Hans van Eck-Casteels / +1-416-931-5241

Value Engineering: Quick Breakthroughs, quick wins – a Procuron.ca advantage

Achieving breakthrough performance in operations across verticals

Many companies have successfully used Lean Six Sigma to improve their operations, yet true transformation

has been elusive, even as firms deploy more lean experts and "black belts" to handle tough situations. Value

engineering, on the other hand, is a Procuron.ca - developed by methodology that has a proven track record of

delivering significant cost savings, engrains sustainable improvements, reduces operational risk and leads to

sustainable business benefits. Value engineering combines elements of Lean (continues flows while eliminating

non value added processes) and Six Sigma (mainly an analytical discipline armed with statistical tools to root

out hidden causes of problems and variation, solidly supported by statistical methods) . Yet while users

continue to tout the solid benefits and results from their Lean Six Sigma initiatives, many companies continue

to struggle to achieve the large-scale performance change they had been seeking. The reasons are under-

standable: Lean Six Sigma typically focuses on solving smaller problems rather than the bigger, more strategic

issues that can generate breakthrough performance. With Procuron.ca’s Value Engineering process, we enable

the major improvements they originally sought by adopting what we call a Focused Lean Six Sigma approach.

While most manufacturing firms have adopted some elements of Lean and Lean Six Sigma in attempts to

improve operations, the principals of Value Engineering are equally applicable to banks, telecoms, high tech,

insurance companies, transportation companies, airports, energy – you get the idea. Value Engineering

principles are transportable – they don’t just apply to manufacturing. Procuron.ca is probably the only

company today to really integrate Value Engineering (Lean Sigma) with IT solutions; design, restructure or

merging of IT systems. VE looks at IT solutions as one element of the End to end process, and not as a

standalone “miracle” that will fix all the problems in the organization. Value Engineering integrated with IT

solutions is an holistic solution and includes; Process & Methods, People & Development, Systems & Tools and

Flow of information & Data Analysis.

We also developed a full methodology for analysing and quantifying the End to end Risk of any process. The

Risk analysis is aligned to cost of bad quality and cost of warranties. Procuron.ca not only reduces risk but also

tells the customer how much money they will save as a result of elimination or reduction of Risk.

Translation: the gains achieved through Procuron.ca’s Value Engineering tools have been significant. For

example, a global automotive manufacturer was able to roll out its first Hybrid models a year ahead of

schedule and well below budget; a global pharmaceutical firm was able to reduce spending by 20 percent; an

banking giant saved $50 million by linking manufacturing and complexity management practices to corporate

strategy.

Typical results from Procuron.ca value engineering initiatives have produced tangible results:

A 97% defect elimination reality;

A 90% reduction in cost of bad debts;

A 95% improvement of throughput times

A 95% reduction of backlogs;

A 75% reduction in down times;

A 50% productivity increase;

An 80% increase in space allocation

A risk reduction factor of 10

Hans van Eck-Casteels / +1-416-931-5241

By corralling the effort and energy of the Procuron.ca Value Engineering process, firms can apply the

methodology concepts how and where they are needed and unlock the full potential of the company.

The Value Engineering infrastructure works best when initiatives are aligned with the broader strategic goals of

the company. This is not always a straightforward task For example, if a business has the vague strategic goal

"to become more responsive to customers' needs," how does that translate to efforts on the plant floor? Or

another example: What takes higher priority—reducing changeover times or reducing waste? Clearly, being

able to change a line more quickly gives the business more flexibility to respond to customers' needs. But

producing less waste frees up the resources necessary for those customer "re-dos," and could offer added

flexibility.

Obviously, judgment is needed in such cases. To help companies apply a strategic focus to confront questions

like these in various settings, we offer a five-step process for implementing Value Engineering approach (see

below).

Source: Internal analysis

In our experience, Value Engineering initiatives must be aligned directly to a company's business

goals. Senior leaders face a host of challenges as they try to connect day-to-day activities with

strategy. This requires articulating the strategy and future vision for the business using measurable

objectives that can be accomplished in a two- to three-year timeframe. Senior leaders do not shy

away from making these objectives as challenging as possible and forcing their teams to consider

major change rather than incremental improvements. The level of challenge established and the

organization's overall prowess will drive which objectives to pursue. The next move is to line up the

entire organization behind the corporate goals and strategy. This process helps break down big, bold

objectives into smaller, more achievable chunks that Lean Six Sigma teams can more easily digest

Hans van Eck-Casteels / +1-416-931-5241

Companies that go through this exercise often discover two things. First, after adding up the

expected results of these initiatives, a significant gap still remains for meeting the actual

"breakthrough." Second, many initiatives don't align well with the overall objectives and,

subsequently, are better off being halted. Such findings can lead to heated internal debates, as every

initiative has an owner being asked to make a sacrifice, and different people have different views on

what is important. For example, production may support initiatives to reduce the number of

products to stabilize demand, but this is at odds with sales and marketing's desire for increased

variety and more demand flexibility.

Also, halting unproductive initiatives mid-year can cause problems when they leave a budget hole

that needs to be plugged. To encourage the right targets and behaviors, budgeting must be

connected to setting strategy and breakthrough objectives. This will help remove "sentimental"

issues from the discussion and get everyone viewing the bigger picture.

Optimization of resources

Effective resource optimization delivers impressive results… A we carried out the optimization of

resources for one of the world largest biotech companies achieving cost savings in access of 3 million

Euros, achieving headcount reductions between 37-52% far better than the 25% estimates from a

leading Tier 1 strategy consulting company..

As we reviewed in a slate of articles published last month, effective resourcing requires a continuous

mapping exercise against ongoing initiatives. A thorough review of initiatives across the board allows

the Firm to develop scenarios around aggressiveness in pursuing each opportunity of improvement

while ensuring that customer expectations continue to be met and that critical processes perform

stably. For almost each initiative, there is a point of diminished returns after which the extra value of

more time and effort begins to decline. The Procuron.ca Value Engineering model establishes a

framework for finding and identifying where best to apply your limited resources.

The net effect of Value Engineering is that it produces a much more focused approach framework for

ensuring that initiatives “from the ground up” aligns with business strategy, expectations and market

pressures at the top of the organization.

For further information: hans@prcuron.ca / +1-416-931-241