Frequently Asked Questions on Value Analysis, Value Engineering and Product Costs

Value Analysis is a structured, function-oriented approach to improving the value of a product, process or service. It looks not only at costs, but also at the functions that need to be performed and at the requirements and benefits for the customer.

The key question is not just “How can we make the existing product cheaper?”, but “Which functions need to be performed, and how can we perform them more economically or better?”

Further reading: What Is Value Analysis? · Value Analysis Work Plan · Project Consulting

Value Engineering refers to applying the Value Analysis mindset particularly to the design and development of solutions. It focuses on functions, costs, customer requirements and alternative technical concepts.

In practice, the terms Value Analysis and Value Engineering are sometimes used differently. They are not two entirely separate methods.

Further reading: Value Analysis / Value Engineering · Value Engineering in New Product Development

Value Analysis is a specific, structured approach for projects. Value Management is broader and also considers value orientation at organisational and strategic level.

A company may, for example, carry out individual Value Analysis projects. Once project selection, qualification, standards and value orientation are permanently embedded in the company, the question moves more towards Value Management.

Further reading: Difference Between Value Analysis and Value Management · Value Management · Value Management Office

Value induction (Wertinduzierung) refers to applying Value Management primarily to strategic questions. The starting point is the question of what value means for a company, its customers and other stakeholders. On this basis, objectives, functions and relevant value drivers are examined, and strategic and operational actions are derived from them.

Whereas Value Analysis is mainly used in specific projects to improve products, processes or services, value induction looks at strategies, business models, portfolios, programmes and the organisation as a whole, among other things.

Further reading: Value Induction – Value Management at Strategic Level

No. Costs are an important element, but Value Analysis looks at costs together with functions and benefits.

A solution is not automatically better just because it costs less. What matters is whether the required functions and requirements are still fulfilled. Depending on the project, the objective may therefore also be to increase customer value, to achieve a cost target in development or to fundamentally redesign technical solutions.

Further reading: Reduce Product Costs · Costs and Customer Value · Value Engineering

Value Analysis can be applied to products and processes. The current VDI framework for Function Analysis and Function Cost Analysis also includes services.

The methodology is particularly useful when functions, costs, customer requirements and alternative technical solutions need to be considered together.

Further reading: Value Analysis for Existing Products · Value Analysis for Processes and Services

A function-oriented approach means that the focus is initially not on the existing technical solution, but on the task that has to be performed.

Instead of simply asking “How can we make this component cheaper?”, the question is, for example, “What function does this component perform, and how else could this function be achieved?”

This can open up new solution spaces.

Further reading: Function Analysis · A Function-Oriented Approach Instead of Component Optimisation

Value Analysis combines cost analysis with customer requirements and functions.

The team first examines which features and performance the customer actually needs, which functions must be performed for this and what effort is associated with these functions. Opportunity areas for alternative solutions are then developed in a targeted way.

This means that the work does not stop at individual component prices; the technical solution itself can be fundamentally questioned.

Further reading: Systematic Product Cost Reduction · Function Cost Analysis · Cost Reduction Project

This first requires clarifying which requirements and functions really matter to the customer.

It can then be examined whether certain functions can be performed with less effort, whether there is overengineering or whether other technical solutions are possible.

Customer value is therefore not checked only after cost reduction, but is included in the analysis from the outset.

Further reading: QFD and Customer Requirements · Overengineering · Cost-Benefit Assessment

A Value Analysis project can be particularly worthwhile if, for example:

• product or manufacturing costs are too high,
• a cost target in development is not being met,
• competitive pressure is increasing,
• a product has become technically complex,
• there are many variants,
• cost reduction potential is not transparent,
• a new product generation is being prepared.

Whether a specific project is suitable should be checked beforehand on the basis of pressure to act, potential, data availability, scope for change and feasibility of implementation.

Further reading: When to Use Value Analysis? · Project Potential Assessment

The most expensive product does not automatically have the greatest Value Analysis potential.

A Project Potential Assessment can look at factors such as the cost gap, margin pressure, complexity, variant complexity, strategic importance, data availability and the scope for technical change.

The aim is a transparent prioritisation of possible projects.

Further reading: Project Potential Assessment

The Value Analysis Work Plan structures the project from preparation through to implementation.

The representation used in the project divides the procedure into steps 0 to 9: prepare the project, define the project, plan the project organisation, collect data, analyse functions and costs, develop solution ideas, evaluate ideas, develop integrated proposals, bring about a decision and implement the approved proposals.

Further reading: Value Analysis Work Plan · Consulting Process

The team should cover the perspectives required for the specific task.

Typical functions are:

• development and design engineering,
• procurement,
• production,
• quality,
• product management,
• cost estimating or cost engineering,
• where appropriate, service, logistics or sales.

What matters is not a fixed number of participants, but that relevant expertise and decision-making authority are properly involved.

Further reading: Cross-Functional Teamwork · Roles in a Value Analysis Project

That depends on the task. Frequently relevant are:

• product and manufacturing costs,
• bills of materials,
• technical documentation,
• customer requirements,
• market and competitor information,
• production and quality data,
• supplier information,
• volumes and economic constraints.

Project preparation should clarify which data is actually needed for the specific decision.

Further reading: Cost Transparency · Value Analysis Work Plan

There is no generally applicable duration.

The effort depends on factors such as product complexity, project scope, data availability, team availability, the number of workshops and the technical depth required.

It is important to distinguish between the joint workshop phases and the subsequent technical development and implementation. A Value Analysis project should therefore not be equated with the duration of a single workshop.

Further reading: Cost Reduction Project and Workshop · Consulting Process

A workshop should not end with a list of ideas.

Selected ideas are refined, evaluated and developed further into concepts or implementation packages. Responsibilities, technical tasks, deadlines and economic expectations are defined in the process.

Implementation reviews then check whether actions are being implemented and what economic impact is actually being achieved.

Further reading: Implementing Value Analysis Actions

Yes. Existing products even offer a particular advantage: real information on costs, production, quality, suppliers and customer feedback is available.

At the same time, change costs, existing tooling, approvals and remaining product lifetime must be taken into account.

Value Analysis can therefore prepare both short-term actions for an existing product and fundamental changes for a successor generation.

Further reading: Value Analysis for Existing Products

Function Analysis examines which tasks a product, process or service has to perform.

It deliberately abstracts from the existing solution. A component can perform several functions; conversely, several components can jointly perform one function.

This perspective helps the team to step away mentally from the existing design and develop alternative solutions.

Further reading: Function Analysis · Defining Functions Correctly

Function Cost Analysis allocates costs to the previously identified functions.

This adds an additional question to the conventional component-based cost analysis:

“How much effort is involved in performing this function?”

This makes it possible to identify high-cost functions or functions with improvement potential and then to address them in a more targeted way.

Further reading: Function Cost Analysis · Allocating Function Costs

Component costs show which costs are allocated to a specific part or assembly.

Function costs, by contrast, look at the effort required for a task or function.

Because a component can perform several functions and a function can be performed by several components, the two give different perspectives. Both are important for sound product cost optimisation.

Further reading: Function Cost Analysis · Cost Breakdown

Function Potential Analysis helps to examine functions with regard to potential for improvement and change.

It can take into account, for example, function costs, customer relevance, technical complexity and alternative solution principles.

The aim is to focus creative and development work on particularly relevant opportunity areas.

Further reading: Function Potential Analysis

QFD – Quality Function Deployment – helps to capture and weight customer requirements in a structured way and to link them with technical characteristics or solution decisions.

In a Value Analysis project, QFD can be particularly helpful in the customer phase, before functions and costs are examined in depth.

This prevents cost optimisation from being driven solely by the existing technology.

Further reading: QFD and Customer Requirements

Target Costing defines the economic target framework: How much may a product or solution cost?

Value Analysis and Value Engineering then help to answer the question of how the required functions can be sensibly performed within this framework.

The methods can therefore complement each other well.

Further reading: Target Costing / Design-to-Cost · Assigning Target Costs to Functions

Cost Engineering examines cost structures and technical cost drivers in great detail.

Value Analysis adds functions and customer value to this perspective.

Cost Engineering can show, for example, why a component is expensive. Value Analysis additionally asks whether this particular technical solution is actually needed to perform the function at all.

Further reading: Value Analysis and Cost Engineering · Cost Breakdown · Should Costing

The methods have different focal points.

Value Analysis is strongly function-oriented and links benefit and effort. Lean focuses on aspects such as the value stream and waste. Six Sigma works in a strongly data-driven way on variation, root causes of defects and process stability.

Depending on the problem, the approaches can complement each other.

Further reading: Value Analysis, Lean, Six Sigma and BPM

After the analysis, alternative solutions are sought for the prioritised functions.

Creativity techniques help to break away from established patterns of thinking. TRIZ can be a structured addition, particularly for technically demanding tasks.

However, the Creativity Phase should not be viewed in isolation: good ideas must then be evaluated technically and economically and implemented.

Further reading: Creativity in Value Analysis and TRIZ

No.

Benchmarking or teardown analysis can provide very valuable information, but is not essential for every project.

Where suitable competitor products are available, they can show how other suppliers implement functions technically, use materials or reduce complexity.

Further reading: Benchmarking · Teardown and Product Benchmarking

The current training page offers, among other things, qualification through Value Analysis / Value Management Module 1 to Module 3, in-house training and specialist methodology courses.

These currently include, for example, training in Function Analysis and Function Cost Analysis.

Current dates and the formats actually on offer should always be checked on the training page.

Further reading: Training Overview

Module 1 teaches the fundamentals of Value Analysis and Value Management.

The key methods are introduced and practised using a continuous case study. These include function and cost analysis, creativity and evaluation, among others.

After Module 1, participants should be able to contribute competently to Value Analysis / Value Management projects.

Further reading: Value Analysis / Value Management Module 1

The training is structured in stages: Value Analysis Module 1, Module 2 and Module 3.

In Module 1, participants learn the methodological fundamentals and apply them to a case study. In Module 2 and Module 3, participants increasingly take on the role of facilitator themselves and practise guiding others through methods and project phases.

The qualification leads up to the examination to become a VDI Value Analyst.

Further reading: The Role of the Value Analyst / Value Manager · Modules 1–3

While Module 1 initially focuses on understanding and applying the methods, in the following modules participants take on increasing responsibility for facilitation.

They must not only know the methods, but also guide the team in using them, structure results and lead the Value Analysis process methodically.

The role thus develops step by step from a methodologically qualified project participant to a Value Analyst who facilitates independently.

After completing the required qualification stages, the programme concludes with the VDI Value Analyst examination.

The current prerequisites, evidence requirements and certification conditions should be checked on the training pages and in the relevant VDI regulations.

Further reading: Module 3 · The Role of the Value Analyst / Value Manager

The qualification is particularly useful for employees involved in cost, development or optimisation projects.

These include, for example:

• R&D and design engineering
• Procurement and cost engineering
• Production
• Product management
• Project management
• Quality
• internal facilitators

The appropriate training level depends on role and previous experience.

A public course is attended by employees from different companies.

In-house training is delivered for one specific company and can be tailored more closely to its questions, participant group and – where suitable – its own products or practical examples.

In-house formats are particularly attractive when several employees are to build a shared understanding of the methods together.

Further reading: In-House Value Analysis Training

Yes. The current training page lists dedicated courses on Function Analysis and Function Cost Analysis.

The Function Analysis course goes into depth on applying and facilitating Function Analysis and structuring functions. The Function Cost Analysis course builds on this and focuses on allocating and analysing function costs.

Current dates and availability should be checked directly on the training page.

Further reading: Training Overview · Function Analysis · Function Cost Analysis

Depending on the task, Value Analysis consulting can begin as early as the selection of a suitable project and extend through to implementation.

Value Coaching’s currently published consulting process includes, among other things, Project Potential Assessment, project preparation, customer phase, Function Analysis, Function Cost Analysis, opportunity areas, idea development, evaluation and implementation support.

Further reading: Project Consulting

External facilitation can be particularly useful when:

• Value Analysis is not yet well established in the company,
• several functions with different interests are working together,
• neutral methodological leadership is needed,
• a pilot project needs to be reliably structured,
• internal employees are to learn the methodology at the same time.

In the long term, external facilitation can be combined with building in-house Value Analysis capability.

Further reading: Cost Reduction Workshop · Teamwork and Facilitation

One possible route is to combine qualification with a real pilot project.

Employees first learn the fundamentals, then apply the methodology in a specific project and gradually take on more responsibility.

After the pilot project, it can be decided how project selection, facilitation, standards, qualification and implementation tracking are to be organised on a permanent basis.

Further reading: Introducing Value Analysis in Your Company · Value Management Office

Yes.

The function-oriented approach can also be applied to processes. This involves examining not only how an existing process step can be carried out faster, but what function the step actually performs and whether this function could be organised or implemented technically in a different way.

Further reading: Value Analysis for Processes and Services

When making your choice, you can consider points such as the following:

• verifiable project experience
• methodological qualifications
• experience in facilitating cross-functional teams
• published references
• a transparent approach
• linking analysis, solution development and implementation
• ability to build in-house capability

A single promise of a specific level of savings is not a sufficient selection criterion.

Yes. The currently published consulting process explicitly includes implementation as part of the approach.

Selected actions are converted into implementation packages and followed up in reviews. A distinction is made between identified potential, evaluated concept, approved action, implemented solution and the economic impact actually achieved.

Further reading: Project Consulting · Implementing Value Analysis Actions