Define value engineering. How is it used to control costs?

Value engineering is a kind of value analysis that focuses on reducing costs by reevaluating various activities and satisfying customer needs. It is the systematic approach to improving the value of a product at a reduced cost.

Value engineering helps in controlling the cost by adopting a reverse analysis of cost based on the target price. From the target price, desired profit is deducted to get the target cost. Then the value engineering process is started to reach the target cost.

It includes the following steps -

a) First of all customer needs are identified as it is the core element to delivering valuable products and services.

b) After identifying customer needs, products are designed in such a way that can be produced very efficiently.

c) Skilled production personnel is employed to improve the production process.

d) Costs are estimated and matched with the target cost. Efforts are made to keep the cost below or at the level of the target cost.