Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost.

Cost
In economics, business, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore....
. Value can therefore be increased by either improving the function or reducing the cost
. 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 sometimes taught within the project management

  Project management
Project management is the List of academic disciplines of planning, organizing and managing resources to bring about the successful completion of specific project goals and objectives....or industrial engineering

  Industrial engineering
Industrial engineering is also known as operations management, management science, systems engineering, or manufacturing engineering; a distinction that seems to depend on the viewpoint or motives of the user....
 body of knowledge as a technique in which the value of a system’s outputs is optimized
Optimization (mathematics)

 In mathematics, the simplest case of optimization, or mathematical programming, refers to the study of problems in which one seeks to maxima and minima or maxima and minima a Function of a real variable by systematically choosing the values of Real number or integer variables from within an allowed set....
 by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers.

  VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of paint has a "function" of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun) and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint.) This is the basis of what value engineering refers to as "function analysis".

 Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships.

  Value engineering is also referred to as "value management" or "value methodology" (VM), and "value analysis" (VA). VE is above all a structured problem solving process based on function analysis—understanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgement. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate.                  

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