Value Analysis and Value Engineering (VAVE)
The Situation Today
Reducing product costs in order to meet bottom-line targets in engineering industry is a challenge almost every company faces today. Effective cost management — from the perspective of the supply chain as well as value engineering — is especially important in light of many other challenges: stiff market competition and price pressure; accelerating innovation with limited R&D resources; globalization and increased pressure on margins; geographically dispersed supply chains; establishing a strong presence in emerging markets while localizing products to reduce costs; and complying with government regulations.
How HCL Can Help
HCL has been in the cost engineering and value engineering domain across industries and geographic locations for the past decade. Through our robust value engineering framework — which includes more than 1,000 cost models across mechanical, electronic, and electromechanical commodities — we help customers focus on the continuous process improvements that reduce costs and increase value. For effective service delivery, HCL has made large investments in teardown and benchmarking labs at offshore locations (Bangalore and Chennai, India) and a near-shore location (Welwyn Garden City, UK).
What You Can Expect
Here’s a snapshot of HCL’s key solutions in the areas of value analysis and value engineering.
- Dedicated Center of Excellence: HCL’s core team of subject-matter experts conduct value analysis and value engineering workshops for customers and focus on delivery excellence by identifying, testing, and validating cost re-dedication techniques and practices.
- Clean-Sheet Cost-Modeling Framework: We help build cost breakdown sheets across 24 mechanical, electro-mechanical, and electronic commodities. Our robust validation process of the cost model involves three levels of reviews by members of HCL’s highly qualified consulting review board followed by validation through supplier visits.
- Global cost database: HCL has leveraged its deep experience in value analysis and value engineering to build a database that is updated regularly and enhanced by third-party subscriptions such as the London Metal Exchange (LME) and Metal Bulletin for metal prices, and Plastic News and Polymer Updates for resin process. Our customers also benefit from our access to the International Labor Organization (ILO) database, which publishes labor rates across industries and skills for more than 200 countries, and to machine burden rate information covering manufacturing processes across 24 commodity groups.
- Product standardization framework:HCL’s six-phase framework addresses product standardization requirements across multiple product lines. Phase 1 commences with the collection of inputs followed by the analysis and standardization of parts, assemblies, and raw materials; the prioritization of ideas; a feasibility assessment; and the preparation of a detailed business case. In Phase 2, selected ideas are implemented, and so on.
- Robust processes to ensure savings:To identify the right product for VAVE, we analyze product portfolios and spending across commodities. Using clean-sheet cost models, HCL has developed a maturity model that helps companies identify gaps and thereby negotiate more effectively with suppliers. So far, HCL has helped customers in eight industries identify potential savings of $300 million.
- Commodity specialists:HCL’s core commodity specialist team tracks commodities such as castings, plastics, rubber, fabrications, stampings, fasteners, and forging and extrusion products in mechanical and electro-mechanical components, while design and manufacturing engineers focus on addressing customer cost-out issues.
- Best practices database:HCL captures lessons learned from every project, enabling junior engineers to develop their knowledge of multiple technical environments. This best practices database is distilled into checklists and workflow sheets to ensure that HCL offers superior service in everyday value engineering activity.
What We’ve Done For Others
- Low-cost market entry:worked with a leading telecom equipment manufacturer to reduce BOM (bill of material) costs by 25% and product development time by 50%. In the process of helping the company launch a product in a low-cost market, HCL led the development of an ultra-low-cost antenna platform and the reengineering of material usage and manufacturing processes, and developed, tested, and certified the product.
- Product benchmarking:enabled a European industrial giant to analyze the strengths and weaknesses of competitors’ products with respect to cost and functionality, including material analysis and chemical compositions, and identified opportunities for cost reduction through the functional benchmarking report.
- Cost modeling: helped a global tier 1 automotive supplier negotiate more effectively with vendors, achieving $20 million in year-on-year savings across 23 mechanical, electronic, and electro-mechanical commodity groups.
- Value analysis:used elements such as teardown analysis, cost analysis, and function cost Pareto analysis to help an industrial heating, ventilation, and air conditioning (HVAC) company identify potential areas for cost reduction related to an existing V-type condenser. HCL recommended short- and long term design and process modifications that led to annual potential savings of more than 11.5%.
- Target costing: helped a leading automotive OEM negotiate an advantageous price with Indian and Chinese suppliers for alternators to be used in a low-cost car platform for India and other emerging markets.