance according to the
market is a competitive market and the way to have success current established measures and project costs. Value is
in this market is to provide the best value price to the then determined according to the ratio of performance over
customer. This is possible by the cost calculation. Value the cost (Pearsall 2006). The mathematical term is given
Engineering is a systematic approach to an improved and below:
value product for every single resource that is used during
the production or in a system (Ibusuki and Kaminski 2007; Value = Performance / Cost
Kwong et al. 2007). The results of value engineering are
proved in so many countries and it is used largely to some To improve the value of a project or product, there must be
sectors. Value analysis is developed through teamwork and a way to measure these values. Ilayaraja stated in his article
diagnosis and the techniques of value engineering gives a that, value is based on three elements. These elements are
solution to reduce the price in an innovative way (Kalani cost, quality and functionality. But in some cases, time and
and Kamrani 2017, p. 57). VE is defined as an organized efficiency can also be determined as the variables to
effort that analyses the system, facilities, services and measure VE (Ilayaraja and Eqyaabal 2015).
supplies to sort out the most essential functions at the
lowest life cycle cost(LCC) without decreasing the required The aim of this article is to conduct a study on value
quality, durability performance and sustainability engineering and its applications through literature review
(Elayache 2010). and an empirical study to understand the value
engineering cost saving method and generate some
The value engineering methodology is taught mostly in thoughts for further research to improve the conventional
industrial engineering programs and in project one. During this report, there are some research questions
that will be answered. The questions are:
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• Tasminur Mannan Adnan, University of Oulu, Finland, 1. What are the important parameters that is
tasminurmannan@gmail.com considered during value engineering?
• Sajid Hasan, Ahsanullah University of Science and Technology, Bangladesh,
sajiddnj@gmail.com 2. What are the phases or steps of value engineering?
• Mohammad Shakilur Rahman, University of Oulu, Finland, 3. How to choose the best option from the
shakil1016@gmai.com
alternatives after the value analysis is done?
• Amit Das, Ahsanullah University of Science and Technology, Bangladesh,
Amit.bandhob@gmail.com

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International Journal of Scientific & Engineering Research Volume 9, Issue 2, February-2018 528
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In this article, a broad literature review was done to compile the end time of the project. In the second phase, he
overview the current status of the value engineering. In discussed about 7 sequential and logical steps which starts
section 3, the methodology was discussed. Section 4 and its from collecting data followed by job analysis, innovation,
subsection determines the case company, current status of brainstorming, evaluation, R&D and ended in presentation
the product to work with, value analysis of the product and of recommendation.
in section 5 we discussed about the result of the analysis to
choose the best option. In section 6, we came into a VE is a process that can be used both in technical and
conclusion and discussed about the further scope of work. business management applications. VE roles vary in
product lifecycle but the main structure remains the same
2. LITERATURE REVIEW with some little variations. In Kalani’s article, he pointed
Value analysis, value engineering and value management is that there are typically 6 different phases in VE which can
a concept of finding solutions to reduce the cost without be summarized into 3 main phases and those are: value
changing the value. Value analysis is applied on project discovery, value implementation (Going on-line) and value
completion or products currently using to get rid of extra optimization and future support. The values might be
costs. Whereas engineering value is used to improve the relevant to the project or inspired by the project (Ibusuki
quality and reduce the cost of projects. And this work is and Kaminski 2007, p. 459-474). Value discovery identifies
done during idea generation or after completion. the optimization and innovation opportunities. According
Management value is another concept to manage programs to Flanagan and Frey, various workshops, tools,
and setup value studies (Ilayaraja and Eqyaabal 2015). community educations and open discussion are some ways
to accomplish this task. The main objective of VD is to
2.1 Value Engineering make a list of values and bring into attention what are

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Haskins stated in his article that VE is a systematic latent in a design project (Flanagan et al. 2008; Frey and
approach and works for the lowest lifecycle cost with Cruz 2013).
required performance, reliability, availability and quality
(Haskins 2010). Whereas Formentini discussed in his paper Value Implementation means the creation of the value,
that VE not only improve the value, it also adds other validation and execution of the values and rendering of
benefits such as risk reduction and quality improvement those values on the ongoing process. In this regard, value
(Formentini and Romano 2011, p. 545-560). implementation in IT sector became one of the major thing
for competitive advantage as most of the improvement in
Value Engineering is a process which balances the company starts with improving the IT infrastructure
functions between cost, reliability and function of the (Bakhrun and Ramadani 2014, p. 219-223). Value translation
product. It does not have to be products only; project or is the action of expressing the values into system. This
services can also be balanced by VE (Ilayaraja and Eqyaabal includes defining the values, implementing them (Flanagan
2015). Successful VE is possible when it is possible to et al. 2008, p. 322-353).
identify the unnecessary cost and remove them without
changing the quality, reliability and performance or any
other factors that is needed by the end customer (Harish Value
Discove
and Menezes 2011, p. 223). There are many tools and ry
techniques in VE to improve the value. Some of those are Support
and Innovati
FAST diagram, creative thinking technique, weighted Future on
scoring technique and so on (Saeed and Hassan 2012). It is Planning
Value
always a good choice to start the study before the proposals Enginee
are accepted or the operation has started. This will reduce ring
the high cost of applications and increase the acceptance Optimiz
Value
Realizati
rate (Tanaka et al. 2012, p. 1801-1811). ation
on

Ilayaraja (2015) discussed in his article about 2 phases of Prototyp

ing
applying value engineering. The first phase is the
preparation of study where there will be five to nine
members including certified value specialists and the
Fig. 1. Importance of VE (retell from Kalani et al. 2017, p.
members will be of multi-disciplinary expertise. This team
59)
will review and study the project, find out the cost of the
project, determine the completion time of each study and

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International Journal of Scientific & Engineering Research Volume 9, Issue 2, February-2018 529
ISSN 2229-5518

From the fig 1, it is seen that after VI, there comes Value difference between this two. Cost reduction is a process of
optimization (VO). VI needs to be continuously accessed to reducing cost based on segmentation and elimination of the
improve the business condition of a company (Bakhrun and parts whereas value engineering is an analytical method of
Ramadani 2014, p. 219-223). VO ensures the delivery time project posts and subtracting the alternatives by using less
and budgeting. VO is responsible for delivering the results expensive alternatives. This process won’t change the
of the upper stages to make sure the outcome of the value. design of the project. Suppose there is a plan of making 8
VO focuses on the leverage of the whole organization. For stories building but budget of 6 stories building. Cost
this reason, it is considered as the most critical element. The cutting method will reduce the size of the building or
VO is critical for future success and therefore needs to be a remove some parts from the plan. VE method will look for
focus and a priority. A strategy should be defined to drive some cheaper alternatives such as electricity system, air
this value optimization. Some of the strategies are internal conditioning etc. but the plan will be constant (Ilayaraja
testing amongst the design team, user testing, interviews, and Eqyaabal 2015).
using prototypes etc. (Flanagan et al. 2008; Frey and Cruz
2013). 3 RESEARCH METHODOLOGY

For the improvement of project, it is needed to apply VE to Very practical and simple qualitative method is used for
multidisciplinary team. According to SAVE International, this case study. Employees working in the production line,
there are 6 sequential phases which leads to a successful VE R&D department of the company and sales department
study which are distributed into 3 stages. These stages are were interviewed for this analysis. They provided all
pre-workshop study, workshop study and post workshop necessary information. Of course, there were some data
study. The stages are shown in Fig 2. unrevealed to maintain the competitive advantage in the

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market. Some research on secondary data from books,
articles and similar case studies and a common survey of
customer was done. From the survey, some basic
requirements of customers are assumed, and value analysis
is made.

4 CASE STUDY
The case company we are working on is “Walton”. Walton
is one of the leading multinational electrical company in
Bangladesh with well-equipped R&D facilities. Many world
class machineries like thermoforming, channel Extrusion,
ABS/HIPS sheet extrusion, magnetic strip extrusion, PP
hollow sheet extrusion, VMC, 5 axis VMC, ultrasonic
welding, injection molding, Styrofoam making, High speed
power press, fin Press, corrugation, SMT pick and place,
SPG printing machine, AOI machine, tamura wave solder
Fig. 2. Stages of value study (retell from Mahdi et al. 2015,
machine, auto insertion machine are used in Walton to
p. 2744)
produce these world-class electronic products. Walton is
targeted to produce 3 million refrigerators, 0.3 million air
From the figure 2, we can see that stage two is the most
conditioners, 0.15 million motor bikes and 1.5 million
technical stage during the VE study. The phases in stage 2
televisions per annum which are also considered as their
are:
flagship product (Walton 2017).
1. Information phase
For the variation of products and finding out an easier way
2. Function analysis phase
for applying value engineering, we have taken a general
3. Creativity phase
type of case study by selecting refrigerator. It is a technical
4. Evaluation phase
component having so many other technical components
5. Development phase
and it requires certain degree of engineering; as well as
6. Presentation phase
value engineering.
2.2 Value Engineering and Cost Cutting
Some get confused between value engineering method with The steps used for the value engineering of Refrigerator are
cost reduction method. But there is some tangible as follows:

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International Journal of Scientific & Engineering Research Volume 9, Issue 2, February-2018 530
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1. Functional analysis expensive part of BDT 159.00 and compressor base plate is
2. Functional evaluation the cheapest, BDT 85.98.
3. Creativity phase
4. Evaluation phase
5. Selection of alternatives

4.1 Functional Analysis

In Walton refrigerator, there are many parts that completes
the refrigerator. For the analysis, we are working on the
body stand, side cabinet, liner, compressor. These parts are
considered to be the core parts of the refrigerator. The
functional definition along with the verb and noun type
definition, basic and secondary functions are given in table
1.
TABLE 1:
Functional analysis of refrigerator Fig. 3. Cost of material

4.2 Functional Evaluation

By using the interacting functions between the components,
a matrix is formed to show the connection between every

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component with other components. According to the
interactions with other components a grading is done as
major performance=3, medium performance=2 and minor
performance=1. A, B, C, D are the key letters from table 2
which only represents the components of the refrigerator,
Table 1 shows that every component has its own functions
not the material.
and these functions are divided into basic functions and
secondary functions. The basic and secondary functions are
divided for making the redesign easier in a way so that the B C D
secondary functions are either added with another function
or being eliminated from the product. A A3 A3 A3

4.1.1 Costing of the parts B B2 B1

The material costs of these refrigerator parts are given in
Table 2. From the table 2, the total price of all the C C1
components is BDT 535.98. The quantities are also given in
kilograms. D
TABLE 2:
Cost of the components By doing the above matrix, the weight of every component
Serial Part Quantity Cost in along with the percentage of cost of the material is given in
Number (kg) BDT table 3.
A Body Stand (ABS 1.86 140.00
Resin) TABLE 3:
B Side Cabinet (PCM) 10.20 159.00 Weight and % cost of the components
C Liner (ABS Resin) 6.22 151.00 Key Part Weight %
D Compressor (Base 1.53 85.98 letter Cost
Plate -Aluzinc) A Body Stand (ABS Resin) 9 26.12
Total 535.98 B Side Cabinet (PCM) 3 29.66
C Liner (ABS Resin) 1 28.17
D Compressor (Base Plate - 1 16.05
Figure. 3 represents the price of the part’s material in a bar Aluzinc)
diagram. From fig. 3 we can see that liner is the most

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International Journal of Scientific & Engineering Research Volume 9, Issue 2, February-2018 531
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From table 3, we get that body stand has the maximum The common parameters that the company follows for each
weight of 9 and whereas liner and compressor has the of her products are:
minimum weight of 1. Considering percentage of cost, side
cabinet has the maximum cost of 29.66% and compressor A. Firmness
has the minimum cost of 16.05%. B. Aesthetic
C. Light weight
4.3 Creativity Phase D. Durability
To make the refrigerator in a cheaper way, there are some The weightage of the parameters are calculated in the
techniques and options available to reduce the cost without below matrix:
compromising the quality and performance of the
B C D Score
refrigerator. After brainstorming, some ideas are generated
in the creative phase. These are: - A A1 A2 A3 6
1. Using PP resin instead of ABS resin for body stand
2. Reduce the thickness of the side cabinet from B B2 B1 3
0.5mm to 0.45mm
3. Using HIPS resin instead of ABS resin for liner C C3 3
4. Substituting wastage VCM sheet instead of
Aluzinc in compressor base plate D 1

The score from the matrix are 6,3,3,1 for firmness, aesthetic,
In table 4, there is the estimated cost of the components
lightweight and durability respectively. The scores are then
after implementing the four factors and also the value gap

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used in the evaluation matrix.
between the existing cost and the new estimated cost. The
ranking is done accordingly with the highest value gap
4.5 Selection of Alternatives
having first rank and lowest value gap having last rank.
An evaluation matrix table is created in table 6. The
purpose of this matrix table is to select the best alternative
TABLE 4:
according to the total score. There are five alternatives in
Function cost worth analysis of the refrigerator
our current analysis. During the survey, the demand of the
four parameters in a product were asked to random people
for the existing and alternative products. Scoring 5 for
excellent, 4 for very good, 3 for good, 2 for fair and 1 for
poor. The scores are at the left of each cells and the total
score of each parameter are at the right of each cell on the
parameter’s column. Total score of the parameter is the
multiplication of the weighting factor and customer’s score.

TABLE 5.
From table 4, we can say that by the modification of the Transformation of Customer feedback to score
product, we can target the new proposed value of BDT Excellent Very Good Fair Poor
420.40. good
5 4 3 2 1
4.4 Evaluation Phase
In order to save money, there are some scope of TABLE 6:
redesigning the product without changing any Evaluation matrix for all alternatives of the refrigerator
performance of the product. In the section 4.3.1, we see that
there are four alternatives of changing the design without
compromising the product quality and parameters. The
alternatives are:
Alternative 1: Using PP resin in body stand
Alternative 2: Reduce the thickness of the side cabinet to
0.45
Alternative 3: Using HIPS resin in liner
Alternative 4: Using VCM sheet in compressor base plate

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From table 6, we see that alternative 1 has the maximum Without decreasing the quality, Walton can redesign the
score of 55 points. The existing product got 48 points, product by changing the material of the body stand.
alternative 2 and alternative 3 got 51 points, alternative 4
has 54 points. In customer’s satisfaction point of view, 6 CONCLUSIONS AND FURTHRER
alternative 1, alternative 2, alternative 3 and alternative 4 all RESEARCH
satisfies the demand of the customer. 6.1 Conclusion
The article is shows a proper way of applying value
5 RESULTS engineering to any product in a company. Value
The above table 4 and table 6 shows that; by changing the engineering can be done to most of the products in a
material to body stand, liner and compressor; the product company. If it is not done to any product then the product
cost can be reduced without any sacrifice of the customer’s is in its optimized situation and no value engineering can
demand. Also reducing the thickness of the side cabinet be done to that product. In this case study, there are 4
does not affect the customer demand and reduces the price. alternatives. Altering the material of body stand, liner and
comparing all the alternatives in table 7, reducing the compression baseplate, reducing the thickness of the side
thickness is more profitable for the company than cabinet were the alternatives. After the value analysis and
eliminating the leg strip. study, altering the material of the body stand is selected as
the best alternative for the product.
TABLE 7:
Price comparison for all alternatives 6.2 Further Research
Part Existi Alterna Alterna Alterna Alterna This case study is based on a complex product considering
ng tive 1 tive 2 tive 3 tive 4 some components of the product, and taking only four

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(Price (Prices (Prices (Prices (Prices alternative solutions. Further scope of study can take into
s are are in are in are in are in account by combining both of the alternatives together. One
in BDT) BDT) BDT) BDT) can also find more alternatives from more components and
BDT) reduce the cost without changing its value. Moreover,
Body 140.0 103.4 140.00 140.00 140.00 improvement of the VE structure can be another research
Stand 0 topic. Further research can be conducted in value
Side 159.0 159.00 134.00 159.00 159.00 engineering and product portfolio to apply value
Cabinet 0 engineering at any stage of the product portfolio.
Liner 151.0 151.00 151.00 127.00 151.00 Sustainability is another alternative. Although most of the
0 studies are conducted on either construction projects or
Compre 85.98 85.98 85.98 85.98 56.00 manufacturing, further VE research can be conducted in IT
ssor systems or in services.
Total 535.9 499.38 510.98 511.98 506
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ISSN 2229-5518

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