What is Value Engineering?
Value engineering, within the context of the Customer Lifecycle Management Methodology, refers to a systematic approach that evaluates the value of each step in a customer's journey with a business. This method seeks to identify areas where value can be added and costs can be reduced.
Key Part of Value Management
The process involves analyzing the customer's needs, wants, and expectations at each stage of their journey and determining how the business can deliver the most value to them. By implementing value engineering within the context of the Customer Lifecycle Management Methodology, businesses can improve customer satisfaction, reduce costs, and increase revenue.
Benchmarking Business Processes
Benchmarking your existing business processes against competitors using independent benchmark databases and benchmarking surveys is a key part of the business case development process. This process helps you understand your current performance level compared to the benchmark performance level. By doing so, you can establish Key Performance Indicators (KPIs) and set mutually agreed post-implementation go-live performance level targets. This step is crucial in ensuring that your business stays on track and meets its goals during and after implementation. With the SAP Value Engineering Methodology, businesses can reduce costs, increase efficiency, and ultimately unlock their full potential. By benchmarking your business processes, you can identify areas where value can be added and costs can be reduced to optimize your overall performance and improve customer satisfaction.
Use the SAP Value Lifecycle Manager for Benchmarking
The SAP Value Lifecycle Manager is also available for public use and customers/partners can evaluate their business processes and key performance indicators (KPIs) and discover the value of the Intelligent Enterprise, powered by best-in-class value content & Insights. As a benchmarking tool, it offers very deep information on many business processes, as reported by actual SAP customers. As SAP has evolved into a digital transformation focused company, this tool has proven key in all successful SAP value management activities.
To summarize, value management is not new concept, but with a clear focus on digital technology delivering business value, the need to manage value is greater than ever.
Value Engineering Concepts, Techniques and Applications
Explore the techniques and applications of value engineering in business
When it comes to implementing SAP in a business, the first step towards success is creating a solid business case. This is where the SAP Value Engineering Methodology comes into play. This systematic approach helps customers develop their business case and put their SAP implementation on the path to success. By creating a strong business case, businesses can identify their needs, wants, and expectations, and determine how SAP can deliver the most value to them. This step is crucial in ensuring that the implementation stays on track and meets the business's goals during and after the implementation. With SAP Value Engineering Methodology, businesses can reduce costs, increase efficiency, and ultimately unlock their full potential.
Value Engineering vs Value Management
Value Engineering and Value Management are two components of the overall value engineering approach to SAP ERP implementations. Both form a part of a systematic approach that businesses can use to improve their operations and increase their revenue.
During the initial phases of the Customer Engagement Lifecycle, Value Engineers will evaluate each business process, benchmarking them as previously mentioned. They will focus on customers, products and suppliers as well as regulatory requirements and provide a value roadmap, that will, ultimately, become part of the Software and Implementation Proposal.
Value Management Helps Control Scope During SAP Implementations
During every SAP implementation, it is inevitable that that there will be requirements that pop-up that were not part of the original SAP implementation proposal nor where they found during the Discovery Phase. These will often be found long after the blueprint phase is 'closed' (during the realization phase) and the business user who identifies these requirements will insist they must be done or they cannot go live.
This is where the first real test of the Value Management approach comes into play. Each of these changes must be evaluated for the impact on the original business case. While some changes to the original scope may be necessary, a good SAP project manager knows that, ultimately, they will most like delay the project.
Value Assurance Experts Required On Projects
Value Management, on the other hand, is a broader approach that involves identifying the value proposition of the business, understanding the customer's needs and expectations, and developing strategies to deliver the most value to them. While Value Engineering is focused on improving specific business processes, Value Management takes a more holistic view of the business and seeks to optimize its overall performance. Both approaches are important tools for businesses looking to reduce costs, improve efficiency, and ultimately unlock their full potential. Value assurance experts should be integrated into the project from the very beginning in order to help guide the project toward achieving the business value expected from the project. They can help ensure that any requested scope changes are truly evaluated from vantage point of their expected impact on the business value.
Value Realization
Once a business has successfully implemented SAP, the next step is to ensure that the expected benefits and targets are achieved. This is where value realization comes into play. The process involves closely monitoring and measuring the post-go live environment and making business process changes aimed at optimizing the business processes and achieving those target KPIs.
By continuously evaluating the performance of the SAP implementation, businesses can identify areas where improvements can be made and ensure that they are getting the most value out of their investment. With the data driven SAP Value Management Methodology, businesses can stay on track and achieve their goals during and after implementation, ultimately unlocking their full potential and improving customer satisfaction.
Total Cost of Ownership (TCO)
Learn how to calculate and reduce TCO for your business
Total Cost of Ownership (TCO) is a concept that plays a key part in determining whether or not a business is achieving its expected ROI from its SAP implementation. TCO is the total cost of owning and operating a system over its entire lifespan. It includes not only the initial cost of implementation but also the ongoing costs of maintenance, upgrades, and support.
By calculating TCO, businesses can identify areas where costs can be reduced and efficiency can be increased. This is where value engineering analysis and methodology come into play. By implementing value engineering within the Customer Lifecycle Management Methodology, businesses can identify areas where value can be added and costs can be reduced, ultimately optimizing their overall performance and improving customer satisfaction. With the data-driven SAP Value Management Methodology, businesses can continuously evaluate the performance of their SAP implementation and ensure that they are getting the most value out of their investment.
TCO
Total Cost of Ownership (TCO) is a critical concept that businesses must understand to ensure they are achieving their expected ROI from SAP implementation. TCO represents the total cost of owning and operating a system throughout its entire lifespan, including the initial implementation cost, ongoing maintenance, upgrades, and support costs.
A thorough analysis of the Total Cost of Ownership (TCO) can help businesses pinpoint areas where costs can be minimized and efficiency improved. TCO analysis encompasses all expenses associated with owning and operating a system throughout its entire lifespan, including hardware and software costs, implementation, customization, training, maintenance, and support expenses.
Understanding TCO is vital because it helps businesses make informed decisions about their SAP implementation and determine whether it is profitable in the long run. By reducing TCO, businesses can optimize their overall performance and improve their bottom line.
To unlock the full potential of their SAP investment, businesses must utilize TCO as an essential tool. By incorporating value engineering into the Customer Lifecycle Management Methodology, businesses can effectively reduce costs, increase efficiency, and achieve their desired ROI.
Business Process Improvement
Discover how business process improvement can reduce TCO and increase efficiency
To achieve the total project ROI projections and hit the expected TCO numbers, businesses need to focus on the specific business processes that will be impacted by the implementation of SAP ERP. For example, benchmarking the existing business processes against competitors using independent benchmark databases is a crucial step in understanding the current performance level compared to the benchmark performance level. By doing so, businesses can set mutually agreed post-implementation go-live performance level targets. This will help them stay on track and meet their goals during and after implementation.
By utilizing value engineering analysis and methodology, businesses can pinpoint areas where value can be added and costs can be minimized to optimize overall performance and enhance customer satisfaction.
Therefore, it is imperative for businesses to prioritize improving specific business processes and implementing value engineering to achieve their desired ROI.
Value Engineering Analysis and Methodology
Find out how to implement value engineering analysis and methodology in your business
Implementing the Value Engineering methodology within an organization is a step-by-step process that can ensure success before, during, and after a SAP implementation.
The first step is to create a solid business case using the SAP Value Engineering Methodology to identify business needs and expectations. During the initial phases of the Customer Engagement Lifecycle, Value Engineers will evaluate each business process, benchmarking them against competitors, and provide a value roadmap.
Value Management helps control scope, evaluating changes to the original business case and ensuring they align with expected business value. Value assurance experts should be integrated into the project from the beginning, guiding the project towards achieving the expected business value.
After the implementation, value realization comes into play, closely monitoring and measuring the post-go-live environment to optimize business processes and achieve target KPIs. Understanding Total Cost of Ownership (TCO) is critical to achieving expected ROI from SAP implementation, and businesses must focus on specific business processes to reduce TCO and increase efficiency.
Value engineering analysis and methodology can help pinpoint areas where value can be added and costs reduced, ultimately optimizing overall performance and enhancing customer satisfaction.
Value Engineering Examples
Explore real-life examples of value engineering in construction, manufacturing, and other industries
As the SAP Industry Principal for six different industries in MENA, which was a combination Program Management and Quota Carrying Sales Role, I ALWAYS used parts or all of the VE methodology with my clients.
One in particular involved a major Middle Eastern Airline undergoing rapid growth. This involved all areas of the airline, including MRO, Asset Management, Passenger Operations, and Financial Management, and many more.
As part of the sales process, we performed benchmarking and value discovery sessions with the airline. These were key to getting a positive decision on the sale. During the implementation, these initial Value Engineering inputs were used to guide the overall implementation strategy, and once the airline was live on SAP, additional Value Engineering tools were used to developed a collaborative value roadmap.
Today, this airline continues to meet and exceed all of the objectives of the initial project. It is also a reference customer, which many other airlines in the region have visited, directly driving incremental demand among those airlines.
Value Engineering Construction
Learn how value engineering can optimize construction projects and improve quality.
As the Value Engineering is highly structured and thus repeatable, it was also very valuable during the Dubai World Airport project, following the much the same process. This airport is now one of the largest, if not the largest, and most profitable airports, in the world.
NPV and Value Engineering
Understand how NPV can be used in conjunction with value engineering to make strategic business decisions
To make informed decisions about proposed projects with different Total Cost of Ownership (TCO), Return on Investment (ROI) and Risk Profiles, businesses often use Net Present Value (NPV) as a tool. NPV is a financial metric that calculates the present value of future cash flows by discounting them back to their current value. By using NPV to compare various proposed projects, businesses can get everything into an Apple-to-Apples comparison. This helps them identify which project will generate higher returns, which project has lower risks, and which project has a lower TCO. By incorporating value engineering analysis and methodology into the objective decision-making process, businesses can pinpoint areas where value can be added and costs can be minimized, ultimately optimizing overall performance and enhancing customer satisfaction. NPV and value engineering can be used in conjunction to make strategic business decisions that will lead to a successful SAP implementation.
NPV
Discover what NPV is and how it's used in financial analysis
To better understand the potential ROI of a project, businesses often use financial metrics like Net Present Value (NPV) in conjunction with value engineering analysis and methodology. For example, let's consider an imaginary project investment of $10,000,000 with a 5-year time horizon for analysis and a Weighted Average Cost of Capital (WACC) of 8%. By calculating the NPV of this project, we can determine the present value of its expected cash flows, taking into account the time value of money and the WACC. If the NPV is positive, it indicates that the project is likely to generate returns that exceed its initial investment and is therefore a good investment opportunity. By incorporating value engineering analysis and methodology into the decision-making process, businesses can identify areas where value can be added and costs can be minimized, ultimately optimizing overall performance and enhancing customer satisfaction.
Value Engineering Examples
See how NPV and value engineering can be applied to maximize business value
To make informed decisions about proposed projects with different Total Cost of Ownership (TCO), Return on Investment (ROI), and Risk Profiles, businesses often use Net Present Value (NPV) as a tool. For example, let's compare two different projects with imaginary initial investments of $10,000,000 and $9,000,000, and a Weighted Average Cost of Capital (WACC) of 8% and 7.5%, respectively. Each project is expected to take one year, with positive cash flow in the 18th month and the 22nd month, respectively. By calculating the NPV of each project, businesses can determine which one is likely to generate higher returns that exceed its initial investment and is therefore a good investment opportunity. By incorporating value engineering analysis and methodology into the objective decision-making process, businesses can pinpoint areas where value can be added and costs can be minimized, ultimately optimizing overall performance and enhancing customer satisfaction. NPV and value engineering can be used in conjunction to make strategic business decisions that will lead to a successful implementation of the chosen project.
Value Mapping
Value Mapping is a valuable tool that businesses can use to optimize their SAP investment. It involves analyzing existing processes and proposed changes to be implemented by the SAP solution. Based on this analysis, recommendations are made that may change the original SAP implementation proposal to achieve value sooner and with greater assurance. By utilizing the value engineering analysis and methodology, businesses can identify areas where value can be added and costs can be minimized, ultimately optimizing overall performance and enhancing customer satisfaction.
It is imperative for businesses to prioritize improving specific business processes and implementing value engineering to achieve their desired ROI. Value Mapping is just one of the many steps that businesses can take to unlock the full potential of their SAP investment and achieve their desired goals.
Many Type of Value Engineering Services
While understanding the overall concept of Value Engineering, Value Management and Value Realization is important, there are actually many tools in the VE toolset you should be aware of. To help with that, we've put together a complete guide to the Value Engineering tools you should be aware of and when you should use them throughout the entire SAP lifecycle.
