Larry Miles and Value Engineering

Larry Miles was the father of the Value Method, or Value Engineering, a problem solving method developed at GE in the late 1940s.

Value Engineering is a systematic team approach used to analyze and improve value in a product, facility, system or service. It focuses on the functions of the "thing" in question. The method has been around since the 1950's, and it's been very successful for its serious practitioners. The Value Method is much quicker and less expensive than the standard trial and error approach that most people take by default.

Larry Miles came up with the powerful new concept of Function Analysis, which is one of eight key elements in the value analysis process. In working with value analysis (VA), you first convert your product or process into a number of word-pairs called Functions. If you ask, when considering a product or process, What does it do?, the answer should be given in a series of two-word sentences – a noun and a verb - such as Remove Pollutants. The remainder of the study then concentrates on the word-pairs rather than on the concrete product or process. Value Analysts call this group of statements a Function Analysis.

By concentrating all of their problem-solving effort on these two-word Functions, the team accomplishes several objectives:

• FUNCTION-COST
• FUNCTION-WORTH
• CREATE BY FUNCTION
• IMPLEMENTATION
• THE JOB PLAN
• THE TEAM
• OWNERSHIP

Q: So if I wanted to begin implanting Value Analysis, where would I start?

In modern VA, Implementation is step one. This is in keeping with Leonardo daVinci's famous exhortation, "Think of the end before the beginning." Here are the steps:

· Prepare a list, before even starting the study, of all of the possible areas in which you might anticipate the results to fall.

· List all of the roadblocks which you might expect to strike in implementing those results.

· List all of the actions which you must consider during the study in order to circumvent those roadblocks. These lists are updated throughout the study. This commonly results in few surprises during the later effort to implement the results of the study. Implementation rates of a properly conducted VA study are typically very near 100%.

How should I go about developing a team?

The ideal VA team comprises five experts on the product under study, each from a different discipline. They must all be Decision-Makers whose assignment presently includes responsibilities on the product under study. The following capabilities must be included in the team:

DESIGN

Project Engineer, Chief Draftsman, Designer. Ideally the Engineer responsible for the product.

OPERATIONS

Factory Supervisor, Industrial Engineer, Manufacturing Engineer, Methods Engineer

COST

Cost Estimator, Industrial Engineer, Accountant

OUTREACH

Marketing, Sales, Field Service, Purchasing

CATALYST

A Constructive Troublemaker, possibly an Engineer, Product Manager, or Marketeer

Ownership: During the Synthesis Phase of the Job Plan, as ideas and concepts arise, the team leader asks team members which one of them will Champion the idea or concept. If no one raises a hand, the idea or concept is dropped. One who volunteers to become a Champion is charged with investigating the feasibility and economics of the idea or concept. This Champion Concept results in a series of solutions which are highly likely to be implemented.

Q: So what else is unique about the Value Method?

Several characteristics differentiate the Value Method from other techniques. These help ensure that the customer obtains the kind of product they need and want.

• Value-based decision process
• Uses functional approach
• Follows a very systematic and organized job plan
• Directs efforts towards maximum possible alternatives through creativity techniques
• Good results are produced by taking the appropriate action at the appropriate time. Unfortunately, the appropriate action and timing are rarely sufficiently clear. Also, there are natural organizational and human limitations that must be contended with by everyone. The Value Method takes human and organizational limitations into account in the key characteristic of its processes. When the fundamental "requirements" of the Value Method are adhered to by those making use of it, success is virtually guaranteed.
• You may have heard of it.
  Applications of the Value Method are known by several common names. Value Engineering (VE), Value Analysis (VA), Value Management (VM), and Value Planning (VP) are some of the most common names used. These names describe small variations in the general Value Method process related to the timing, selection, type of activity, or other specific application. Application of the Method is usually referred to as value studies. Each year companies save billions of dollars in expenditures; improve quality, service while improving customer satisfaction; and increasing revenue, market share, and profits.
• Systematic and organized
  The Value Method process uses tested and successful procedures that are directed toward achieving success in meeting the purposes for the "project" by all involved. The process instills "common understanding", generates high production and high performing team activities, reduces the time necessary to obtain a product, and focuses the efforts on the purposes behind the project or activity being studied. A standard job plan is used to guide the entire process.

Alternatives
The Value Method generates, examines, and refines creative alternatives toward the concept of producing an end product that produces high customer acceptance. The process endeavors to widen the number and scope of the available alternatives. This is done to increase the potential for enhanced satisfaction, and take advantage of the added expertise brought into the studied activity through the value study process.

Functions and FAST
One of the most unique and useful qualities of the Value Method is its use of functions to describe the activity or product being studied. The value study breaks the "project" into components so as to avoid misunderstanding of the planned intents for the project. Then a Functional Analysis is conducted on each component. In the Value Method process, functions are limited to the shortest sentence possible. Just two words are usually allowed: a verb (active preferred) and a noun (measurable preferred). The main functional purpose for the component being studied is the primary function. Of course, things often happen as a result of the choice of a component, or something must be done to make the selected component work as needed. These functions are called supporting or secondary functions. The results of the functional analysis are placed into a function-logic diagram called a FAST (a short term for Functional Analysis System Technique).

Value
The true value of an activity or product is its relationship to its perceived worth as opposed to its life-cycle costs. In Value Method terms: Value = Worth / Cost. When an item has a Value greater than 1.0, the item is perceived to be a fair or good value. When an item has a Value is less than 1.0, the item is perceived to be a poor value or bad value. When the perceived worth far exceeds the life-cycle cost, we usually consider purchasing the item.

Worth
The worth of a product involves many features. The most common cited are: benefits received, services obtained, satisfaction of the product performance, quality, safety, and convenience. The worth of the product is a measure of what is in it for the customers involved. It is a measure of how well the end product meets the involved essential needs and the added desires of those that have a voice in the product selection or its use. An end product must always supply the essential need, or its worth will be poor

Life-Cycle Costs
The true cost of an item is not just the amount of money that you pay when you buy it. Much more is involved. When you buy something, you also buy its long-term effects. The initial costs plus these long-term costs are called life-cycle costs. This includes things like the time involved to get the project done, the people needed (number, expertise and so on), the degree of difficulty involved, availability of money or other resources, the amount of maintenance needed, and the money that must be expended and kept in reserve.

Q: Why does the methodology apply to everything? The secret is because the methodology involves function analysis and everything has a function. Therefore the methodology has universal application to every endeavor.

Value Methodology is a complete system to produce results!

Q:How did this Value Method develop?

Larry Miles, its “father,” moved from design engineering to purchasing for General Electric (GE) shortly before the United States entered World War II. Later (about 1943), he was assigned to be the procurement officer for a GE manufacturing plant. He developed a reputation of great enthusiasm for conceiving cost-effective operations and using unusual methods for problem solving.

Due to the competition for raw materials, products, personnel, and other resources in a time of war, Mr. Miles developed a procedure for procuring, designing, and using components and products. This procedure used "functions" as its basis. Mr. Miles found that he could more readily obtain what he needed if he used his new procedure, rather than specifying standard designed components. This new "function" based procedure was so successful that it was possible to produce the goods with greater production and operational efficiency, and less expensively. As a result of its tremendous initial success, GE formed a special group to refine the method. Larry Miles headed the group.

In the mid-1960's, three Federal organizations, Navy Bureau of Shipyards and Docks, US Army Corps of Engineers, and US Bureau of Reclamation adopted the use of the "function" based procedure in their organizations. Due to the nature of their work and involved staff, these Government groups named the method "Value Engineering". The name Value Engineering subsequently became the most universally accepted name for the "function" based procedure.

In the 1960's, Mr. Charles Bytheway developed an additional component to the basic Method. During his work for Sperry UNIVAC, he created a functional critical path analysis procedure that highlighted the logic of the activity under value study. A diagramming procedure called the "Functional Analysis System Technique" (FAST) was adopted as a standard component of the Value Method.

Before the death of Mr. Miles in 1985, the Value Engineering process had gained world-wide acceptance. It spawned an international organization dedicated to its practice, and the certification of competent practitioners (Society of American Value Engineers International or SAVE International). Further, it had saved billions of dollars.

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