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Value Engineering – A Chemical Process Industry Perspective




Wikipedia gives the general definition of value engineering as follows:

"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. 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."

For further details on VE refer the following link:

http://en.wikipedia.org/wiki/Value_engineering

We need to further examine this from the perspective of the chemical process industry which includes oil & gas, refining, petrochemicals, fine chemicals and others. Installing, operating and running a sustainable chemical process plant is a very expensive proposition. In this context VE becomes an important tool in optimizing the plant / unit cost over its entire lifecycle. When I mention the term cost it is to be considered as the total cost including CAPEX, OPEX and the Human Cost Index (HCI). Most of you are familiar with CAPEX (Capital Expenditure) and OPEX (Operating Expenditure) but many might wonder what this Human Cost Index is? Well simply put, it is the long term benefit in terms of employment for the members of our society and maintaining a sustainable environment for human habitation. A VE exercise needs to consider all these three aspects of cost in enhancing value.

Well let us move on to the specifics of Value Engineering related to the chemical process industry. A slight modification or enhancement is proposed to the definition of value as given by Wikipedia. I would like to add the term Quality to function in the definition so that the definition of value becomes the ratio of function plus quality (Function + Quality) to the Cost.

Function here means the output or product from the chemical process plant, quality here means the way or method required to obtain the output or product from the plant and cost is the summation of the CAPEX, OPEX and HCI. Putting this concept in the form of an equation we have:

Value = Function +Quality / Cost

The equation demonstrates that value is increased by holding cost constant while increasing Function & Quality, or by decreasing cost while holding Function & Quality constant.

The process of VE requires the effort to answer the following broad questions:

Q.1 What is the intended function?

Q.2 What is the cost of the current system or method which fulfills the intended function?

Q.3 is there an alternative system or method to fulfill the intended function?

Q.4 If yes, what is the cost of the alternative system or method?

Q.5 What is the tangible and intangible cost benefit in applying the alternative system or method to fulfill the intended function from the originally envisaged system or method?

The VE process revolves around these 5 basic questions. Different companies have their own detailed procedures or methodologies for conducting a VE exercise. VE exercise requires a multidisciplinary participation where all the stakeholders are involved. As an example for a new chemical process plant a VE exercise may require the participation of the technology licensor (if technology is involved), the engineering design consultant, the client or facility owner, the equipment manufacturer and supplier (in particular when proprietary equipment is involved) and government or regulatory bodies (where environmental laws and regulations need to be critically evaluated).

During my tenure in the Middle East I was fortunate to participate in one big VE exercise as part of the engineering design consultant's team. It was a big learning exercise for me and that is where I came to appreciate the true merits of a VE exercise for a chemical process plant.

I would love to hear the comments of some of the senior members of the "Cheresources" community who have participated in a value engineering exercise.

Regards,

Ankur




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th.amitkumar
May 03 2012 11:58 PM
Sir Will you please tell me the criteria of sizing the bypass valve for a controll valve assembly & sizing procedure.

with regards
Amit Kumar
Dear Ankur Sir,
Can you share Value Engineering procedure or methodology with me.
In addition can you send me any example os value engineering exercise with outcome.
My mail id is : gaur_7583@yahoo.co.in
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shivaprasad
Sep 15 2013 08:38 PM

Dear sir,

 

can you send me the examples of value engineering exercise in EPC stage?

My mail Id is: prasaa@gmail.com.

 

Regards

Dear Ankur ,

I need a sample in economic analysis of proposed flow assurance solution ( if there is ) or any projection in oil & gas field.

please send to msdsabrine@gmail.com .

Best Regards  

Dear all,

Here is a presentation that includes practical example of cost savings.

If any of you experienced other cost savings, please share!

http://fr.slideshare...eering-49136656

Best Regards

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