Value Management 價值管理

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Note

Revised 28 February 2019 to add Process and Criteria

Created 31 January 2018

Different Terms 不同的名稱

  • Value analysis 價值分析 - Original name used to refer to the methodology used to analyse the values of the various components of a product.
  • Value engineering  價值工程 - A later name used when the methodology has been more well established as a system. It is said to be more focused on the technical aspects of the value study.
  • Value management  價值管理 - An even later name used when the methodology has been adopted for services and processes.  It is said to be more focused on the strategic or policy aspects of the study.
  • Value methodology 價值方法 - A name referring to the methodology used in the value study.
  • They should now be regarded as synonymous without being too academic to distinguish between them.

Value 價值

  • Standard equation: Value ≈ Functions / Costs.
    標準方程式: 價值 ≈ 功能 / 成本。
  • Modified equation: Value ≈ Functions / Resources.
    修訂方程式: 價值 ≈ 功能 / 資源。
  • “Functions” can include prices, benefits, uses, worth, relationship, etc. of ALL parties.
    “功能”可包含各方的價格、好處、用處、代替成本、關係、等等。
  • "Resources” can include costs, time, labour, materials, plant, effort, waste, etc. of ALL parties. 
    “資源”可包含各方的成本、時間、人工、材料、機械、努力、損耗、等等。

Worth 代替成本

  • "Worth" has a special meaning in VE/VM. It means the cost of achieving the same function using alternative means. If the worth is less than the cost of the present means, the present means has poor value.
    英文的"worth"一般亦解作價值或值得否,但在價值工程,它有特別的含意,乃指達到同樣功能的其他辦法的成本。若此"代替成本"比現行方法的成本低,則意味現行方法的價值低。

Value Index 價值指數(性價比)

  • Value index = worth / cost of a function = function worth / function cost . If worth < cost, i.e. value index < 1, then the function has poor value.
  • Somebody uses value index = cost / worth, then if cost > worth, i.e. value index > worth, then the function has poor value.
  • It is suggested to use the former formula, because it is more consistent with the Value ≈ Functions / Resources formula and the intuition that higher value ratio is better.

Purposes of VM 價值管理的目的

  1. Not necessarily cost reduction.
    不一定是減錢。
  2. “Cost” can be non-financial.
    ”成本” 可以不是金錢上的。
  3. Enhancing Value by:
    提升價值,可:

    • Reducing resources;
      減低資源;
    • Keeping resources unchanged;
      維持資源不變;
    • Increasing resources to a lesser extent;
      增加資源但幅度較細;
    • Increasing the extent of existing functions;
      增加現有的功能的程度;
    • Expanding the scope of functions.
      擴大功能的範圍。

Value Study 價值研究

  • A specific study on a particular product, service, process or entire project using VA / VE / VM to improve value.
  • Usually done by conducting a workshop attended by many stakeholders representing different expertise, needs and interests.
  • A value study should have the following three-stage process:
    • Pre-workshop preparation;
    • Value workshop;
    • Post-workshop documentation and implementation.

Six-Phase Value Workshop 六階段價值工作坊

  • Introduction Phase (preceding the 6 phases)
    介紹階段 (六階段前)
  • Information Phase
    資訊明暸階段
  • Function Analysis Phase
    功能分析階段
  • Creative Phase
    方案創造階段
  • Evaluation Phase
    方案評估階段
  • Development Phase
    擇優深化階段
  • Presentation Phase
    總結報告階段

Similarity of the Processes of Various Management Models

  • They all call for cyclical and continual review and improvements.
  • A VM workshop is only a start at the “plan” stage and that continual review and improvements would be required throughout the course of project delivery.

Integration of Various Management Models

  • Integrity management is the backbone throughout, and can be considered as part of the risk management.
  • Quality, health and safety should be the basic minima that a project should achieve. They are only a sub-set of all the risks which may be encountered.
  • Risk management is about preventing or mitigating risks in order to make a project successful.
  • Value management is about adding value to the project on top of mere success.
  • Non-contractual partnering helps people work easier and smoothly.

Ground Rules of Workshops

  • Equal right and opportunity.
  • Mutual trust and respect.
  • No pre-judgement.
  • Non-adversarial.
  • Better value creation.

Persistent Critical Questions

  • First ask "Do What" to identify the functions of the particular product, service, process or entire project being studied.
    • e.g. [Do A], [Do B], [Do C].
    • Phrase "Do What" in the form of a verb followed by a measurable noun to represent a simple and single function.
    • The verb is to represent the action achieving the function.
    • The measurable noun should represent the object to be acted upon to achieve the function.
    • The objects should not use the names of the actual components making up the product, service, process or project so as to free up the choice of the components.
  • Then ask "<-- Why" and "How -->" to link up the relationship of the functions.
    • Why? [Do A] <-- in order to <--  [Do B] <-- in order to <-- [Do C].
    • How? [Do A] -- by -->  [Do B] -- by --> [Do C].
    • Linked path: [Do A] -- [Do B] -- [Do C].
    • Asking ”Why“ can help align objectives and ultimate goals on the far left.
    • There can be functions not linked up in the horizontal manner but branched off at the same time, e,g. when [Do B], [Do C] also happens at the same time.
    • There can also be parallel paths, or functions which happen at one time or all the time.
  • Then ask "Why not" and "What else" to challenge the existing and generate new ideas.

Brainstorming Rules

  • State ideas quickly.
  • Quantity more important.
  • “Free-wheeling” welcome.
  • OK to state the obvious, to repeat, to think out of the box.
  • OK to add upon, combine, improve on others’.
  • OK to twist or turn around others’.
  • No explanation required.
  • No criticism, doubting, judgement.

Evaluation

Evaluation as a Phase or a Technique

  • The Evaluation Phase follows after the Creative Phase where creative ideas are evaluated to judge their values.
  • During the Information Phase and Function Analysis Phase, some prioritization, shortlisting and selection may be conducted.
  • Each of these actions would involve some kind of evaluation techniques and judgement.
  • Therefore, evaluation occurs across the whole process of value study.

Process

(Section added 8 February 2019)

  • Why?
    • Select the most significant and promising ideas for adoption
  • How?
    • Consolidate ideas
      • Group similar ideas (no screening!)
      • Review ideas critically
      • Advocate or doubt-cast (but no scoring yet!)
      • Adjust and expand ideas
    • Determine criteria
      • Observe overall objectives
      • Observe individual functions
      • Suggest criteria (no judging yet!)
      • Group similar criteria (no screening yet!)
      • Review criteria
      • Adjust and expand criteria
      • Weigh criteria (5 to 10)
    • Score ideas
    • Recommend ideas

Criteria

(Section added 8 February 2019)

  • Using a noun, e.g. time, as a criteria is not sufficient. Do you want shorter time (fast project) or longer time (long lasting battery)? A criteria should have some qualitative or quantitative qualifiers.
  • Some qualitative qualifiers:
    • Lower, higher
    • Shorter, faster, longer, just in time
    • Excellent, better, just OK
    • Easier
  • Some quantitative qualifiers preceded by "more than / less than / equal to" and the like:
    • Monetary
    • Temperature
    • Quality grade
    • Environmental assessment grade
    • Life span 
  • Aspects to study:
    • Quality
    • Price
    • Life cycle cost
    • Time
    • Life span
    • Maintenance
    • Operational use 
    • Risks
    • Safety
  • Combine a qualifier and an aspect to form a qualitative criteria, e.g.:
    • Shorter time
    • Good safety
  • Qualitative criteria may be more specific and may become screening criteria, e.g:
    • Less than one month
    • Zero accident
    • Not more than ... accident rate

Units of Measurement

  • When all the functions and resources can be converted into monetary units, the evaluation of the values will be much easier.
  • However, not all can be converted into monetary units, then some other common units of measurement should be devised, e.g. some scientific units, mass, energy, speed, time.
  • Yet, in many cases, there are no suitable monetary units or scientific units, human subjective views are to be adopted.
  • When human subjective views are to be adopted as units of measurement, they have to be quantified, even for qualitative views, after thorough discussions.

Voting

  • One can make and record one's own choices in whatever manner, but voting is the best way to express collective views in a quantitative manner.
  • VM is about collective wisdom and collective decision.
  • Dominance by the bosses or vocal people should be avoided.
  • During group discussions, vocal people would involuntarily speak more to express their views or influence other people.
  • Voting giving better chances for everybody to express free will and choices should be preferred.
  • Voting can be by:
    • Ballot paper - confidential, but needs time to count.
    • Show of hands - quick, but may be dominated by bosses or vocal people.
    • Show of figures (0 for no support, 1 for least support, 5 for strongest support) - expressing different degrees of support.
    • Marking or sticking voting points on a displayed list of choices - quick and not dominated by others.
  • When selecting top few choices out of many choices, give sufficient number of votes to each participant:
    • e.g. for 30 participants each suggesting 3 choices, there will be 90 choices.
    • When the participants are asked to vote for the top 10 choices, and each participant is allowed 10 votes, then the total number of votes will be 300 votes.
    • Which number when divided by 90 choices will mean 5 votes per choice on the average.
    • If the participants' choices are very diversified, each of the top 10 choices may only have a small number of choices of 10 to 20.
    • Therefore, it would be better to give more than 10 votes to each participant.
  • If desired to amplify the preferences between each participant's own choices:
    • Request the participant to indicate on each vote a weighting on a scale of 5 or 3.

Tabular Comparison

  • Workshop participants may be asked to give scores on a scale of 10 for expectation and achievement to identify the gap between the two.
  • An example is as follows:

  • The aspects help people focus on the areas for present consideration and further study.
  • Each aspect may be guided with evaluation criteria (e.g. on time, within budget, least environmental harm, good health, good quality, good safety, or further breakdown) for scoring.
  • The scoring direction must be clarified, e.g. time or cost may be scored as 0 for very poor time or cost control or as least time or cost overrun, of totally reversed meanings.
  • In this example, 5 is treated as the passing score for on time and within budget, and 10 as the excellent performance.
  • The scoring scale may be a 5-point scale such as:
    • 5 for excellent;
    • 4 for good;
    • 3 for fair;
    • 2 for marginal;
    • 1 for worth something;
    • 0 for not supported.

Column Chart

  • The results may be presented as a column chart for visualisation:

Bar Chart

  • Or as a bar chart:

Collective Scoring

  • It may not be possible to agree the scores between a group of participants quickly without being dominated.
  • Voting may need to be conducted.
  • Each participant will give his/her score for each Aspect.
  • The scores are then totalled and averaged per Aspect as follows:

  • A show of figures based on a 5-point score will be quicker than a 10-point score.

Radar Chart

  • For an even quicker gathering and presentation of the scores at the workshop, a radar chart would be very useful.
  • Here, there are three participants each having been requested to indicate their expectation and achievement scores for each aspect by putting a dot on a 10-point scale axis.
  • After that, the approximate centres of gravity of the dots of different aspects are connected together.
  • The distance between the two connecting loops will be the gap.

  • For a workshop where the number of aspects or criteria to be scored is unknown in advance, a hand drawn circular radar chart with the number of axes flexibly added may be adopted:

Pareto Principle

  • Also known as the 80/20 rule, or the law of the vital few.
  • Roughly 80% of the effects come from 20% of the causes.
  • Applying the principle generally:
    • Focus on the significant 20% causes to generate 80% effects.
  • When applied to construction costing:
    • 20% of the items in the pricing documents represent 80% of the costs.

Most Cost Significant Items

  • The most cost significant items should be selected for value study because they have the greatest potential for and impact of cost savings.
  • Components listed in the regular cost reports:

  • Sorted in the descending order of their costs:

  • Visualisation:

Priority Rating of Intangible Items

  • For intangible aspects of products, services, processes or projects, they can be rated by a single set or two sets of scores as follows, where the product score = importance score x probability score:

  • Similar scoring concept has been used in risk management.
  • The same can also be applied to the selection of value options.
  • For physical components of products and projects, only one final value option would be chosen for a component.
  • However, for intangible aspects of products, services, processes and projects, more than one value option may be adopted for achieving the same objective..
  • But, because of limited resources, not all can be adopted.
  • The above multiple scoring method may be used to select the top priority value options.

Comparison of Two Options

  • Like school examinations, the simplest way to calculate scores to compare between two options (projects below) would be as follows:

  • This is useful when every score counts for precision (passing marks in examination) and the scores at columns B and C can be countable.
  • Collective scoring as described above may be conducted when precision is not tha critical.

Multiple Criteria Comparison

  • If the aspects or criteria should not carry equal weight, then weighting of the aspects or criteria would be required:

  • The following shows the results if the same group of participants scored on a 10-point scale at the same time:

  • The following shows the results if the same group of participants scored on a 5-point scale at the same time:

  • The above 3 sets of results show that the absolute degree of accuracies may vary but the relative merits are not affected very much.

Pairwise Comparisons

  • A more detailed method to determine the relative ranking of different aspects or criteria is by pairwise comparison.
  • A pairwise comparion is done by asking: between the pair of aspects or criteria at the left and at the top, which one is preferred, then write down the preferred one in the intersecting box.
  • The total occuurence is then counted and the proportion calculated.
  • The following is based on the ranking shown above.
  • Note that if the comparison is done independently, the results may be very different because participants may say safety is of paramount importance.

  • The above shows that Environment having the lowest ranking will score zero.
  • This would not be used when the proportion is used as weightings.
  • The following gives at least one vote for one aspect to avoid zero proportion, the ranking remains the same.

  • Weighting may be added when doing the pairwise comparion by giving, for example, 3 for strongly preferred, 2 for moderately preferred, 1 for preferred. 

  • There are many formats and ways of pairwise comparion tables.

Life Cycle Costs

  • When comparing different options having different patterns of initial costs and long term running costs, their life cycle costs should be worked out and compared.
  • See Life Cycle Costing.

Action Plan of Applying VM on Intangible Aspects

 

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