MODULE 1

SYLLABUS:
Introduction to Industrial Engineering - Evolution of modern Concepts in Industrial Engineering -
Functions of Industrial Engineering - Field of application of Industrial Engineering Product
Development and research- Design function - Objectives of design, - Manufacturing vs purchase-
Economic aspects- C-V-P analysis – simple problems-Development of designs- prototype,
production and testing - Human factors in design- Value Engineering.

INTRODUCTION:
• The American Institute of Industrial Engineers (AIIE) has defined the special field of industrial
engineering as “Concerned with the design, improvement and installation of integrated
systems of people, materials, equipment and energy”.
• The prime objective of industrial engineering is to increase the productivity by eliminating
unproductive operations and improving the effective utilisation of resources.
• The main resources are men, money, materials, equipment and machinery.
• The Industrial Engineer carries out such analysis in order to achieve the objectives (to increase
productivity, or profits, etc.) and policies of the organization.
• Productivity improvement implies: (i) a more efficient use of resources, (ii) less waste per
unit of input supplied, (iii) higher levels of output for fixed levels of input supplied and so
on.
• The inputs may be (i) human efforts (ii) energy in any of its myriad forms, (iii) materials, (iv)
invested capital etc.
• Succinctly stated, the mission would be to try to produce more or to serve better without
increasing the resources being consumed.

EVOLUTION OF MODERN CONCEPTS IN INDUSTRIAL ENGINEERING:

• History of industrial engineering dates back to industrial revolution and it has passed through
precious phases to reach the present advanced and developed stage.
• Frederick Taylor is known as the father of scientific management and Industrial Engineering.
• Period between 1882-1912 was the critical period in the history of industrial engineering.
• The important works during this period are:
➢ Factory system and owner — engineer and manager concept.
➢ Equal work, equal pay and incentive schemes.
➢ Scheduling and Gantt charts.
➢ Engineers started taking interest in cost control, and accounting. The most often quoted
and acknowledged investigator that have led to be discipline of industrial engineering in
present form was F.W. Taylor, who took interest in human aspects of production and
productivity.
• The modern industrial engineering techniques had their origin during the period between
1940 to 1946.
• Predetermined time standards (PMTS), value analysis and system analysis are few
prominent ones. They were expanded, refined and applied in subsequent years.
• Operation Research technique has brought a revolution and changed and expanded the
scope of industrial engineering activities.
• The computers have added dimension to the industrial engineering activities.
Present stage in industrial engineering:

• Industrial engineering has not remained restricted to manufacturing activities but has
extended its services to service industries also. The development of techniques like
➢ Value Engineering
➢ Operation Research
➢ CPM and PERT
➢ Human Engineering (Ergonomics)
➢ Systems Analysis
➢ Advances in Information Technology and Computer Packages
➢ Mathematical and Statistical Tools have expanded the scope of activities of industrial
engineering.

FUNCTIONS OF INDUSTRIAL ENGINEERING:

1. Selection of processes and assembling methods.
2. Selection and design of tools and equipment.
3. Design of facilities including plant location, layout of buildings, machines and equipment
material handling system, raw materials and finished goods storage facilities.
4. Design and improvement of planning and control systems for production, inventory, quality
and plant maintenance and distribution systems.
5. Developing a cost control system such as budgetary control, cost analysis and standard
costing.
6. Development of time standards, costing, and performance standards.
7. Development and installation of job evaluation systems.
8. Installation of wage incentive schemes.
9. Design and installation of value engineering and analysis system.
10. Operation research including mathematical and statistical analysis.

APPLICATION OF INDUSTRIAL ENGINEERING:

• Before 1940, Industrial Engineering was mainly applied to manufacturing industries for
improving methods of production, to develop work standards or to formulate production
control and wage policies.
• Later on, the use of industrial engineering also spread to non-manufacturing activities such
as construction and transportation, farm and air-line operations and maintenance, public
utilities, government and military operations.
• Still today, Industrial Engineering finds major applications in manufacturing plants and
industries.
• In an industry besides the production, other departments utilising industrial engineering
concept are Marketing, Finance, Purchasing, Industrial Relations etc.
PRODUCT DEVELOPMENT:
• A Product is an article obtained by the transformation of raw material and is marketed/sold
by the manufacturer.
• It may be a consumer product such as cigarettes, televisions or an Industrial product, e.g., a
lathe, an overhead bridge crane, etc.
• Development is carried out after applied research which follows pure research.
• Development involves design/redesign and fabrication of new or modified product and then
testing it to find its usefulness.
• Product Research and Development are concerned with all aspects of the product design and
applications including its,
➢ Functional efficiency
➢ Quality
➢ Unexplored uses
➢ Investigation of materials and possible substitutes
➢ Utilization of waste products, and
➢ Standardization and customer satisfaction.
PRODUCT DEVELOPMENT PROCEDURE:
The various stages involved in selecting and developing the product may be listed as:
1. Venture new product ideas
2. Screening of ideas - The various project ideas are then carefully screened. Poor ideas are
dropped and through the process of elimination, only the most promising, feasible and
profitable ideas are selected for further detailed investigation and evaluation.
3. Concept development - All product ideas selected after preliminary investigation
(screening) are subjected to detailed investigation and analysis. The purpose is to develop
ideas into mature product concepts
4. Product analysis
5. Product design and development program
6. Test marketing
7. Commercialization.

INTRODUCTION TO PRODUCT DESIGN:

• It is essential to design a product before starting its manufacture.
• The idea for new or improved products comes from many sources, such as
➢ Customer’s suggestions and complaints.
➢ R & D department.
➢ Other competitor products in the market.
REQUIREMENTS (OR OBJECTIVE) OF A GOOD PRODUCT DESIGN:
It is not possible to specify exactly what constitutes a good design, but the essential requirements
are that it should bring:
(a) Customer satisfaction
(b) An adequate profit.
a) In order to achieve customer satisfaction:
➢ The product should function correctly.
➢ It should possess desired degree of accuracy.
➢ It should have required standard of reliability.
➢ Product design should be such that it is easy to achieve accessibility for servicing.
➢ Product design should obtain good space utilization.
➢ Product should be sufficiently rugged to withstand all but exceptionally rough handling.
➢ Product should have pleasant appearance. Colours play an important role in product
design.
➢ Product should be of reasonable price to compete other products in the consumer
market.
b) Making adequate profit means:
➢ It should be easy to manufacture the product within the available resources.
➢ Manufacturing process should be decided on the basis of the product quantity to be
manufactured. Small parts on mass scale may be produced by Die casting rather than the
sand casting.
➢ The use of standard component parts wherever possible can lead to great saving.
➢ A well-designed product will consist of minimum number of parts.
➢ Good product design will call for minimum number of operations.
➢ Good product design should not extend the time.

C-V-P (COST - VOLUME - PROFIT) ANALYSIS:

• CVP analysis is the analysis of three variable viz. cost, volume and profit.
• Such analysis explores the relationship existing amongst costs, revenue, activity level and
resulting profit.
• It aims at measuring variation of cost with profit.
• Fixed Cost: -These are the costs which incurred for a period and which within certain output
and turnover limits, tend to be unaffected by fluctuations in the levels of activity (Output or
turnover). For example: Rent, insurance of factory building etc. remain the same for different
levels of production.
• Variable Cost: - These costs tend to vary with the volume of activity. Any increase in activity
results in an increase in the variable cost and vice versa. For example: Cost of direct labour,
direct material, etc.
• Semi-Variable Cost: - These costs contain both fixed and variable components and thus partly
affected by fluctuation in the level of activity. Examples of semi variable costs are telephone
bill, gas and electricity etc.

ANALYSIS:

• CVP analysis considers:

➢ the total costs (fixed and variable)
➢ the total sales revenues
➢ desired profits and the sales volume
• It is used for predicting how the changes in costs and sales volume affect profit. It is also
known as 'Break-Even Analysis'.
• CVP analysis could be helpful in the following situations:
➢ Budget planning: for forecasting profit by considering cost and profit relation, and
volume of production volume. This will help in determining the sales volume
required to make a profit.
➢ To make decisions regarding pricing and sales volume.
➢ Preparing flexible budget considering costs at different levels of production.

OBJECTIVES OF CVP ANALYSIS:

• Understand the interaction among:

➢ Prices of products.
➢ Volume or level of activity.
➢ Per unit variable cost.
➢ Total fixed cost.
➢ Mix of product sold.

CALCULATIONS

• Profit Equation and Contribution Margin

1. Profit = Sales -Total costs
2. Profit = Sales -Total variable costs - Total Fixed costs
3. Contribution margin = Total revenue – Total variable costs
4. Profit = (S-VC)*Q – FC
5. Q = (FC + Expected Profit)/(S - VC)
Q is the no. of units required to be sold to obtain target profit.
 S = Selling Price per unit
VC = Variable cost per unit
FC = Fixed Cost.

Example:

• Suppose that Super Bikes wants to produce a new mountain bike called Hero1 and has
forecast the following information.
Price per bike = 800
Variable cost per bike = 300
Fixed costs related to bike production = 55,00,000
Target profit = 2,00,000
Estimated sales = 12,000 bikes
• We determine the quantity of bikes needed for the target profit as follows:
Quantity = (55,00,000 + 2,00,000) / (800 - 300) = 11,400 bikes.

VALUE ANALYSIS/ENGINEERING:

• Value analysis aims at a systematic identification and elimination of unnecessary costs.

• Value analysis is an organized approach to identify unnecessary costs associated with any
product, material, part, component, system or service by analysis of function and efficiently
eliminating them (i.e. unnecessary costs) without impairing the quality, functional reliability
or its capacity to give service.
• Thus, it enables to produce the products with the same performance, quality and efficiency
with a less overall unit cost and consequently greater profits.
• Value Analysis is applied to the existing product with a view to improve its value. It is analysis
after the fact and it is a remedial procedure.
• Value Engineering is applied to the product at the design stage and thus ensures prevention
rather than elimination.
1. VALUE:
• Value is the price we pay for a product, process, material, or service required to perform a
specific function or service with the required quality and reliability.
𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛 (𝑜𝑟 𝑢𝑡𝑖𝑙𝑖𝑡𝑦) 𝑤𝑜𝑟𝑡ℎ 𝑡𝑜 𝑦𝑜𝑢
• 𝑣𝑎𝑙𝑢𝑒 = =
𝑐𝑜𝑠𝑡 𝑝𝑟𝑖𝑐𝑒 𝑦𝑜𝑢 𝑝𝑎𝑦

2. TYPES OF VALUES:
• Economic value can be subdivided into four types:
 a) Cost value (b) Use value (c) Esteem value (d) Exchange value.
• Cost value: It is the cost of manufacturing a product or a component. It is the measure of
sum of all costs incurred in producing the product. The cost value, therefore, is the sum
of raw material cost, labour cost, tool cost and overheads expended to produce the
product.
• Use value: It is the price paid by the buyer (customer’s view) or the cost incurred by the
manufacturer (manufacturer’s view) in order to ensure that the product performs its
intended functions (i.e. renders the required services) efficiently. Item without use value
can have neither exchange value nor esteem value. .
• Esteem value: It is the measure of properties, features, attractiveness, qualities, fancy,
packaging, etc., which increases sales appeal, or which attracts persons and creates in
them a desire to possess the product. Esteem value, therefore, is the price paid by the
customer or the cost incurred by the manufacturer beyond the use value.
• Exchange value: A product is said to possess exchange value if the same (because of its
qualities, usefulness) can be exchanged for another product or money. In a conventional
sense, exchange value refers to the price that a customer will offer for the product, the
price being dependent upon the satisfaction (value) which he derives from the product.
3. USES OF VALUE ENGINEERING
• It is a cost prevention as well as cost elimination technique thus reducing cost of the
product.
• Helps employees for better understanding of their jobs and orients them towards creative
thinking.
• Balance the cost and performance.
• Prevents over design of components.
• Motivates employees to come out with creative ideas.
• Increases the profits and deflates costs.
• Helps to satisfy the customer with company’s products.
4. WHEN TO APPLY VALUE ANALYSIS?
• Company’s products are losing in the market and there is a decline in sales.
• Company’s products are priced higher than the competitors.
• New design of products being undertaken.
• Symptoms of disproportionate increase in cost of production.
• Decreasing profitability and return on investment (ROI).
• Company failing to meet its delivery commitment.
5. VALUE ANALYSIS PROCEDURES (STAGES IN VALUE ANALYSIS):
a) Orientation phase: This phase involves identification of the problems very clearly,
selection of projects, formation of teams, laying down objectives and targets and in-depth
training of all the team members.
b) Information phase: After clearly identifying what is to be accomplished, all the relevant
information like drawings and technical specifications, manufacturing processes, detailed
cost break up, performance/ failure reports, quality and production problems etc. is
gathered.
c) Functional analysis phase: This phase involves analysis and identification of functions.
d) Creative phase: All the possible alternatives are generated. This can be achieved by
application of brain storming and other creativity techniques in order to generate a large
number of ideas for providing the functional requirements.
e) Evaluation phase: In this phase the possible alternatives developed are analysed. The cost
of each idea is estimated. Critical evaluation of all points of the solution is carried out.
f) Investigation/Development phase: In this phase short listed ideas are investigated in-
depth to arrive at optimum and practical solution.
g) Presentation phase: In this phase the selected alternative is presented to the decision
maker for approval and implementation.
h) Implementation phase: As a result of all the above phases a definite, specific and tangible
solution acceptable to all is reached
i) Follow up phase: This is the last stage which compares the results with original
expectations and suggests corrective action in the approach for the next project.
INDUSTRIAL ENGINEERING - MODULE 1
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MODULE 1
 Introduction to Industrial Engineering
 Evolution of modern concepts
 Functions of Industrial Engineering
 Fields of application
 Product development and Research
 Design function
 Objectives of design
 Manufacturing vs purchase – economic aspects
 CVP analysis – simple problems
 Development of designs – prototype, production and
testing
 Human factors in design
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 Value engineering
INTRODUCTION
 Industrial Engineer deals with the detailed analysis of the
use of resources of an organization
 Resources: Men, money, materials, and machinery.
 Primary function is management
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. .
INTRODUCTION
 Deals with the optimization of complex systems
or processes.
 Tries to eliminate wastage of various resources
such as time, money, machine, material and
energy.
 Industrial engineers are productivity and quality
improvement specialists.
4
INTRODUCTION
 Industrial Engineering is concerned with the
 design
 improvement
 and installation of integrated systems of
 people,
 materials,
 information,
 equipment
 and energy. 5
INTRODUCTION
 It draws upon specialized knowledge and skill in
 mathematical, physical, and social sciences
together with the principles and methods of
engineering analysis and design to
 specify, predict, and evaluate the results to be
obtained from such system
6
 INTRODUCTION
Industrial Engineering
 “Concerned with the design, improvement, and installation of
integrated systems of people, materials, information, equipment
and energy.
 It draws upon specialized knowledge and skill in the mathematical,
physical, and social sciences together with the principles and
methods of engineering analysis and design to specify, predict,
and evaluate the results to be obtained from such systems”.
- American Institute of Industrial Engineers (AIIE)
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EVOLUTION OF INDUSTRIAL ENGINEERING
8
. .
HISTORY OF IE
 Started with industrial revolution in 18th century (around
1750)
 Passed through various phases with contributions from
various individuals.
 The industrial revolution obtained from the development of
new inventions, particularly in textile industry and the steam
engine led factories with large number of workers.
 With enormous growth in industry, the management thinking
had begun.
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. .
SOME OF THE CONTRIBUTORS
Adam Smith (1723-1790) (Economist- Division of labour):
The Wealth of Nations was published in 1776.
Frederick W. Taylor (1856-1915) – The principles of
Scientific management was published in 1911. Father of
scientific management
Henry L Gantt (1861-1919)- Gantt Chart
F. B. Gilbreth (1868-1924) – Method study-Motion study.
Ralph M Barnes – (American Industrial Engineer) Noted
for his research in the area of motion study. Motion and
Time study published in 1937.
Henry Ford – Contributed in the development of 10
assembly line technique in mass production.
HISTORY OF IE
 During late 19th century drive for IE was provided by
engineers / managers of US.
 It achieved maturity after World War ІІ.
HISTORY OF IE
 Phase 1: Pre-Industrial Revolution Era.
 Phase 2: Industrial Revolution
 Phase 3: Scientific Management Phase
 Phase 4: Operations Research and Quantitative
Phase
 Phase 5: Automation and Computer Integrated
Manufacturing Phase
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HISTORY OF IE
 Pre-Industrial revolution era-
 Hand-operated manufacturing activity
 Adam Smith wrote Wealth of Nation and advocated
the concept of division of labour, skill development,
specialization, etc.
 Adam Smith - Father of economics
 Division of labour - This idea relates primarily to the
specialization of the labor force, essentially the
breaking down of large jobs into many tiny
components
 Initially applied to pin manufacturing industry
13
. .
HISTORY OF IE
 Industrial revolution-
 Industrial Engineering emerged as a profession
during the Industrial Revolution.
 This was during the period around 1750 to 1840.
 The industrial revolution involved the
transformation of a technology resting heavily
on human and animal labor into a technology
characterized by machines.
 Technically qualified people were needed to
plan, organize and control the manufacturing
processes.
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. .
 HISTORY OF IE
 Scientific Management Phase (up to 1940‟s)
 Taylor‟s contribution: Father of Scientific Management
- Real beginning of Industrial Engineering
Time study
 Taylor had observed that there was excessive
inefficiency in the management and functioning of
industrial enterprises.
 Work should be done in the best and the cheapest
manner.
 Unscientific approaches should be avoided– Eg: a trial
and error approach.
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HISTORY OF IE
Scientific Management Phase (up to 1940‟s)
 F. B. Gilbreth (industrial psychologist) : Motion
study-Therbligs are 18 kinds of elemental
motions used in the study of motion economy in
the workplace.
 Therbligs comprise a system for analyzing the
motions involved in performing a task.
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. .
HISTORY OF IE
Scientific Management Phase (up to 1940‟s)
 The identification of individual motions, as well as
moments of delay in the process, was designed to
find unnecessary or inefficient motions and to
utilize or eliminate even split-seconds of wasted
time.
 Henry L Gantt: Gantt chart for planning and
scheduling.
 A Gantt chart, commonly used in project
management, is one of the most popular and useful
ways of showing activities (tasks or events)
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displayed against time.
HISTORY OF IE
 Operations research and Quantitative
Phase (1940‟s to Early 1980‟s):
 Mathematical and statistical tools were widely
used.
 Mathematical or OR tools: Linear
programming, non-linear programming,
transportation models, queing models, etc.
 Statistical tools: ANOVA, F- test, t- test,
Regression analysis
 Optimization became the buzz word.
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. .
HISTORY OF IE
 Automation and Computer Integrated
Manufacturing Phase (Since Early 1980‟s):
 The term computer integrated manufacturing (CIM)
is used to denote the use of computers
 to design the products
 plan the production
 control the operations, and
 perform the various business related functions
needed in a manufacturing firm.
 Cycle-time reduction
 Flexibility
 Customer focus 19
. .
FUNCTIONS OF INDUSTRIAL ENGINEERING
20
. .
ACTIVITIES/FUNCTIONS OF INDUSTRIAL ENGINEERING
 Methods engineering – method study, time study, selection of
equipment, etc.
 Locate plant & design layout
 Material Handling
 Production planning and control – management of raw materials,
finished products, work-in-process, routing, scheduling, etc.
 Management of Inventory
 Inspection and Quality control
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 Budget and cost control
. .
ACTIVITIES/FUNCTIONS OF INDUSTRIAL
ENGINEERING
 Job evaluation and merit rating
 Study equipment replacement feasibility
 Measure effectiveness of marketing
 Schedule projects (PERT or CPM)
 New product development
 Logistics management 22
FIELDS OF APPLICATION
23
 AREAS OF APPLICATION
 Initially, applied to manufacturing industries-
 to improve methods of production
 to develop work standards
 to formulate production control and wage policies.
 To control inventory
 To design plant layout
 To schedule machines and processes, etc.
AREAS OF APPLICATION
 Later, applied to non-manufacturing industries-
 Construction project planning
 Transportation
 Air-line operations and maintenance
 Hospital management,
Military operations, etc.
 In an industry, besides production, Industrial Engineering
concept is used in the areas of finance, marketing
management, purchasing, industrial relations, etc.
25
. .
AREAS OF APPLICATION
 Top management: assist the management in
activities like designing, planning, inspection,
decision making using various techniques (eg:
Statistical technique, Operations research, etc.)
 Procurement of raw material: determines
Economic Order Quantity (EOQ), reorder point,
etc.
 Technical aspects: to choose best design,
equipment, testing method, etc.
26
AREAS OF APPLICATION
 Maintenance: To select the proper maintenance
technique and maintenance procedure and thus
to reduce maintenance cost and improve
production output.
 Production and quality control: Proper
scheduling, use of advanced technologies, use of
proper quality control techniques, inspection.
 Material handling: Selection of proper material
handling equipment, management of in bound
and out bound logistics, reduction of damage cost
materials. 27
AREAS OF APPLICATION
 Marketing: better marketing strategy including
pricing.
 Employee relationship: to improve morale of
the employees by providing proper work
environment, training, etc.
 Finance: Design better financial system
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REDESIGNING MIDDAY MEAL LOGISTICS
 The Akshaya Patra Foundation was founded in
2000 in Bangalore to provide free mid-day meals
to the students of government schools.
 Time of delivery and temperature of food at
the time of delivery should be maintained as per
the specifications.
 1.3 million children in more than 9,000 schools in
nine states.
 The foundation faced a logistics problem in
efficiently distributing food within the available
time window.
29
REDESIGNING MIDDAY MEAL LOGISTICS
 Study by IIMB
 Used OR modeling to overcome logistics issues
 Clustering schools
 Assigning appropriate distribution vehicles to
clusters
 Routing vehicles within the clusters.
 Estimate annual cost savings will be about
US$1.96 million.
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. .
ROLE OF AN INDUSTRIAL ENGINEER
 Advisor / Consultant, Advocate/Activist, Analyst,
Motivator, Decision maker, Designer/planner,
Coordinator, Innovator, Trainer/educator, Negotiator,
Project manager and Data gatherer.
31
. .
ROLE OF AN INDUSTRIAL ENGINEER
 An industrial engineer works towards finding
simpler, most efficient and cost effective ways to
produce parts.
 They determine the most effective ways to use
the basic factors of production – man, machine,
material, information and energy to process a
product or produce a service.
32
. .
 PRODUCTIVITY
 Productivity is one of the commonly used term in industrial
engineering
 It is a measure of how well the resources are utilized to produce an
output.
 It is the quotient (ratio) obtained by dividing output by one of the
factors of production.
 Factors of production: Land, Labour, Capital, Raw materials,
Machines, etc.
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 Two types of productivity should not be directly compared.
KINDS OF PRODUCTIVITY MEASURES
 Labour productivity – in terms of Labour hours
(Denominator)
This index does not reflect the effect of changes
in wage rates and changes in labour mix.
 Capital productivity – e.g. Value of capital
investment.
 Raw material productivity – e.g. weight of raw
material consumed in the denominator.
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 PRODUCTION VS PRODUCTIVITY
 Production and productivity are two different things
 Increased production does not mean increased productivity.
 Higher productivity means that more is produced with the same
expenditure of resources; (i.e. at the same cost in terms of land,
material, machine, time or labor.)
 Alternatively, same amount is produced at less cost in terms of
land, labor, material etc; thereby releasing some of these
resources for the production of other things.
35
. .
PRODUCT DEVELOPMENT AND RESEARCH
36
PRODUCT DEVELOPMENT AND RESEARCH
 Product development is an activity which involves
creating a new product or modifying the existing
product in order to meet the changing customer
requirements.
 Industries have to continuously upgrade their
products and introduce new products in the market
in order to retain and increase their market share.
 In a manufacturing company, product development
is done by Research and Development Department.
37
PRODUCT RESEARCH
 The research may be of two types:
 Pure research
 Applied research
Pure research is concerned with discovering new
facts and to learn more accurately about the
characteristics of known facts.
Applied research is a methodology used to solve a
specific, practical problem of an individual or group.
Product development is carried out after applied
research. 38
TOOLS OF PRODUCT DEVELOPMENT
 Standardization:
 Simplification:
 Specializaion
 All these factors lead to higher efficiency in
production.
39
. .
SIMPLIFICATION
 Simplification is a process of product analysis
through which unnecessary varieties and designs
are eliminated.
 Only a limited number of grades, types and sizes
of the product are retained.
40
. .
STANDARDIZATION
 Having selected the varieties and grades of the
products to be retained as much of its
manufacturing details are standardized as
possible.
 It also reduces component cost since standard
components are manufactures by mass production
methods and are cheaper.
 Selection of standard materials ensures physical
performance and guarantees failure-free
operation.
41
SPECIALIZATION
 It is the natural outcome of the application of
standardization and simplification.
 Specialization means concentrating efforts on a
particular field of action or towards a specific
attempt.
 A worker is said to be specialized in a work when
he acquires skill and proficiency in it by
concentrating solely on it
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. .
DIFFERENT STAGES OF PRODUCT
DEVELOPMENT
1. Generation of new product ideas
2. Screening of Ideas/ evaluation
3. Concept development
4. Business analysis / market analysis
5. Product introduction
6. Product life cycle analysis
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. .
1 GENERATION OF NEW PRODUCT IDEAS
 Product ideas come from a variety of sources.
 Usually they come from:
 Internal resources like companies on research
and development department, managers, sales
force personnel etc.
 From external sources like customers, dealers,
competitors, consultants, scientist etc.
 Customers needs and wants seem to be the most
logical place to start looking for a new product.
 Also, ideas are generated to address the gaps or
loopholes in a competitor‟s product 44
. .
2. SCREENING OF IDEAS/ EVALUATION
 After collecting the product ideas, the next stage
is screening of these ideas.
 Interactive brainstorming sessions will help to
determine which of the ideas have the potential
of making significant contribution to marketing
objectives and to finally select the most preferred
idea.
45
. .
3. CONCEPT DEVELOPMENT
 At this stage, product idea is transformed into a
product concept.
 i.e. a product which target market will accept.
 Identifying physical features, benefits, price of
the product are done.
46
. .
4. BUSINESS ANALYSIS / MARKET ANALYSIS
 Business analysis will prove the economic
prospects of the new product.
 Market analysis involves a projection of future
demand, financial commitment and return.
 The demand potential of the product and the cost
of production and marketing are determined.
 It must also be ensure that product concept is
compatible with the resources of the
organisation, i.e. technological, human and
financial.
 SWOT analysis is also performed
47
5. PRODUCT INTRODUCTION
 Make prototype - The first fully operational
production of the complete design solution.
 Only after testing under all expected and
unusual operating conditions the prototypes are
brought into full production.
 After the above basic requirements are met, the
product is sold on a small scale or regional bases
(test market).
 Advertisement and sales promotions for the
product are done.
 Feedback is used to take a decision regarding
48
complete market launch.
. .
6. PRODUCT LIFE CYCLE ANALYSIS /
PRODUCT SUPPORT
 Product planning doesn't stop with the product
launch.
 It must also include managing the product through
various stages of its product life cycle.
 Introduction, growth, maturity and decline stages
 During the growth phase, sales are usually strong
while competition is low.
 However, over time, competitors will come up with
their own products.
 This competitive products will eat into the market
share of the existing product and sales will fall.
 This is the time new strategies have to be formulated
like lowering the product price, throwing in freebies,
developing new or additional features for the product,
etc. 49
PRODUCT EXTENSION/PRODUCT LINE
EXTENSION
 When a company creates a new product in the
same product line of an existing brand with
unique features that the original product does
not have, it is called a product extension.
 For example, consider the case of Apple iPod.
 Apple realize that it needed new models and new
markets to keep the profits growing, which
resulted in the introduction of iPod shuffle, iPod
nano, iPod touch, and iPod classic.
50
. .
PRODUCT EXTENSION/PRODUCT LINE
EXTENSION
 Product extension is most commonly initiated in the
maturity stage.
 The key distinction between a product improvement
and product extension is that when a line extension
is introduced the original product can still be
acquired by the consumer where as a product
improvement serves as a replacement for the
original product
51
DESIGN
Design is the most creative part of engineering or
Technology.
Engineers have a wide spectrum of design
requirements.
Research and development is the focus of all
thriving engineering organizations.
52
. .
DESIGN FUNCTION
 It is essential to design a product before starting
its manufacture.
 Designing is very important before actual
transformation of raw materials into finished
products.
 The design determines the commercial success of
a product.
53
 DESIGN FUNCTIONS
 Things, a designed device or system is supposed to do.
 Engineering functions almost always involve transforming or
transferring energy, information, or material.
More functions leads to more constraints
 For example, the drill should work in high humidity (in rain)
 The drill should switch off if the load exceeds
 Thus, some of the functions can lead to constraints
(specifying the maximum load)
 DESIGN FUNCTION
 This is about the specifics, the design is planned to do
 Function refers to the way a technical system works
Primary function – It is the basic operational outcome of the
device
Secondary required functions – It supports primary functions
Secondary unwanted functions – Undesirable byproduct eg.
Generate heat , generate noise
PORTABLE DRILLING MACHINE - DESIGN
FUNCTIONS
. .
Primary
 The drill should drill hole of required dimension.
Secondary
 Compact and less weight
Secondary unwanted
 Generate heat
 Generate Noise
OBJECTIVES OF DESIGN
 The objective of product design is to create goods
or services with excellent functional utility and
sales appeal at an acceptable cost and within a
reasonable time.
58
. .
REQUIREMENTS/OBJECTIVES OF A GOOD PRODUCT
DESIGN
 Satisfy the customer needs.
 Profitable
 Should provide all functional requirements.
 Extra feature
 Reliable
 Quality
 Environmental friendly
 Safety
 Easy to handle
 Availability of spare parts
 Aesthetics 59
REQUIREMENTS/OBJECTIVES OF A GOOD PRODUCT
DESIGN
 Easy to store
 Competitive price.
 Easy to manufacture
 Easy to assemble
 Variety-options for the customer.
 Possibility of add-on features.
60
. .
PRODUCT DESIGN
 New products have changed the life of one and all.
 E.g. Computer, cell phone, etc.
 Look around-Variety
 Present designs of products are significantly
different from those at some 20 years back.
Design variation of cell phones
61
 TYPES OF DESIGN
Classification is based on the difficulty of the
design process:
 Adaptive design
 Development design
 New design
. .
ADAPTIVE DESIGN
 Easiest
 Deals with the creation of a design process based on an
existing similar process.
 Existing design → Modifications → New design
. .
DEVELOPMENT DESIGN
 Complex in nature
 The design may start from an existing design,
but the final outcome may vary significantly from
the initial product.
 Eg: Manual Transmission → Continuously variable
transmission (CVT)
NEW DESIGN
 Most difficult
 Creativity of the designer
 Involves mastering design and engineering
knowledge in addition to creativity and
imagination
 Any product which is the first of its kind may be
regarded as an outcome of a new design process.
STAGES IN PRODUCT DESIGN
1. Conception
2. Acceptance
3. Execution
4. Translation
5. Pre-production
70
1. CONCEPTION
 In this stage, after incorporating the user
requirements, the draft specifications for the
product are laid down.
 On design specification, the following information
should be furnished:
 Performance requirements
 Appearance or supplying requirements.
 Estimated quantity which will be sold.
 Maximum price within which the product should
be offered
 Probable date of introduction of the product into
the market 71
. .
2. ACCEPTANCE
 This is a stage, where the design activity of the
product begins after the feasibility analysis
 Calculations of the product is accepted in this
stage.
72
3. EXECUTION
 Based on general design considerations, a model
is prepared as per the acceptance of specification
in stage 2.
73
4. TRANSLATION
 At this stage, the production engineering
department is involved in design work.
 The manufacturing feasibility is tested at this
stage.
 The final manufacturing drawings are also
prepared in this stage.
74
5. PRE-PRODUCTION
 Before starting the production on commercial
basis, it is recommended to carry out a pilot run
under production conditions.
 The pre-production run will ensure the quality
and reliability of the product as per the
specifications.
75
MANUFACTURING VS PURCHASE –
ECONOMIC ASPECTS
76
. .
MAKE OR BUY DECISION
 A make-or-buy decision is the act of choosing
between manufacturing a product in-house or
purchasing it from an external supplier.
 In a make-or-buy decision, the most important
factors to consider are part of quantitative
analysis, such as the associated costs of
production and whether the business has the
capacity to produce at required levels.
77
MAKING DECISION – FACTORS
 Purchase and maintenance of any production
equipment.
 Cost of production materials.
 Additional labor required to produce the items
 Storage requirements within the facility or if
additional storage space must be purchased
 Proper disposal of byproducts from the
production process.
78
BUYING DECISION - FACTORS
 The price of the item
 Any shipping or importing fees
 Applicable sales tax charges.
 Expenses relating to the storage of the incoming
product
 Labor costs associated with receiving the
products into inventory.
 The reliability of the supplier.
 The firm should also consider whether the
supplier can offer a long-term arrangement, if
that is desired. 79
FACTORS THAT MAY INFLUENCE FIRMS TO BUY A
PART EXTERNALLY INCLUDE
 Lack of expertise.
 Suppliers' research and specialized know-how
exceeds that of the buyer.
 Cost considerations (less expensive to buy the
item).
 Small-volume requirements.
 Limited production facilities or insufficient
capacity.
 Indirect managerial control considerations.
80
. .
FACTORS THAT MAY INFLUENCE FIRMS TO
BUY A PART EXTERNALLY INCLUDE
 Brand preference.
 Item not essential to the firm's strategy.
 The supplier has previously provided outsourced
services successfully in the past and can sustain
a long-term relationship.
81
. .
FACTORS THAT MAY INFLUENCE FIRMS TO
MAKE A PART INTERNALLY INCLUDE
 Cost considerations (less expensive to make the
part)
 Desire to integrate plant operations
 Productive use of excess plant capacity to help
absorb fixed overhead (using existing idle
capacity)
 Need to exert direct control over production
and/or quality
 Better quality control
 Design secrecy is required to protect proprietary
technology. 82
FACTORS THAT MAY INFLUENCE FIRMS TO
MAKE A PART INTERNALLY INCLUDE
 Unreliable suppliers
 No competent suppliers
 Desire to maintain a stable workforce (in periods
of declining sales)
 Quantity too small to interest a supplier
 Control of lead time
 Transportation and warehousing costs
 Political, social or environmental reasons (union
pressure)
 Emotion (e.g., pride)
83
C-V-P ANALYSIS
 Cost-Volume-Profit Analysis
 It is also known as 'Break-Even Analysis'
 CVP analysis is the analysis of three variable viz.
cost, volume and profit.
 Such analysis explores the relationship existing
amongst costs, revenue and resulting profit.
 It aims at measuring variation of cost with profit.
 Takes into account:
 The total costs (fixed and variable)
 The total sales revenues
84
 Desired profits with regard to the sales volume
. .
CVP ANALYSIS
 CVP analysis could be helpful in the following
situations:
 Budget planning: in determining the sales
volume required to make a profit
 To make decisions regarding pricing and sales
volume
 Determining the sales mix of different products,
in what proportions each of the products can be
sold. 85
ASSUMPTIONS OF CVP ANALYSIS
 Expenses can be classified as either variable or
fixed.
 CVP relationships are linear over a wide range of
production and sales.
 Sales prices, unit variable cost, and total fixed
expenses will not vary within the relevant range.
 Volume is the only cost driver.
 The sales mix remains unchanged during the
period.
86
. .
CVP ANALYSIS - FIXED COST
 These are the costs which incurred for a period
and which within certain output and turnover
limits, tend to be unaffected by fluctuations in
the levels of activity (Output or turnover).
 For example: Rent, insurance of factory building
etc. remain the same for different levels of
production
87
FIXED COST GRAPH
88
CVP ANALYSIS - VARIABLE COST
 These costs tend to vary with the volume of
activity.
 Any increase in activity results in an increase in
the variable cost and vice versa.
 For example: Cost of direct labour, direct
material, etc.
89
. .
VARIABLE COST GRAPH
90
BREAK-EVEN ANALYSIS (CVP ANALYSIS)
91
BREAK-EVEN ANALYSIS
 BEA is used to analyse the relationship between
cost, volume and profit.
 At break-even point (BEP), the total revenue
cover all fixed and variable costs, resulting in
zero profit.
 No profit or No loss point
92
BREAK-EVEN ANALYSIS
 Decision to make or buy is based on break-even point.
 Break-even Point (in units) =
𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
 (𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒/𝑢𝑛𝑖𝑡 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡/𝑢𝑛𝑖𝑡 ) = Contribution
margin / unit
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
 Break-even Point (in sales value or turnover) =
𝑃𝑉 𝑟𝑎𝑡𝑖𝑜
 The contribution margin ratio (CMR) i.e. PV ratio is the
percentage by which the selling price (or revenue) per unit
exceeds the variable cost per unit, or contribution margin as a
percentage of revenue.
93
. .
CVP ANALYSIS
Example 1:
 Super Bikes wants to produce a new mountain bike
called Hero1 and has forecast the following
information.
 Price/bike = 8000
 Variable cost/bike = 3000
 Fixed costs related to bike production = 5.5 Crore
 Target profit = 20,00,000
 Estimated sales = 1,20,000 bikes
Determine BEP (in units), BEP (in sales value),
Contribution margin/unit, Total contribution margin for
the estimated sales, PV ratio, quantity of bikes to be
sold for the achieving the target profit. 94
. .
CVP ANALYSIS
Ans:
 BEP (in units) = 11000 units
 BEP (in sales value) = 8.8 crore
 Contribution margin/unit = Rs. 5000/unit
 Total contribution margin for the estimated sales
= 60 Crore
 PV ratio = 0.625
 Quantity of bikes to be sold for the achieving the
target profit = 11400 units
95
BREAK-EVEN ANALYSIS : EXAMPLE 2
 XYZ company presently purchases a component
for its end product at Rs. 5 per unit. The company
is considering to make the component at Rs. 3 per
unit. However, it will incur a fixed cost of Rs.
20000. What is the minimum quantity to be
manufactured so that it is more profitable as
compared to buying?
96
BREAK-EVEN ANALYSIS
 Ans: 10000+1
97
. .
BREAK-EVEN ANALYSIS: EXAMPLE 3
 From the following data (a) find out the break
even point. Variable cost per unit =Rs. 18, Fixed
cost = Rs. 80000, Selling price per unit = Rs. 28.
(b) What should be the selling price per unit if
the BEP brought down to 4000 units.
 Ans: (a) 8000
(b) 38
Graphical method can also be used for Break-even
analysis 98
PROTOTYPING:
 A prototype is an original model that serves as a basis
for future models.
 Prototyping consists of building a prototype of the
product
 For example, a new aircraft design would first be tested
as a scale model in a wind tunnel.
 Wind tunnel tests would generate information to be
used in constructing a full-size prototype of the aircraft.
 Test pilots then fly the prototype extensively under real
conditions.
 Only after testing under all expected and unusual
operating conditions are the prototypes brought into
full production.
. .
PROTOTYPING
 This is not just a model but a full fledged product
made as per the design.
 They are tested in the same operating environments
in which they‟re expected to function as final
products.
 At times, prototyping is done for some parts of a
design to check certain requirements.
. .
PROTOTYPING
 Prototyping is done using the materials specified so that
their performance is also taken into account.
Need of a prototype:
 Cost and time effective
 Feedback is obtained quickly so that product issues are
resolved earlier in time.
 Better product is built after testing and modifications
based on the results of testing.
PROTOTYPING
 The decision to build a prototype depends on
a number of things, including:
 the size and type of the design space,
 the costs of building a prototype,
 the ease of building that prototype,
 the role that a full-size prototype might
play in ensuring the widespread acceptance
of a new design,
 the number of copies of the final design
that are expected to be made or built.
 TESTING AND EVALUATION
 Before the product is introduced it is to be tested fully for all the
designed function.
 Testing and evaluation ensures whether the product will work or
does it require refinement.
 To identify potential faults
 Other requirements that are taken into account in the design are
to be evaluated (safety, environmental issues, etc.)
REASONS FOR TESTING AND EVALUATING
THE PROTOTYPE
 Testing and evaluation allows the Client or
customer to view the prototype and give their
opinions.
 Safety issues are identified by narrow testing and
evaluation.
 The prototype can be tested against any relevant
regulations and legislation.
 The prototype is evaluated in order to allow the
production cost to be assessed and finalized.
 Component Failure is often identified during the
testing process. This may mean that a component
104
has to be redesigned and not the end product.
. .
PRODUCTION
 When the prototype is designed, manufactured
and tested successfully the next stage is product
manufacturing
 The production manager must plan and control
the process of production so that it moves
smoothly at the required level of output while
meeting cost and quality objectives.
. .
PRODUCTION
 The time limit for production and the
quantities needed at different points of time
are also decided.
. .
PRODUCTION
 The production level might need to be
adjusted from time to time to address
fluctuating demand or changes in a
company‟s market share.
 When more than one product is involved,
complex industrial engineering or operations
research procedures are required to analyze
the many factors that impinge on the
problem.
PRODUCTION
 Successful transformation of design into a
saleable product is a challenge to the
organization.
 This needs a close coordination of production and
design department.
 The concept of DESIGN FOR PRODUCTION is
the current trend.
108
HUMAN FACTORS IN DESIGN -
ERGONOMICS
109
ERGONOMICS
 The word "Ergonomics" originated from two
Greek words "ergon," meaning work, and "nomos“
meaning “law."
 How well the design fits the human user.
 It deals with the user interactions with the
product and making sure that it is easy to use
and maintain.
 It is the study of man in relations to his work.
 Human engineering or human factors
engineering.
 The aims of ergonomics are, therefore, to enhance
functional effectiveness while maintaining or 110
improving human welfare.
. .
ERGONOMICS
 It is concerned with designing and improving the
workplace, workstation, tools, equipment, etc.
 To limit fatigue, discomfort and injuries, while
efficiently achieving personal and organizational
goals.
 A successful ergonomics program utilizes the
skills of many disciplines, including engineering,
psychology, medical, safety, management, etc.
 Two goals:
 Enhance performance and thus productivity
 Prevent fatigue and injury. 111
ERGONOMICS
 Ergonomics is a multi-disciplinary science
comprising subjects like anatomy, psychology,
physiology, sociology, engineering, anthropology,
physics and medicine.
112
. .
OBJECTIVES OF ERGONOMICS
 Improve human well-being and overall system-
performance by optimising the integration of man
and machine.
 Obtain maximum satisfaction for the worker by
taking care the factors governing the physical
and mental fatigue.
 Attempts to minimize the risk of injury, illness,
and errors without compromising productivity.
113
ADVANTAGES OF ERGONOMICS
 Higher productivity
 Less fatigue and more comfort to the worker
 Better design of the machine
 Increased safety.
 Reduced labour turnover
 Better integration of man-machine system.
114
. .
RELATED SCIENCES OF ERGONOMICS
Anthropology:
 It is the study of human characteristics such as
height, weight, reach, and its variations over
time.
 The data is useful for determining the boundaries
of the work-place, heights and shapes of the seats
and work tables to suit human body
measurements.
 The data is useful for designing handles, levers,
etc. so that they are easy to reach and operate.
115
RELATED SCIENCES OF ERGONOMICS
Physiology:
 Concerned with the determination of :
 The effect of stress and strains caused by
environmental factors such as light, heat, noise,
humidity, etc. on human body and the extent to
which it can tolerate.
 The speed, accuracy and force with which body
movements can carried out.
 Human stamina
116
. .
RELATED SCIENCES OF ERGONOMICS
Psychology:
 Study concerned with human behaviour and
human reactions under various working
conditions and under the influence of mental
strain.
 In the language of ergonomics, the factors which
make the job uncomfortable are called „stressors‟
and the effect of stressors on human body is
called strain.
 Strain can either physiological or psychological or
combination of them.
117
FACTORS AFFECTING HUMAN COMFORT IN
WORKPLACE
 Physical factors such as lighting, ventilation,
noise and temperature.
 Psycho-social factors such as working hours, rest
pauses, shift timings, safety, etc.
118
. .
 119
. .
 120
. .
ERGONOMICS
 International labour organization defines human
factors engineering as “the application of
human biological sciences along with
engineering sciences to achieve optimum
mutual adjustment of men and his work,
the benefits being measured in terms of
human efficiency and well-being”.
121
. .
ERGONOMICS
 The fundamental concept of human engineering
is the system.
 A system is composed of humans, machines, and
other things that work or interact together to
accomplish some goal which these same
components could not produce independently.
122
MAN-MACHINE SYSTEM
 Human-factors engineers regard humans as an
element in systems, and a man-machine model is
the usual way of representing that relationship.
 The simplest model of a man-machine unit
consists of an individual operator working with a
single machine.
 In any machine system, the human operator first
has to sense what is referred to as a machine
display, a signal that tells him something about
123
the condition or the functioning of the machine.
MAN-MACHINE SYSTEM
 A display may be the position of a pointer on a
dial, a light flashing on a control panel, the
readout of a digital computer, the sound of a
warning buzzer, or a spoken command issuing
from a loudspeaker.
 Information processing
 Human operator normally takes some action; a
pushbutton, lever, crank, pedal, switch, or
handle.
124
MAN-MACHINE SYSTEM
 The man-machine system is a combination of one
or more human beings and one or more machine
interacting to bring about, from given inputs,
some desired output.
125
126
127
VALUE ENGINEERING
128
. .
 VALUE ENGINEERING / VALUE ANALYSIS
 Value analysis aims at a systematic
identification and elimination of unnecessary
costs.
 It is primarily developed as a cost reduction
technique.
 It critically investigates and analyses the
different aspects of materials, purchase, design
and production of each and every component of
the product.
 Value analysis is normally applied to existing
rather than to new products.
129
. .
VALUE ENGINEERING / VALUE ANALYSIS
 Value analysis examines the design, function,
and cost of each and every component in order to
produce it economically without decreasing its
utility or reliability.
function (or utility) 𝑤𝑜𝑟𝑡ℎ 𝑡𝑜 𝑦𝑜𝑢
 Value = =
𝐶𝑜𝑠𝑡 𝑝𝑟𝑖𝑐𝑒 𝑦𝑜𝑢 𝑝𝑎𝑦
 Thus, value analysis should not be taken as only
cost reduction technique; but instead it may
increase the value of a product either by
increasing its utility with the same cost 130
VALUE ANALYSIS- QUESTIONS ASKED BY A
VALUE ANALYSIS TEAM
 Does it (a component) contribute value to end
product?
 Is its cost proportionate to its function?
 Would there be a better product?
 Can a component be produced by less costly
process?
 Is it possible to use a standard component?
131
. .
VALUE ENGINEERING
 It is the application of the concepts of value
analysis at the design or pre-manufacture stage
of the component parts.
132
. .
VALUE ENGINEERING
 Value engineering (VE) is the study of
functions to satisfy the user needs of a
quality product at low life cycle cost through
well planned design with creativity.
 Value, as defined, is the ratio of function to
cost.
VALUE ENGINEERING
 Value engineering is a systematic method to
improve the "value" of goods or products and
services by using an examination of function.
 Value can be increased by either improving the
function (performance) or reducing the cost.
134
VALUE ENGINEERING
 It is a primary tenet of value engineering that
basic functions be preserved and not be reduced
as a consequence of pursuing value
improvements.
 Value Engineering is gaining much more
significance in the present scenario because of a
lot competition among the various companies.
. .
VALUE ENGINEERING
 Maximum value is obtained when essential
function is achieved for minimum cost
 Maximizing the functionality and/or minimizing
the cost would add value to the products
Value Equation: V= P/C
V- Value
P- Performance
C – Cost
VALUE ENGINEERING
 Reduction of parts during design.
 Introduction of simple design modifications that could
assist in manufacture or assembly.
 Choosing materials that can replace costly ones and
improve the performance.
. .
 Functions may be primary, secondary or tertiary.
138
. .
APPLICATIONS
VA/VE has applications in almost all fields.
 Machine tool industry
 Automobile industry
 Military equipment
 Transportation and distribution
 Construction
 Healthcare
139
BENEFITS
 Faster cost reduction technique.
 Improved customer satisfaction (as the value of the
product is increased).
 Increased sales and thus increased profit.
 It requires little expenditure because the value
analysis team can be formulated out of the staff
available in different sections like purchase,
production, finance, etc.
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REASON FOR POOR VALUES
 Gaps in user expectation and the product or
service
 Design based on habitual thinking or faulty
beliefs
 Not enough time for project formulation and/or
design
 Lack of and/or poor coordination amongst
designers
 Failure to utilize all available resources
 Not using standardised products
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TYPES OF VALUES
 It is usually difficult to specify value mainly
because values change from person to person.
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TYPES OF VALUE
 Use value: It is also called functional value. It
considers the work done, functions performed or
services rendered by a product or component.
 Esteem value: It provides properties, features and
attractiveness to a service, product or work, which
make the ownership desirable.
 Scrap value: It is the money, which can be
recovered when the item is not needed.
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TYPE OF VALUE
 Cost value: It is the total cost of material, labour,
overhead and services to produce an item (or to
deliver a service).
 Exchange value: A product is said to possess
exchange value if the same (because of its
qualities) can be exchanged for something else.
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STAGES IN VALUE ANALYSIS
 VA starts with the identification of its function or end
use.
 The main purpose is to provide the required function
at the least cost.
Stages:
 Orientation phase
 Information phase
 Functional analysis phase
 Creative phase
 Evaluation phase
 Investigation/development phase
 Presentation phase
 Implementation phase
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 Follow-up phase
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STAGES IN VALUE ANALYSIS
 Orientation phase: Identification of the problems
very clearly, formation of teams, laying down
objectives and in-depth training of all the team
members.
 Information phase: All the relevant information
like drawings, technical specifications,
manufacturing processes, quality, production
problems, etc. is gathered.
 Functional analysis phase: Involves analysis and
identification of functions.
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STAGES IN VALUE ANALYSIS
 Creative phase: This is the essence of value
engineering. Brainstorming sessions and other
creativity techniques are used to generate a large
number of ideas for providing the functional
requirements.
 Evaluation phase: the possible alternatives
developed are analysed and ranked. One or more
alternatives are selected for development.
 Investigation/development phase: short-listed
ideas are investigated in-depth to arrive at
optimum and practical solution.
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STAGES IN VALUE ANALYSIS
 Presentation phase: the selected alternative is
presented to the decision maker for approval and
implementation.
 Implementation phase: involves the
implementation of the selected alternative.
 Follow-up phase: compares the results with the
original expectations and suggests corrective
action, if any.
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VALUE ENGINEERING
What the product is supposed to do?
What else can it do?
What else is needed to enhance the value?
Will these secondary functions add value ?
VALUE ENGINEERING - UNNECESSARY
COSTS
 These are costs which neither contributes to
function or appearance of the product.
 Value engineering aims to reduce unnecessary
costs.
Reasons for unnecessary costs:
 Poor design of the product
 Unrealistic or too tight specifications
 Lack of standardization
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VALUE ENGINEERING VS VALUE ANALYSIS
 These two terms are often used synonymously.
 Though the philosophy underlying the two is same,
the difference lies in the time and at the stage at
which the technique is applied.
 Value analysis is the application of a set of techniques
to an existing product with a view to improve its
value. It is thus a remedial process.
 Value engineering is the application of exactly the
same set of techniques to a new product at the design
stage. Thus it is a preventive technique. 151
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DIVISION OF LABOUR
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