Plavecsky's Ponderings By Jim Plavecsky
by Jim Plavecsky
April 5th, 2018

Battling Cost Increases With Value Engineering

As a material and component supplier, I have had the unfortunate task of passing along my share of price increases to door and window customers. Obviously, the news is less than welcome on the receiving end.

So, what can door and window manufacturers do to remain competitive given the seemingly endless series of material and component price increases? The answer may lie in value engineering.

The idea of value engineering sprung up in the 1940s at General Electric during  World War II. A purchasing engineer named Lawrence Miles and others sought substitutes for materials and components since there was a severe shortage of them due to the unusual demands spawned by the war. Substitutes were sought to reduce costs and provide equal or better performance.

Value engineering (VE), as defined by Investopedia, is a systematic method to improve the “value” of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. The value of an item is defined as the most cost-effective way of producing an item without taking away from its purpose.

The thing that must be stressed, however, is that value engineering should not only consider alternative materials and components, but also the process and the machinery employed. So, the total overall cost is a function of not only the materials used but also the labor, the overhead, the wastage, and the “cost of quality” as well. So, a value-engineered redesign that perhaps involves more expensive materials can still result in an overall lower unit cost and/or greater performance if the methods employed involve fewer people, improved efficiency and lower cost of quality. The machinery can also contribute to these factors, especially if automation is involved.

But all too often, engineers may look at materials only in their quest to lower cost or improve performance – looking for a lower cost material that will get the same or better results in the end. They may fail to consider the overall picture which includes the design itself plus what I call the overall manufacturing triad.

A overall manufacturing triad is completed by integrating the three dimensions of the overall manufacturing process.  These are the material, the methods and the machinery.

The material may be a lower-cost material, but it can also be a higher-cost, higher-performance material that, when used with a different method and/or different machinery, can result in an overall unit cost that is lower while at the same time offering greater performance and more consistent quality in the final product. This occurs when the method is changed, resulting in fewer manufacturing steps and lower labor and variable overhead costs, Indeed, the third M, which is machinery, may also contribute to lowering overall cost and improving function. It can do this by improving efficiency via automation, which also lends itself to greater consistency and lower cost of quality.

So, perhaps every door and window company should have a value engineer. It can be a dedicated person in a large company or simply one of the many hats that the small-business owner wears. But in any case, someone in the company needs to be responsible for reviewing the intended function of each product and consequently reviewing not only the best materials or components to use but also to constantly seek better methods to manufacture the product while seeking state-of-the-art machinery to optimize efficiency and lower the cost of quality.

So, as the markets grow, so does demand for materials and components from which to build our doors and windows, which of course leads to cost increases. The ongoing practice of value engineering can help manufacturers stay a step ahead of the game by providing an ongoing focus upon providing greater value to the consumer while minimizing the net effect of cost increases. In the end, those who offer the greatest value to the end user will reap the benefits of increased market penetration and profitability!

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