How is the concept of cost and value engineering (C&VE) currently incorporated into companies with a focus on engineering, and what level of maturity has it reached? What strategic goals are pursued with C&VE, and what benefit does it have? What are the key factors for the success and effectiveness of C&VE? What does a best-practice organization look like? Answers to these questions and more can be found in the market study recently conducted by FEV Consulting.
Pressure from global competition is rising, and customers are demanding lower and lower prices. Satisfying customers‘ requests quickly and affordably without sacrificing quality requires interdisciplinary cost and value engineering (C&VE).
FEV Consulting‘s smart cost reduction advisory approach combines eight service modules to achieve best-cost solutions for technical products. Our interdisciplinary team of experts, consisting of FEV engineers, production specialists, costing specialists, and purchasing experts, can help you cut costs by between 15% and 25%. A recent study by FEV Consulting shows companies use different organizational forms for C&VE. Thus far, there is no discernible procedure or recommendation for building a C&VE team.
Strategy and objectives
• Of the companies surveyed, 75% have either not established a comprehensive C&VE system, or they have none at all.
• A full 78% of respondents have had positive experiences with C&VE methods and have managed to lower their costs.
• More than 60% of companies do not integrate C&VE early enough in their product engineering process (PEP).
• A whopping 94% of respondents are heavily or very heavily affected by increasing cost pressure.
The majority of companies surveyed that have a C&VE system, or are in the process of establishing one, have placed their central C&VE organization within their purchasing or development departments, and 70% of the companies we asked use C&VE methods worldwide across every major subsidiaries or all subsidiary companies. External partners are closely involved in the design and development phases. The main challenges in C&VE are poor data quality, insufficient resources, and low acceptance among the operations departments.
Companies that have implemented C&VE are applying these methods more and more often during the early phases of the development process. Moreover, they are seeing costs come down during series production. Lower costs, target costing, and redesign activities are the primary tasks of C&VE, with the most important interfaces being research & development, procurement & purchasing, and production.
Methods and tools
Target costing and design to cost are by far the main methods used in C&VE. Others include cost structure analysis, should-cost analysis, and benchmarking of competitors‘ products. Approximately 75% of respondents use SIEMENS PLM or FACTON EPC as their costing software.
Main features of a best-practice organization
A best-practice organization incorporates C&VE throughout the company and product life cycle. Top management supports C&VE. Also, customers‘ requirements have been clearly laid out and the target costs clearly defined. The C&VE team is organized as a centralized and interdisciplinary group of experts with strict integration in all development projects. C&VE is made part of the PEP early on, and a life cycle cost management system has been set up. Standardized software applications aid in continuous cost monitoring. Uniform methods and a tool box ensure professional standards are met. Target costing and design to cost serve as the leading methods for realization of optimum products.