October/December 1983 Volume 6 No. 3

The Journal of Value Engineering for the Society of American Value Engineers

A A

4 ml TABLE OF CONTENTS 4

IN THIS ISSUE

Features Page

Shopping for Value in Construction at Robert A. Feger 5 Social Value Analysis Against Unemployment Giacomo d'Ascanio 9 Keynote Address, 1983 SAVE Conference Jack F. Reichert 15 Eastern Shore Revisited Tom King 18 Value Analysis Shared Effort (VASE) / Hospital Council of Western Pennsylvania 24 Regular Departments

The Manager Who Understands Value Window of Value 22 Calendar of Events 32

Other Articles Apples to Apples A.E. Mudge, CVS 7 You Hold The Keys A.E. Mudge, CVS 14 The Professional Society vs. The Drinking Glass , A.E. Mudge, CVS 32 A

A Publisher Society of American Value Engineers 220 N. Story Rd., Suite 114 Irving, Texas 75061 Phone (214) 253-5171

1983-1984 SAVE National Board

President William F. Lenzer Executive Vice President John A. Jonelis Vice President •- Finance B. A. Zolezzi Vice President •- Administration Nathan Borsuk Vice President •- Communications Edward W. Mitchell Vice President -- Professional Development R. Glenn Woodward Immediate Past President John W. Bryant Vice President - International William J. OP de Beeck Vice President - Northwest Region Douglas M. Hood Vice President - Great Plains Region Teresa A. Barlow Vice President - Great Lakes Region Eugene R. Smith Vice President - Northcentral Region John H. Maurer Vice President - Northeast Region Hal Goldman Vice President - Southwest Region Julian J. Pennello Vice President - Southcentral Region Robert C. Pumpelly Vice President - Southeast Region Peter S. Megani

Co-Editors

Rita Bates - Managing Editor O. James Vogl - Technical Editor

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Value World October/December 1983 HOSTING THE 1984 INTERNATIONAL SAVE CONFERENCE

"DISCOVER THE GOLD IN VALUE ENGINEERING" MAY 6 - 9, WOODLAKE INN, SACRAMENTO, CA

This conference, open to all, is dedicated to Be an exhibitor - present a paper - or just at­ a philosophy and methodology that improves tend and learn more about value management productivity, reduces costs and strengthens and participate in the 25th Anniversary of the the economy Society. Papers will be published in our "pro­ ceedings", copy furnished to all attendees. Value engineering/Value analysis Conference fees and booth costs will soon be established by the national office (214) Come to our educational conference. At­ 253-5171. tend one of three simultaneous sessions for 3V2 days. Out technical theme: "State of the Let us see what you have, let us hear how Art", which so aptly demonstrates the above you did it. - achieving "function" at the lowest accept­ able cost. Julian J. Perinello Conference Chariman

CALL FOR PAPERS 1984 CONFERENCE

To present a paper to the SAVE International Con­ typing on the special SAVE paper which will accom­ ference you must have a paper published in the Pro­ pany the edited copy. ceedings. The final typed copy MUST be received by the in­ The first step is to select your subject. Please check dicated date else it can not be given to the printer by his with the Conference Chairman or the Proceedings deadline for having the Proceedings ready for the Con­ Editor to see if your subject is compatible with the Con­ ference. ference theme. Please contact: Jim Vogl, Editor Once the subject has been approved, the Editor will 4909 via el Sereno send you a brochure on how to prepare a paper for the Torrance, CA 90505 SAVE Proceedings. Please follow the directions (213) 378-1803 carefully for if you do not, your paper will be unaccept­ able and we will lose your services as a speaker. or Julian J. Pennello, The brochure will direct you to prepare a draft of Conference Chairman your paper, complete with abstract and biography. 1509 Mission Ave. These should be sent to the Editor for editing as soon as Carmichael, CA 95608 possible. The edited paper will be returned to you for (916) 440-3476/2640

Value World October/December 1983 3 Carlos Fallon, CVS THE MANAGER WHO UNDERSTANDS VALUE

Once value work is understood, the I asked him, "How in the world do you During World War I, the British wanted to use manager must supervise the fieldwork keep that white woolen tunic so clean?" the power of the Royal Navy to bombard the necessary to define the function—not a German-held coast of Belgium. Problem was "Do I have to be scientific about this simple mathematical function but the broad doing that the offshore waters of Belgium were too function of value analysis, the function that cleaning problem?" he protested. shallow, but the Royal Navy thrives on pro­ pinpoints information on what to do. This in­ blems. They built monitors. That is how I was "Please," I begged. "The spotless white rescued by a monitor of the Brazilian Navy. formation is sometimes on the way. tunic of Austro-Hungarian officers are a mystery to all of us. How do you keep them HOW BRAZIL CAME ABOUT WHAT IS GROUP DYNAMICS? clean?" Late in the XVth Century, Spain and Portugal The term is an abbreviation for a natural implemented a papal dividing line with the After clearing his throat, he told us. "The tendancy among members of a group to sup­ Treaty of Tordesillas. The treaty recognized Por­ secret is in the cleaning fluid," he explained port each other. Zebras, gazelles, impalas all tugal's African colonies but also gave Portugal a as he sat down, "We owe is to Dr. Nikolaus move around in groups. If one fails to see, toe-hold on the coast of South America. hear, or smell an ememy, another in the group Otto, Gottlieb Daimler, his daughter will. Group action is not limited to the higher Mercedes, and Carl Benz. They discovered a At the independence from Europe, each animals. We are all familiar with bee-hives, waste product of petroleum refining. Spanish colony became a separate nation but the Brazilians united into an American Empire. anthills and wasp nests. Trouble with their "A waste product! . . .?" I cut in. means of transmitting information is that it is Their pioneers, the bandeirantes (flag bearers) slow. It has to wait a generastion at every step. THE OBJECTIVE OF followed all rivers upstream. They gained control Human communication is faster, particularly THE FUNCTION and jurisdiction over the meeting places of the great rivers that flow into the mighty Amazon. within a group. It is true. Gasoline was a waste product The magic of our language is that it has a from petroleum. It was refined to separate the The Brazilians are good value engineers too. past and a future range while other living oil from the tar. One of the products of this We have had them at our international con­ creatures communicate only in the present. separation was gasoline. Too dangerous for il­ ferences. There is more than just speaking. The gesture lumination and cooking, it was sold only as a EFFECTIVENESS OF of a clenched fist into an open palm is more cleaning fluid. GROUP DYNAMICS than face-to-face communication, so is poun­ Like the rest of us, the Brazilians suffered a I had thought that Professor Kurt Lewin's skill ding the table. Understanding the operating shortage of fuel during the Near East oil em­ in analyzing the activity of groups was unique. functions of value analysis calls for all aspects bargo. The obvious function could be Produce Then I discovered the value task groups of Larry of communication. Fuel, but they looked at the objective of the Miles. Neither oceans, nor cultural barriers can function to produce fuel on the surface of Brazil. The people who make a product or render a nullify people's need to work together. Once in a service know a lot about what they are doing. Solving problems and unravelling mysteries while someone arises who finds a way to make Much of the success of value work results does have value. The mystery of the spotless this work truly fruitful. Such Is the method from the vertical communication between the white tunic of Czarist Russians and Austro- developed by Lawrence D. Miles. Larry's executives responsible for making a product Hungarians led us to the humble origin of management techniques enhance the best or rendering a service and the persons who ac­ gasoline. Another mystery is how, at the height characteristics of human groups. tually do the manual or machine work. of the Spanish Empire, little Portugal, though There is no room for the them-mnd-us hostility Then, there is the horizontal communica­ barely a corner of the Iberian Peninsula, gave in value improvement. It has to be a truly joint tion among all the diverse specialists whose rise to Brazil. Unravelling this mystery can lead effort. We are all trying to turn out greater value combination of skills make the product or ser­ to a better understanding of the Brazilians. for the resources committed. The value work of vice passible. Larry Miles is done in the utmost friendliness Brazil has a huge tropical rain forest, thinly in­ and it is a lot of fun. Traditionally, cost accountants only record­ habited by native Americans who are just enter­ ed events. In value work today they recom­ ing the Neolithic. In addition to hunting and We have sense organs that reveal reality to us mend courses of action. Recommendations gathering, these forest people have learned to through sight, sound, smell, feel and God knows must be, above all convincing. grow some of their own food. This food is very what else. How well do we understand reality? TREATING EMPLOYEES nutritious cassava or manioc root. Fermented Are logic and mathematics enough to cope with and distilled it can be used as motor fuel. this problem? AS ADULTS Hardly. My sixteenth birthday was a rite of passage. GROWING THEIR OWN I was passing from ordinary seaman to able- MOTOR FUEL When a successful manager says, "I have a bodied seaman. I had grown up! It was a big good (or a bad) feeling for this idea," he is The Federal Republic of Brazil is doing just event in my life. I would be treated and paid summing-up all his ancestral genetic heritage, that. Not only have they solved their energy pro­ as an adult. I had first gone to sea as an ap­ maybe as far back as the dinosaurs and possibly blem but they are on the way to solving their prentice seaman — really a deck boy — at further. balance of trade problem, manufacturing more fourteen. motor vehicles than all other South American HERITAGE OF INTUITION Wanting to see China, I ended up working countries together and building ships for export! The living descendants of the dlnoauars: the in Manchuria for two winters and one sum­ I have lived and worked in the Amazon region alligator, the cayman, the crocodile and the mer. Wrong mix, too cold. and I have been rescued by a Brazilian monitor. gavial, must have done something right to be On my birthday my shipmates gave me a alive today. They must have made lome good A monitor? . . . ! party at the home of one of them ashore. To­ decisions. That ancient heritage •howa up in our day we would call the host a Czech. He was a A monitor, to be sure, not the lizard but the feelings. Add to this language, writing, and the former officer in the Austro-Hungarian army, naval vessel. They both exist. Maybe I had better and he put on his uniform for my party. explain. ICoiillniiml on Page 7)

4 Value World October/December 1983 Shopping for Value In Construction

By Robert A. Feger from informal suggestions to a formal, Here, the construction manager/general organized process. Normally, VE incorporates contractor must be familiar with retail func­ these steps: tions and systems to contribute meaningful Reprinted with permission from the ideas. For example, many large retail chains November 1982 issue of Shopping Center 1. The information stage, in which the con­ have master specifications for their stores, but World: a publication of Communication struction manager/general contractor's an experienced contractor will know these Channels, Inc., Atlanta, Georgia. estimating group identifies • the high-cost or characteristics and may still be able to suggest "problem" areas of the project, based upon a various options to adapt the store or center to study of the schematics. the geographic conditions, or to improve Very few retailers or shopping center 2. The brainstorming phase is the creative function, aesthetics or cost-efficiency. owners and developers sit down at the incep­ aspect of VE, during which the estimators tion of a building program with a blank -and often the entire building team - take a 3. The recommendation phase allows the checkbook. With today's tight money and second look at the specifications and try to entire building team to evaluate the VE uncertain economy, each has to make some determine what alternate systems or products results. The VE team has identified what it tough decisions and encourage creative team­ or construction methods could perform the re­ believes are alternatives that will either work by the architect and contractor to pro­ quired function at a lower cost. enhance the quality, lower initial or life cycle duce a quality building within their budget costs, or shorten the construction schedule. and schedule. Sometimes this may involve a comparison of several structural systems or skin types. It is up to the architect and the owner to ac­ Unfortunately, too many owners face the Often, it goes beyond systems and products to cept or reject the alternatives - or to modify unpleasant economic facts only when work­ look at construction methods that might be them to suit the owner's needs or enhance the ing drawings are completed and the job is bid. employed, bidding techniques that might design. Often, the VE reports do no more than But when cuts have to be made at this stage, save money, purchasing procedures, ad­ lay out the facts and costs. What VE does is to the redesign can be costly and the delays ministrative systems and processes, schedul­ give the owner, as well as the other team significant. There is a remedy, however, that ing, life cycle costs such as maintenance and members, the information and perspective gives the owner more effective - and earlier energy utilization. needed to weigh alternatives. - control over project costs and schedule. It is called value engineering (VE). Four-Stage Process VE is not just cost-cutting. It involves analyzing a shopping center or retail store design from the construction viewpoint with the goal of balancing performance and quality against initial and life cycle cost. The objec­ tive is to optimize quality, time and cost. By bringing in a qualified construction manager/general contractor at the beginning of the design phase, owners can analyze costs at the stage where they can exercise the most control over them. VE gives the owner, the ar­ chitect and the contractor the information on which to base sound decisions. For a small, up-front investment of time and money, the retailer or developer can realize significant savings - without sacrificing the function, quality or design integrity of the building. The key to success is to start early in the project. Typically, VE is conducted at several stages of the project, beginning after the func­ tional planning phase when schematics have been prepared. VE is often conducted again during the design phase, and "value manage­ ment studies" are conducted during the con­ struction phase. The important fact for the retail owner/developer to recognize is that potential savings are greatest during the early stages, and decline as the project progresses (see Graph A). Depending upon the owner's needs and the complexity of the project, VE efforts range

Value World October/December 1983 5 4. During the implementation phase, the tural steel plans with varying architectural to save the owner approximately 20% of building team takes the recommendations detail and finishes, while two others used estimated installations costs. that are accepted by owner and architect and structural steel with Teflon-coated fiberglas On the same project, we developed an alter­ works them into the final design and con­ fabric skin. There was a $50,000 difference native method for constructing the lighting struction schedule. between the most and least expensive cost system, substituting a plug wire system for estimate, providing the owners with the infor­ Worth the Effort the original scheme, which called for all light mation on cost and feasibility early on, before fixtures to run off a pigtail. With the new How the VE effort can meet the needs of expensive design time was spent on a plan system, the light fixtures could be removed owners with different priorities and interests that might have exceeded the owner's budget completely for repair and another fixture can be illustrated by several projects on which and presented unforeseen construction pro­ plugged into placed immediately - an obvious the technique was successfully applied. blems. improvement in flexibility, ease of maintenance and in long-term cost benefit to On the 145,000-sq. ft. Sears store at Often, VE recommendations concern im­ store operations. Westridge Mall in Phoenix, which cost about provements in construction methods that im­ $3,600,000 in 1980, the owner saved more pact design. For example, on a Sears store in Some owners don't want VE, despite its than $157,000 through VE. Flagstaff, Arizona, plans called for the well-documented results. Some are not will- A large part of the savings was made by sprinkler systrem to run parallel to the main analyzing the exterior skin and the structural structural members. By rotating the sprinkler Present a Paper at the 1984 SAVE International system of the building early in the design. system 90 degrees, to ran at right angles to the Conference in Sacramento, California. Four exterior masonry wall types were com­ structural steel and attach to it, we were able See Page 3. pared for initial cost maintenance and aesthetics. They were eight-inch high, integrally-colored, split-faced, fluted masonry block, eight-inch high, painted, split-faced, fluted block and the same two op­ tions with four-inch high blocks. To save on expensive maintenance, the choice was nar­ rowed down to the integrally-colored blocks. By choosing the eight-inch instead of four- inch blocks, approximately $19,800 was saved, primarily in labor costs. Three schemes for the structural system were studied, ranging from $3.83 to $4.53 per square foot. By selecting the least expensive of the acceptable alternatives, Sears saved ap­ proximately $43,000. Other savings were made to maintain the re­ quired quality while bringing the project within the owner's budget. Fiesta Mall, built by Kitchell in Mesa, Arizona, in 1978-1979, was a lump sum, com­ petitive bid project. Although input in the Value engineering during the construction phase is called value management. As used on the early phases of the project was not possible Fiesta Mall in Mesa, Arizona, it studies the most cost-effective ways to resolve any problems with under this type of contract, our firm con­ constructability or product availability. ducted considerable value management to resolve construction feasibility problems. We worked with the architect to develop the best way to construct the mall's skylights and researched alternative floor coverings when the originally specified tile was found to have durability problems. In a case like this, value management can help prevent project delays and minimize costly order changes.

Small Changes Save Big Blocks Many shopping center owners and developers are interested in renovation of ex­ isting properties, now that some of the early malls built in the 1950s are in need of facelifts. At the open-air Park Central Mall in downtown Phoenix, the most cost-effective method of enclosing the structure (which our firm built in the late 50s) currently is being analyzed. Working with the architect and owners, five different schematic designs for cost conse­ Various schematic designs were analyzed for cost and construction foaufbflfty of «m;losing Park quences and construction feasibility have Central Mall in Phoenix, with a cost range of $50,000 between tho iiiokI

6 Value World October/December 1983 ing to spend the small initial investment that APPLES TO APPLES the review entails. Experts estimate that a comprehensive VE effort will cost from 0.1% by A. E. Mudge, CVS to 0.5% of the project cost and will take Making sure that you are comparing apples several weeks to a month. Savings realized to apples is one of the most difficult things to from the effort typically range from 10% to EARNINGS do when analyzing different companies Cost much more. Improvement/Value Engineering Activities. The other drawback for some owners is the One of the reasons for this difficulty, in part, IMPROVEMENT time they must devote to the effort. Once is the various methods used by companies in again, the savings may justify the involve­ calculating both their Project and Annual PROGRAM ment of the owner, but the process can be Savings. painful. The nature of VE requires that some Although there are a multitude of methods hard decisions be made. COORDINATOR used, the three most prominent are noted How can owner/developers who want below. These are shown with the most conser­ thorough VE for their retail projects make sure vative first and progressing to the most they will get it? First, consider VE capabilities liberal. when selecting a construction manager/gen­ An aggressive Columbus, A. (Direct Material + Fringe Benefits) X eral contractor. Do they listen to your needs? Annual Volume - Amortized Imple­ Ohio company is Which one offers a strong technical staff of mentation Cost = Project Savings. estimators and schedules? Who has prior ex­ searching for an Earnings amples of VE studies that yielded good results B. (Direct Material + Direct Labor + Full Improvement Program for their clients? Check the references and Burden) X Annual Volume = Project success stories. Savings. Coordinator. Second, select one person in your organiza­ C. (Direct Material + Direct Labor + Full tion who can represent you on the project Burden + Programmed Expense) X An­ This position will have team. This person must be able to make deci­ nual Volume = Project Savings. total responsibility for the sions or obtain a decision quickly, and must A second factor, which further complicates Company Earnings be willing to get involved in the process. this comparison, is the direction of the pro­ Third, if you are serious about VE, you may grams intensity. If the efforts are directed at Improvement Program want to write into the contract with your ar­ the Material and Expense Costs content, the which will include chitect and construction manager/general difference between the three methods will not administration for the contractor the specified stages at which you be that great. However, if the efforts are want VE studies conducted - usually after directed at the Labor content of the costs, the Earnings Improvement schematics are completed, during the results of the three formulas can be greatly Teams, establishing design/development stage, and finally, when skewed, particularly "B" and "C". This is working drawings are completed. because Full Burden is usually taken/calcu­ training programs for cost lated as a percentage of Direct Labor. reduction and value Basically, VE is value seeking, an effort which involves an entire building team - the There is yet a third factor which makes the analysis methodology, owner, the architect and construction man­ comparison more difficult; this is Annual maintaining records of all ager/general contractor - in getting the most Volume. Some companies use planned An­ store or shopping center for the least cost. It nual Volume with no post-audits for correc­ Earnings Improvement isn't easy, but most owners who have used it tion to actual Annual Volume. Other com­ activity and supervise find the results well worth the effort. As panies use more than one year's Volume, specific cost reduction center retailers and developers know, it pays sometimes two, three even up to five years, to to shop for value. determine Savings. projects. Applicant must When comparing one company's Cost Im­ have a minimum of five Robert A. Feger is vice president-construction provement Activity results to any other, be (5) years experience. for Kitchell Contractors' Arizona Contracting sure that you know all of the facts and factors Division. Feger has been with Kitchell since being used. Make sure that you are comparing 1963 and has served as project manager on a apples to apples. Competitive salary and number of retail projects. In his position, he benefits are offered, along has overall responsibility for management of the firm's operations department and for pro­ (Fallon Continued) with the potential of jects under construction. Kitchell, one of the career growth. Please top 50 building contractors/construction blessed conflagrations that baked the Summerian managers in the U.S., has offices in Phoenix, and Babylonian clay tablets into lasting brick, forward your current Newport Beach and Dallas. and we have a treasure-trove of information, resume and salary history wisdom and judgement going back to the dim in confidence to: past. For the present we have the here and now MURPHY'S GOLDEN RULE: advantage of the specialists in the value task group. Personnel Director WHOEVER HAS Box 1879 THE GOLD REFERENCE Columbus, Ohio 43216 Park, R.J. and Associates: Park's Catalog of MAKES THE RULES. Frequently Used Functions in Value Engineer­ ing. This catalog is a substantial contribution to An Equal Opportunity Employer M/F/H our work.

Value World October/December 1983 7 Technoconcepts '83 ' ' ' / I I \ \

An exposition of the most advanced robotic and computer controlled automated adhesive and sealant dispensing systems.

Learn how today's adhesive technology and advanced, automated dispensing systems can help you cut costs and improve quality.

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Date: November 1, 2 & 3, 1983 Time: 8:00 a.m. - 5:00 p.m. Daily Place: Hamilton Hotel 400 Park Boulevard Itasca, Illinois 60143 (Just 20 minutes from O'Hare)

Bring your parts, prints and problems. To register for Technoconcepts or for further information regarding the seminar schedule, call Loctite Corporation at (203) 246-1223.

8 Value World October/December 1983 SOCIAL VALUE ANALYSIS AGAINST UNEMPLOYMENT by Giacomo d'Ascanio

I. WORLD UNEMPLOYMENT AND ITS COST FOR THE COMMUNITY UNEMPLOYMENT (Numbers 000"s) Figure 1.1 shows world employment data in the years 1972-1980, from studies con­ ducted by the ILO (International Labor Office) (1979) of Geneva, Switzerland,1 and the UN (United COUNTRY 1972 1974 1976 1978 1980 Nations), New York.2 The trend is clearly an alarming one. Egypt 134,6 208,6 _ 354.5 (458.2) The cost of unemployment can be calculated taking into account its various Tunisia 31.9 32.4 32.6 59.0 66.2 components, grouped (for simplicity's sake) Canada 552 510 727 911 867 into seven classes: United States 4840 5076 7288 6047 7448 1. Benefits distributed directly to Venezuela 219.5 233.8 193 .3 272.4 unemployed workers. - India 5928 8378 9563 L1837 15317 2. Governmental loss of social security con­ tributions normally paid by workers and Israel 2.7 3.0 3.6 3.6 4.8 employees. Japan 730 730 1080 1240 1140 3. Loss of income tax. In a number of coun­ Austria 50.0 41.3 55.3 58.6 53.2 tries the unemployment benefit paid out is Belgique 105.2 124.1 266.6 333.4 382.3 not subject to tax, either because the government intends it that way or because Germany 246.4 582.5 1060 993 889 it falls below the minimum tax threshold. (Fed.Rep.of1 But at the same time the unemployed per­ Gre ece 23.8 27.1 28.5 30.9 37.2 son continues to derive a full entitlement to all other social security benefits, in­ Italy 1297 1113 1426 1571 1698 cluding retirement, medical and educa­ United Kingdom 875.6 620.4 1359.4 1475.0 1794.7 tional, although neither the unemployed Yugoslavia person, nor his former employers, are 315.3 448.6 635.3 734.8 785.5 making contributions. 4. Costs incurred due to incentives provided in various forms to create jobs in depressed Figure 1.1 industries, or in particular sections of the population. scholars. Sir Frederick Morton Eden (1797)5 is rigid law that regulates the succession of in­ regarded as a pioneer, and contributions 5. Losses in industrial output, which would ventions and innovations (See Fig. 2.1). towards a thorough study of this issue have otherwise have been produced by the These occur, one might say, like cherries that been made by, among others, T.B. Malthus,6 unemployed labor. This loss is a real one ripen when their time comes. The distance be­ A.C. Pigou,7 and J.M. Keynes.8 and provokes a general decrease in the na­ tween invention and innovation is statistical­ tional standard of living. In recent years, particular relevance is to be ly defined and shows a tendency to become attributed to the studies conducted at the In­ shorter with the passing of time. Figure 2.1 6. Costs ensuing from the socially and ternational Institute for Applied System shows a series of three historical inventions politically unstable situation, discourag­ Analysis (HASA), Laxemburg, Austria, by C. and innovation waves (represented, respec­ ing investments. Marchetti et al.'i10 on the great events capable tively, by wood, hay power, and coal) and the 7. Human cost of unemployment, which can of affecting energy sources and the oddly present oil wave. The pairs of straight lines be qualified by hypotheses. represent respectively the dates when impor­ tant inventions and innovations took place. If we limit our calculations to the first three The left side represent fundamental inven­ THE TOTAL COST OT UNEMPLOYMENT classes in the list, we notice that they are tions and the right side, the dates of their im­ enough to total a cost that is roughly the same plementation. For example electricity produc­ as the wages earned by the workers before los­ tion: invention 1708, innovation 1800. It is 6R05S 4% ing their jobs. also surprising how the diagram predicted, SALARY . , LOSS OF with considerable insight, the fall of oil prices Figure 1.2 shows the cost of unemployment BEFORE e 12* IHCOME TAX that we are witnessing. in the countries of the European Economic UNEMPLOYED Community (EEC), according to data collected by Neil Irons.3 33% The most worrisome datum seems to be the 10SS Or EKPlOYEITSAHt trend in the capital stock required for the II. FAILURE TO INTRODUCE INNOVATIONS EMPLOYEE'S SOCIAL maintenance of a job, which shows a more AS NEW AND DECISIVE CAUSE SECURITY COMTBBffTKWS than linear growth (See Fig. 2.2). This was OF TODAY'S UNEMPLOYMENT. clearly put by W. W. Leontlef: "Given the rate Unemployment has always existed in the of technological advance, the creation of one working world, ever since the times of ancient ^^ONEHPLOYHEHT additional job that 20 yea is ago might have re­ Egypt, as pointed out by J.A. Garraty in his '0 BEMEFIT quired an investment of $50,000. now Unemployment in History.4 It is only in the demands $100,000 and In 20 years will de­ last 200 years that this problem has been taken Figure 1.2 mand $500,000 even with Inflation dis­ into consideration by a growing myriad of counted."" With regard to political

Value World Octobor/Docombor 1983 9 satisfaction of his need. The advancement of technology coupled with normal production "learning", allow the most skillful manufac­ turers to produce at decreasing costs, and to sell more cheaply, lowering further the numerator of this ratio. Diminution of the manufacturer is also caused by the progressive saturation of the markets, to which is added a decrease in market satisfaction for an identical commodi­ ty unit, as accounted for by the well-known law of diminishing utility.

In many countries we are witnessing a serious crisis in the public sector, particularly in public utilities, and it may well be getting worse. Similar to what happens for any other product or service, the problem is one of 1700 1800 19O0 7000 2100 value. YEAR

Invention and Innovation waves, the secular set: The first three waves of the series are The government (which has accepted, no historical. Wc live In the fourth. The following two are Indicated lo show the Interlocking of the various doubt for praiseworthy reasons, full liability components. In the upper part of the figure the indexed prices for energy are reported to show the precise for the expenditure originating from the ser­ match between energy price flaring and wave centers. By analogy one should expect £ rapid fall of the real vice) shows inability to administer it price for oil in the next few ye2rs. Sources: For the U.S. cost Index, U.S. Department of Commerce [IS]. economically in a changing world, and thus For the Guir and OPEC oil cost Index, BeUdorffar.d Lukas [16]. compels the community to pay for it with ex­ Figure 2.1 tremely burdensome prices. There results a diminished capacity for expenditure for all economy, Leontief recommends the adoption Jantsch defines technology as "the vast area parties involved, a lowering of the general of a model similar to the one favored in of utilitarian application of the contents of standard of living, and, beyond a certain Austria, which provides for a strict co­ physical, natural, and behavioral sciences," point, an irresistible push towards unemploy­ operation among management, labor and and includes in it "all technical notions, as ment. government, through a progressive reduction well as medicine, agriculture, management, It is not enough, however, to be capable of of man-hours. etc. with their practical and theoretical solving the problem of innovation in purely teachings."12 I am in full agreement with this proposal, technical terms alone. It is often but I am, however, rather sceptical as to its In this concept of technology, products and uneconomical for the productive unit to pro­ capacity to halt the threat of rising services may be regarded as particular ceed with innovation. At this stage I must technological unemployment. My view is that technological forms developed to cope with stress that to innovate, to create new products failure to innovate (to rejuvenate existing out­ given tasks. We can thus affirm that a vast or services of high value, is equivalent to put, or create a new one) is the real cause of new discipline encompassing applied creating more jobs, and therefore to ac­ today's growing unemployment. research, transfer of technology and utiliza­ complishing a social function that should in tion, is now well under development. It could any case be accomplished. Why is this so? The answer is easy. In a aptly be named the Science of Technological world that is more and more progressive, Innovation. It may thus be inferred that it is entirely pro­ diversified and complex, it has become per for the community to reward whoever in­ In the sphere of this new science, Value technically and economically difficult to in­ troduces the "social function" in his produc­ Analysis (VA) represents the inner core, that troduce innovations. tion unit, as explained in sections 4 and 6. pertains to the domain of envisioning and Luckily enough, while scientific advance­ creating the new where "envisioning" and Going back to the feasibility of innovation, ment of learning is the first cause of occupa­ "creating" are used as operational terms. one might raise objections, or set limits both tional problems, it is also the source of a To give an example, one might say that if of fruition or technology. On this point, too, I technical solution to overcome them. New in­ we had to set up a condensed course to teach am an optimist. Regarding fruition, there struments of analysis, synthesis and decision­ managers this new discipline, we should comes to our aid (either luckily or unluckily) making are now available, first of all the com­ teach them Value Analysis. In fact, the prob­ man's insatiability, which requires ever new puter. lem that must be faced (if one has to adapt products or services, in sharp contrast with oneself satisfactorily to a hew situation and, man's satiability derived from a particular in general, if a productive unit is to survive at product or service. As to possible 13 all) is a problem of "value", if we assume as a technological limits, there is no ir­ measure of value for products or services the replaceable technology, the market buys ratio of worth (duly quantified) vs. total cost "functions" not products, as expounded in of production, such a ratio should of necessity section 4. It will suffice to point out here that be greater than 1. Above 1 means success, I in the future most of the means of transport, means survival, less than 1 means commercial which have so far performed the function of death. "permitting communication" will be replaced by more expedient means so that the physical

__i 1 1 Nevertheless, everything conspires to bring movement of human beings will become un­ 4955 A°>1% this ratio as low as possible. necessary. A provision must be made, Scientific progress provokes a continuous perhaps, for a certain degree of "viscosity" of VALVE OF CAPITAL 5T0CK PER MAN-HOUR change in the user's tastes and requirements: the system, which suggests the necessity of IN MANUFACTURIHGr INDUSTRIES IH U.S. if the products on the market are not modified not charming too swiftly. Once mankind has reached a general lovol of well-being, any ad- Figure 2.2 when the necessity arises he finds decreasing

10 Value World October/December 1983 ditional increase in productivity will result in mally goes on, despite additional fusions, till a reduction of time on the job and a corre­ the death of the product or service due to ob­ sponding increase in spare time, a situation I solescence. It is noteworthy how birth and believe is still pretty far in the future. death of new products or services produce v/1. 2 serious occupational consequences only in the geographical areas which witness the cy­ cle, because of the viscosity of labor mobility. m. A MODEL FOR THE PRODUCTIVE It is almost as if Ergospace were a pot of boil­ SYSTEM: THE ERGOSPACE - ing water, with bubbles moving along vertical A productive system, whether it pertains to axes only. a whole nation or a part of it, when examined In the suggested representation, the average from an occupational standpoint, can be K ) J national level of technological development is represented in terms of the model (See Fig. at a barycentric height of the whole ergospace 3.1) named "Ergospace". Figure 3.1 surface (See Fig. 3.5). The figure shows (a) a The representation takes into account two typical developing country, (b) a typical variables only: the capital intensity and the developed country, and (c) a country with a personnel employed at the various levels of marked imbalance between its developed nor­ capital intensity. It is possible, if need be, to thern region and its developing southern use a third variable having discrete values and region, as evidence by the use of a third relating to the geographical distribution of the variable. labor force. We define as capital-intensity of a produc­ tive unit the relationship "t" between the capital stock and the total number of workers. This relationship, when it is regarded as an aggregate value, is also assumed to be fairly representative of the level of technological development in its usual meaning. Let us then Figure 3.2 represent with portions of space the labor force which is available. More exactly, the areas encompassed by the two levels "t " and

"t2" in Figure 3.1 represent, on the ap­ 10 propriate scale, the labor force available be­ tween the two levels, while at a disaggregate level the areas represented by circles in Figure Figure 3.5 3.4 are single productive units of given pro­ ducts. IV. SOCIAL VALUE ANALYSIS AS If a third variable is introduced (See Figs. SPECIFIC DISCIPLINE TO OPERATE 3.2 and 3.3), it is also possible to concurrently INNOVATION IN SOCIO-ECONOMIC take into account the geographical areas of TERMS. particular interest, e.g. the North vs. the Human knowledge has become so vast South, very often occupationally extremely nowadays, and keeps changing so swiftly, diversified. that an individual is no longer able to plan an Figure 3.3 The diagram shows available labor that industrial plant, a product, or any service results from the sum of employed and whatsoever from beginning to end. Every pro­ unemployed workers. For the distribution of duct must be the result of the co-operation of a the unemployed among the various group of professionals who contribute their technological levels it is, of course, necessary respective skills. This is a truth almost to make the appropriate hypotheses. Figs. everybody agrees with, although almost 3.1.b, 3.2.b, and 3.3.b represent unemploy­ nobody really knows what to do next. VA14, ment in the range of technological develop­ in its essence, purports to transform the work ment in the productive system under con­ of this team of professionals into a successful sideration. venture, by organizing into a single body of It can be particularly interesting to follow discipline the skills and methods most dynamically on the Ergospace the occupa­ necessary to fulfill such a task. First of all VA tional phenomenon, as outlined in Fig. 3.4. is required to develop a language that allows The birth of new products or services takes communication among experts from several place, as a rule, in the inferior sections of fields, for example marketing, finance, Ergospace, characterized by low intensity of design, production, buying, costs, manage­ capital. A typical instance of such a ment, and, if necessary, other departments of phenomenon occured in the U.S. in a firm, so that they may form a productive 1973-1979, when three new services (fast unit capable of exchanging views profitably Figure 3.4 food, health care, and business administra­ and creatively. This purpose is served by the tion) were capable of creating an average of 1 so-called "functional language". million new jobs each. productivity of which is higher than the original units. This is followed by a further For example, a chair will no longer be At a later stage, a fusional phenomenon of technological advancement, which causes described as having four legs, a seat, etc., but the productive units takes place, and thus at a labor derating. The process of contemporary according to its functions: "outdistance superior level greater units are formed, the technological growth and labor squeeze nor­ body", "support body", etc., so that the prob-

Value World October/December 1983 11 lem under examination may be viewed by plete set of provisions is used by the U.S. everybody in its essential components. Such a Department of Defense. Dating from 1962, language has another important advantage: it provisions motivating VA studies have ap­ is highly creative. Going back to our example, peared quite regularly in the "Armed Services it would be most natural to design a masonry Procurement Regulation" (ASPR).18 Periodic chair if the function "permit shifting^ were changes have been made, the latest being in not required, or, perhaps in the Far East — the Defense Acquisition Regulation issued in where the function "outdistance body" 1982. In 1968, the Department of Defense also would be unnecessary — one might design a issued a booklet on Value Engineering,19 a carpet to serve as a chair. Further, if the func­ term which is equivalent to VA. These rules tional language were not enough to generate are still used, and quite successfully as shown ideas, it would always be possible to use other in Fig. 5.1, which tabulates data pertaining to 15 systems of creative thinking. Each function a recent year, randomly chosen. requires, also, that it be stated in quantitative terms, and for each function it is necessary to For our ends, the saving thus realized is a consider the various solutions by taking as a Figure 4.1 highly significative index of VA superior guideline their respective values defined in results in comparision with a traditional pro­ terms of the ratio performance vs. cost. ject, i.e. a project carried out without VA. I explained in the paper presented at the 1975 This discipline suggests the appropriate SAVE Conference.17 Functions such as There are two types of clauses: (a) Value methods16 to quantify immaterial things — "create jobs", "reduce pollution", etc., that Engineering Incentive Clause, and (b) Value such as beauty, or prestige — so that, to afford the individual firm cannot afford to take into Engineering Program Requirement Clause, evaluation of different solutions, they will be consideration, are social functions. Since the (a) provides for a way to share in the saving exactly defined in terms of monetary value benefit arising from them will be enjoyed by resulting from a VA study; (b) obliges the con­ and cost. the community, it is appropriate that the costs tractor to submit a VA study as a constituent thereof should be paid by the community up part of contract schedule. The aim of this It should be possible to obtain for each func­ to the extent and at the cost accepted by it. clause is to reduce costs in the initial stages of tion a diagram that represents the user's design and development. satisfaction, and a diagram showing the cost One can thus understand how, while the of realization, to afford maximization of use of VA affords management of change and, VI. A PROPOSAL TO ADOPT RULES value, (See Fig. 4.1). therefore, innovation on economic grounds, PROVIDING INCENTIVES FOR the adoption of Social Value Analysis affords There are various methods to assess and SOCIAL VALUE management of change and innovation in select the best solution. Some of them are ex­ ANALYSIS STUDIES. socio-economic terms with important conse­ tremely simple, others extremely complex quences on employment. From the above, particularly sections II, III, and are used, if need be, with the assistance of and IV, it should be clear how it is to be hoped the experts in operational research. All this is V. A SUCCESSFUL EXAMPLE OF that the government will decide to motivate a part of a work program, the "job plan", GOVERNMENT PROVISIONS TO Social Value Analysis studies having as their which is a series of logical operations that MOTIVATE VALUE ANALYSIS social function: "create jobs". It is high time must be performed successively and STUDIES. for us to state the problem of definition and systematically. Although a number of local and' national quantification of the incentive. The provision One might go as far as to state that in every authorities included in their contracts clauses for incentives, if its ultimate goal is to fight firm there is, scattered in the cultural that provide incentives for VA studies, there unemployment, must be expressed with background of its employees, the necessary is no doubt that the most extensive and com­ regard to various possible situations: body of scientific knowledge. The firm only needs to be offered a way to break the watertight bulkheads, both organizational and phychological, that pre­ ARMY NAVY AF vent these ideas from circulating and getting DLA OTHER fused into a successful new production. It is also true that somewhere in the firm some a.VECPs Submitted 411 122 234 213 23 good ideas are normally discarded, being b.Percent of Total 41 12 23 21 2 regarded as "foreign bodies". VA, with its c.VECPs Approved 124 32 - methods of multidisciplinarian team work 84 96 and its knowledge of psychology applied to d.Percent of Total 37 10 25 29 - team work, succeeds in overcoming any pro­ e.$ Savings (k) 13,533 1,393 6,858 438 cess of rejection and makes it possible to ac­ - f.Percent of Total cept change as an idea or plan pertaining to 61 6 31 2 - the individual business functions. g.VECP Approval Rate 30 26 36 45 - (line c-al (%1 Very often a VA study is not limited to analyzing and optimizing a single product, h.Avg.S Savings/ Approved VECP which has a relative importance in the whole (e - ci (K) 109 44 82 business economy; rather it is an attempt to 5 - optimize the value of the entire output. In such a case, all costs, even the structural ones, are relevant and adjustable, and VA takes on the name of Value Management. Value Engineering Change Proposals (VECPs) activity, by Military Service, in FY 1977. Source: Value Engineering Digest. And lastly, when VA introduces in the batch of functions the social functions, it takes on the name of Social Value Analysis, as Figure 5.1

12 Value World October/December 1983 (a) Birth of new products or services, capable And finally, as to hypothesis "c", which model here proposed under the name of of opening entirely new markets. regards a company in a depressed segment of "Ergospace" clearly shows how the long market needful of restructuring, the incentive wave of employment is substantially depen­ (b) Birth of products or services to replace the could be computed making the hypothesis of dent on the birth, or absence of birth, of new old ones, which will not open new a standard technology, having a standard pro­ products or services. markets, but will be helpful for their in­ ductivity with regard to the labor factor. In a duced effects (for example, alternative period of diffused unemployment and as long It is thus that innovation (in the form of energy sources). as the crisis persists, the adoption of relatively creation of ever new products or services) is labor-intensive costs thus ensuing must be the basis for a sound and stable employment (c) Steps aimed at countering the reduction of borne by the community. We leave out the policy. personnel due to technological advance­ practical calculation of the incentive that does ment. not present (if the suggested hypotheses are Social Value Analysis (of which we have adopted) any difficulty whatever. The results outlined the charcteristics and ways of im­ In general, it is logical that the incentive are briefly shown in Figure 6.1, which ex­ plementation) can be regarded as the most should be allocated: (1) in a form which can plains how the firm that benefits from the in­ promising tool now available to successfully be audited; (2) in proportion to an assessment centive avails itself of a reduction in cost of manage innovation and fight unemployment. of the number of jobs to be created; (3) in an labor. This can be used in any intermediate amount not higher than the cost the collectivi­ form to the following: National authorities must become con­ ty should bear for the unemployed eliminated vinced of the rationality of this new con­ during the economic life-cycle of the new pro­ (1) At a parity of total production cost, output figuration of the problem and test its validity duct, new plant, or new service. can be increased up to the extent that its iso- by a few trials. cost "2" becomes a tangent of output isoquant For new plant or new service (hypothesis "II". "a"), the calculation of new jobs is com­ (2) At a parity of output, an inferior total cost REFERENCES paratively simple; the same applies to the in­ can be obtained: iso-cost "3" tangent of iso­ 1. 1981 Yearbook of Labor Statistics, 41st centive attributable to them. Particular atten­ quant "I". tion must be paid to the event more and more Issue. International Labor Office, Geneva diffused because of its inherent effectiveness Both solutions are convenient for the firm 1981, page 315-328. when production of the new product or ser­ under consideration and for the community. 2. 1979/80 Statistical Yearbook. Depart­ vice is going to get started in one or several The political line proposed might be the ment of International Economic and assembly points, which require a limited target of some criticism, and in its defense I Social Affairs, Statistical Office, United number of hands, while the component parts offer: Nations, New York 1981, page 90-95. of the same are produced elsewhere. In such 3. Neil Irons, "Directory General of an occurrence, the benefit to be allocated 1. It is lesser evil, since the monetary cost of Brussels Based Continental Benefit Con­ should be calculated on the total number of an unemployed worker could be higher for sultants", Vision, February 1981, page the commumty. new jobs, (jobs in assembly points plus jobs in 14-18. component parts departments). 2. Quality is not, as a rule, dependent on the 4. John A Garraty, Unemployment in technological level of the productive History. Harper & Row, New York 1979. The computation of the incentive to be system, since it can be achieved by im­ 5. F.M. Eden The State of the Poor. Lon­ allocated to finance technical or marketing plementing various technologies. Cost don 1928. research, or the development of plans to alone varies, and suggests adoption of the 6. Thomas R. Malthus, First Essay on create new products or new services, is more most sophisticated technologies, thus, Population/1978. New York 1965. complex and yet, thanks to the appropriate there is no danger of losing a market due to 7. A.C. Pigou, Unemployment. London techniques of statistical evaluation, quite poor quality. 1913. feasible. 8. J.M. Keynes, General Theory of 3. In a fast-changing world, specific produc­ Employment, Interest and Money. New tion equipment rapidly becomes obsolete. In the case of a firm intending to install the York 1964. Production shifting gets increasingly cost­ equipment to produce a product or a service 9. C. Marchetti, "Society as a Learning ly and is much slower than is the case with having "induced effect" (hypothesis "b"), System: Discovery, Invention, and In­ less specialized and less costly machinery. the computation of the incentive cannot be novation Cycles Revisited", Internation­ The issue is, in reality, a rather complex done for each case separately. The authority al Institute for Applied System one, but the statement can be regarded as must first supply the appropriate data, which Analysis, Laxemburg, Austria, Nov. substantially valid. must be obtained through a study for this pur­ 1981, page 271-283. pose. For example, the authority could deter­ 10. C. Marchetti, "On Energy Systems in mine that a saving of x tons of oil per year Historical Perspective" CFRN, Geneva, creates a new job, because of its induced ef­ k Nov. 1980, page 14-16. fect. This can be regarded as a typical exam­ 11. Wasily W. Leontief, "The Distribution of ple. In some countries it is impossible to Work and Income", Scientific Ameri­ stimulate growth of GNP (which would can, Sept. 1982, page 152-164. automatically create new jobs) because im­ 12. Erich Jantsch, Technological Forecast­ ports would rise to such an extent, due to the ing in Perspective, Organization for coefficient of marginal propensity to import, Economic Cooperation and Develop­ that the balance of trade would be dangerous­ ment, Paris 1967, page 6. ly unbalanced. This creates monetary prob­ 13. D.H. Meadows, System Dynamics lems and inflation. Nor is it possible to rely Group, MTT, The Limits of the Develop­ on the simultaneous growth of exports Figure 6.1 ment. The Club of Roma, Geneva 1972. because they depend on other factors, such as 14. Lawrence D. Miles, Techniques of Value home demand and competitiveness of na­ Vn.CONCLUSION. Analysis and Engineering. McGraw-Hill tional output. An example of incentive We leave out the consideration the cyclinal Book Co., New York 1972. regulations to save energy is in the rule 20 ups and downs in the occupational rate deter­ 15. A. Besse, et.al., Le capital imagination 1303/78 of the European Economic Com­ mined by occasional causes, such as cost of (Brainstorming),Editions de 1'entreprise munity (EEC). oil, interest rates, etc...The socio-economic moderne, Paris 1958.

Value World October/December 1983 13 16. Diane M. Meyer, Eastman Kodak Com­ YOU HOLD THE KEYS procedures or Paperwork. In reality they can pany, "Direct Magnitude Estimation: A by A. E. Mudge be related to anything that incurs cost to your Method of Quantifying the Value location. Only by each individual highlight­ Index", SAVE Proceedings-1971 You hold the keys to successful cost im­ ing such problems or high cost areas that they Conference, page 293-298. provement that will unlock the door to the see, can we ever hope to correct or eliminate 17. Giacomo d'Ascanio, "Social/ Value reduction or elimination of unnecessary costs. them. Analysis", SAVE Proceedings-1975 Starting today, you should take the positive Conference, page 174-178. Only as we work together, as an informal or approach toward every problem and/or high 18. Armed Services Procurement Regula­ formal team, can we maintain or improve our cost areas. Take the approach that you, and tion, Department of Defense, U.S.A., competitive position in the market that we only you, are the first person that has seen or General Provisions, part 17 Value serve. Such competitiveness maintains or in­ isolated this situation. Then take the few Engineering, 1 July 1974. creases our sales in today's and tomorrow's minutes necessary to outline the conditions, 19. Principles and Applications of Value economic environment, which, in turn, im­ including as many specifics as possible. Then Engineering, Department of Defense, proves the job security of everyone at your submit this information, along with your Course Book 1968. location. idea(s) of how to correct and/or overcome it, 20. Financial Support to Demonstrative to your Cost Improvement Department. Projects for Energy Savings, EEC Rule Yes, your eyes, ears and mind hold the vital 1308/78. Official Journal of European Such problems or high costs can include, keys; put them to work today, tomorrow and Communities, N.L 158, 16 June 1978. but not be limited to, Products, Processes, every day.

SAVE VIDEOTAPE RENTALS

The Society of American Value Engineers has three videotapes for your use through the permission and cooperation of Joy Manufacturing Company and Harbridge House, Inc. These tapes are for top executive use only. Therefore, we make the tapes available for one of your meetings, so that your entire top management staff can view it. We think you will agree that these 30 minute tapes will be the answer you have been looking for and in your language.

VIDEOTAPE #1 CHAIRMAN'S THOUGHTS ON COST IMPROVEMENT This tape is by Mr. J. W. Wilcock, President and Chairman of the Board, Joy Manufacturing Company. This tape has been prepared so that executive management is talking to executive management. It was made prior to Mr. Wilcock's retirement. Mr. Wilcock put his thoughts on Value Engineering and JOY's Cost Improvement Program on this tape. He is a strong proponent of the concept and feels that every top executive should avail himself of this invaluable tool. He ex­ plains how it should be applied, where it should report in the organization, what it takes to have a successful program, training required and a few examples of how it has been applied.

VIDEOTAPE #2 VALUE ENGINEERING FOR MANAGEMENT This tape is by Mr. George J. Rabstejnek, President of Harbridge House, Inc. Mr. Rabstejnek put his thoughts on Value Engineering on this tape after viewing what has been available throughout the Society. He is a strong proponent of the concept and feels that every top executive should avail himself of this in­ valuable tool. He explains how it should be applied, where it should report in the organization, what it takes to have a successful program, training required and a few examples of how it has been applied.

VIDEOTAPE #3 COST IMPROVEMENTS'S CONTRIBUTION TO FINANCIAL FLEXIBILITY This tape is by Mr. Andre R. Horn, Chairman of the Board, Joy Manufacturing Company. Prior to becoming Chair­ man, Mr. Horn was Vice Chairman and Chief Financial Officer. Mr. Horn demonstrates in this tape how an effective Cost Improvement Activity contributes to improved Return on Sales, Return on Investment, Debt Ratio and Return on Equity. He accomplishes this by simplified P&L and Balance Sheets of a model company, first without Cost Improvement, then with Cost Improvement using actual audited results of JOY's activity. * * * The equipment required is a % " cassette player capable of using NTSC recorded tapes and a compatible television set. The equipment can be rented, but usually can be found at most larger corporations in their training facilities or in the Industrial Relations Department. Please request the Letter Agreement for Videotape #1, #2 or #3 from the SAVE Business Office, 220 N. Story Rd, Suite 114, Irving, TX 75061. If you fully agree to abide by the terms and conditions stated therein, have your President or Vice President sign it and mail one copy with your check for $50.00 (per videotape) to the SAVE Business Office.

14 Value World October/December 1983 Keynote address by Jack F. Reichert, President and CEO, Bumswick Corp. at the 1983 International Conference of The Society of American Value Engineers, Chicago, Illinois, May 23, 1983.

Thank you Bill.

I'm highly impressed with the presentation that was made on behalf of all of the various countries represented here. I think that's marvelous! It's these kinds of things that I think are important to spread the gospel of value throughout the world and to avoid some of the problems facing us in the area of "Protectionism". I feel somewhat like ad­ dressing a UN gathering this morning with all the flags. I don't have a grasp of all of the languages that the presenter had, but I was reminded of a little incident that happened to me about a dozen years ago when I was a young fledgling vice-president of Brunswick Corporation and running our Marine business. We were dedicating a plant in Petit Rechain, Belgium and we had everybody in our company that was anybody over there, the entire board of Directors, all of our Corporate officers and many dignitaries from Belgium. They had asked me to dedicate the plant in French, and I don't speak French. So I had gone over early and had memorized my remarks. But immediately before going on and dedicating this plant I was kind of walk­ ing back and forth, obviously a little nervous. The then Chairman of the Company came up to me and said, "Jack, what's the matter?" I said, "Mr. Hanigan, I don't speak French and I'm going to go out before this huge gathering of people and make a fool of myself speaking French." He said: "Just relax - just relax - and don't worry about it. First of all you don't It's kind of interesting how this whole issue issue. Bud Rose, whom I introduced earlier, know what you're saying, and the way you came to my attention. It was when I was run­ was brought into our Company from Xerox, speak French they won't know what you're ning our Mercury Marine operation, in Fond and I said to Bud, "I really believe that there talking about either." So that was the one du Lac, Wisconsin. I was called Group Ex­ is something to this Value Analysis program, time that I did try to speak bilingually and I ecutive at the time, and we did not have Value but I don't know how to start it and I don't made it. Analysis or Value Engineering anywhere think there is very much enthusiasm in the within the company. It was about the mid 70's Company for it. I would really like to have and I had read a number of papers on Value you go out and look into it and come back and I'm delighted to be here and I appreciate Analysis and Value Engineering . . . and I was tell me what you think we would have to do to this opportunity to talk to you. I feel intrigued. But, being a non-technical type I get it started. We don't have to get it started in somewhat inadequate, however, because really didn't know whether there was all of our divisions." frankly I could perhaps best be described in substance there or not. So I called the head of the area of Value Analysis and Value our Engineering Department in and I said, "I At that time, we were organized into some Engineering as being the champion. I am not think there is something here and I think we 14 divisions, but I said, "Let's get it started the doer. The people who are responsible for really ought to look into Value Analysis and, even if we have to pay for it." And typically whatever measure of success we have reach­ of course, subsequently develop it into Value in larger companies, why, you have those cor­ ed, in what I consider to be a very important Engineering." The response I got, which porate folks who are the overhead, and the program for our company, would be Dr. made a lasting impression on me was, "This operating divisions who are not. At any rate I Henry Marvin, our Vice-President of isn't anything new. We do it all the time and said, "I'll pay the bill. Just find me one of our Technology, Bud Rose, our Director of Cor­ apparently you've just picked up a new buzz operations who is willing to start with a Value porate Purchasing, and Hoshang Karani, our word.'' I must say that that disturbed me a lit­ Analysis program." Corporate Manager of Value Programs and tle bit, but frankly and candidly, we didn't Bud did, and interestingly enough, we General Chairman of this Conference. These start any Value Analysis programs while I went right back to where I had come from, are the people who have really made it hap­ headed up our Marine operation. Mercury, which shows that Bud was a lot bet­ pen within our Company. However, since you ter salesman than I am. And wo decldnd to In­ asked that I tell you what's going on, I'll do When I moved from our Marine Power stitute a Value Analysis program In some four the very best I can to tell you what we have ac­ operations to become President and Chief or five different specific product areas at Mer­ complished, when it started and what our Operating Officer of the parent Company a cury. We paid all the cost. We went out and results have been to date. year or two later, I was still bothered by this brought in outside consultants. It was sue-

Value World October/December 1983 15 cessful. In the first year, measurable quan­ him take these people through the introduc­ And now I'd like to talk about apples and tifiable results were something like a million tion to Value Analysis. I have come back and oranges for just a moment because I really dollars and, obviously even in a business that revisited those same people when they made think a better way of looking at our success in large, you know, a million here and a million their presentation to management, and I have this whole area of Value Analysis and Value there and pretty soon you're starting to talk been very impressed. I have been impressed Engineering is a total picture of what we have about real money. People got enthused and, not only with the results, but I have been im­ done in the area of cost reductions. And at the therefore, Value Analysis really started within pressed with the absolute total enthusiasm of forefront of it was this program. In 1979, I our Company because of Bud's efforts in our our employees who were involved in the pro­ decided after budgeting that I was going to Marine operation. gram of Value. Analysis. give everybody a cost reduction target. It didn't make any difference whether it was We think that our program in Value One of the things we do within our Com­ capital related, whether it was Value Analysis Analysis is giving us a payoff of about 9-to-l pany, which I don't think is abnormal or related, or whether it was Purchasing related. through cost reductions and other things that unusual, is to bring all of our Division General But I wanted specific ad hoc committees we - have achieved".' More important than Managers together about four times a year, established to address certain issues in the anything else, in terms of my own personal typically,. in our Skokie Headquarters. Each of Company. We set a target. It was fairly philosophy, is that we are providing better them makes a presentation to the Corporate modest, about $18 million. We exceeded the values to our end-users. And in the final Officers and to each other. It's, kind of a target and our cost reductions were far in ex­ analysis if you think about why all of us are in "share the knowledge" type of-a quarterly cess of $20 million. In 1980, we did the same business and why we have plants and why we meeting where what one is doing in one thing. We beat our target! have employees, we have them for only one business may have application to another-one fundamental reason. And thafis to provide of our businesses. And.1 had asked that Value I think there's been a tendency within our customer base, whoever they are, with a Analysis be presented by the successful divi­ American business, because of the mentality superior value at a profit. And that's the only sion that used it; namely, Mercury, And we of some senior people, to play a portfolio reason you're here and that's the only reason have done this continuously over the years, if management game, and not addressing the I'm here. And if we don't supply a superior not only to share the benefits among our peo­ basic issue of tending to the store and running value to our group of customers at a profit, we ple, but to jtry to encourage other people to the business. A lot of people will pay lip ser­ aren't going to be around. So Value Analysis use initially Value Analysis and, of course, vice to something and then let it die. I can tell is very much a cornerstone of what we are do­ subsequently, Value Engineering where you this. We aren't going to let this program ing in the Company. appropriate. die at Brunswick. I had an example with Hoshang in our valve It has spread into other such exciting pro­ I'd like to tell you a little bit about some of actuator plant in St. Charles, Illinois. We had the things that we have done, to emphasize ducts as the core of our basic business, Bowl­ a product line that we were about to discon­ ing, in a number of major capital equipment the point that I'm making about the value of tinue. And we decided, what the hell! Let's this program. About 14 months ago our Com­ items; and into billiard tables - a major, major give it to a group of people using value techni- - cost reduction and improvement in quality pany almost was lost as the result of an un­ ques and see what happens. The result was friendly tender attack, which we defeated. I was done in this product line by the applica­ that costs were cut in half! In half! The pro­ tion of Value Analysis. Believe it or not, we don't know whether you know this, but of duct is now in the market and we are gaining every six companies which are attacked, did- it in our retail bowling centers. We own market share. This shows how smart people and operate world wide more than 200 retail about five lose and one survives. We sur­ are if you only tap the human resource and the vived! It was a very difficult period for the bowling centers. Value analysis was applied skills which they have. So, obviously, we're in the architectural design and physical Company and upon its conclusion, I was made pretty excited about Value Analysis. I don't Chief Executive Officer of the Company from layout of those bowling centers. And it was know that we are one of the companies that done hi our Technical businesss in industrial Chief Operating Officer. It was at that time I you can say have saved the most money, but I decided to make a massive move back towards filtration, valves and controls and related pro­ know the program is alive, it's vibrant, our ducts. what I consider to be fundamental values of people like it, our people are using it and we the business. I chose to decentralize the Com­ have moved into many of our operations from - By the end of the decade of the 70's We pany in a massive way. To give you an idea of what I would call Value Analysis to where we looked like we had something going. We then how massive, we had three group executives should_be and that is into Value Engineering. decided that it might be a good idea to have and we eliminated the entire group executive level. To show you what I thought of my the program brought in-house. We did not I have all of our operating division general previous job, I eliminated it! We had 14 divi­ have anyone in the area of Value Analysis. managers report directly to me as Chief Ex­ sions, we cut to 8. We reduced our Corporate Bud Rose was championing the program from ecutive. I have eliminated all the tiers of staff by over 50% and I said to the operating his role as the head of Corporate Purchasing. management between them and me. I've done divisions, "Your responsibility is to create We did a little study and we decided fhat we this within the last year. Therefore, I travel all wealth and we're going to get out of your way could do a much better job if we could bring over the country. I'm a pretty active guy. Last and let you do that." And in my judgment the professionals into the corporate staff and week I was in about four different cities in five wealth is created by designing, making, sell­ offer the service for our operating divisons. days and the fifth day was at a Carroll College ing, and servicing high quality products and And, of course, we found Hoshang who has Board meeting. I was at Zebco where we make services. No wealth is created in the Corporate done a marvelous job for the Company. fishing reels and talked to the General office, although Corporate does play a key Manager and asked him what he thinks of The numbersNthat they have given me are role in the preservation of wealth. Wealth is Value Engineering. His comment was, "We that we have done about 40 Value Analysis created by the doers who design, make, sell, had the best first run introduction of a product programs within Brunswick. We have encom­ and, service products. Therefore, Corporate we've ever had in the history of Zebco." A passed about'35 product lines and we have staff was reduced significantly. saved well-over a million dollars a year from week ago Friday I was at Mercury, our largest that program. And I'll tell you one of the operation. I talked to the Division General Because these actions affected people, it reasons why I have championed this. I have Manager and Vice President of that operation wasn't a very pleasant task. But I felt it was personally sat through the beginning and the and he very proudly told me what he had ac­ necessary for us to do that within Brunswick. end of a Value Analysis program with complished that I had never accomplished I won't try to pretend that I personally used Hoshang. I have seen him bring a group of when I was up there. He said, "We now get Value Analysis at all, but we looked very people in who didn't know how they were go­ our new products in on time and we meet our thoroughly at where the values were coming ing to approach the subject, and have seen cost targets." I never did that. from within the Company and where they

16 Value World October/December 1983 weren't. And we reduced on that basis and much as I like it. And that involvement of lots dress it. If the answer is Value Engineering, saved our Company some $18 million in Cor­ of people, in fact all of the people of Bruns­ well, that's what we are going to do, and we porate overhead on an annual basis. Why do I wick toward a common cause, is what I am don't .want a bureaucracy to obscure the tell you all of that? Because one thing we did trying to create. problem. not touch was Value Analysis or Value Hoshang says that not enough people know Thank you for the opportunity to talk to you Engineering. about Value Analysis. Well, if they don't this morning. I think Value Engineering is ex­ know about it, shame on them! But if you cellent. I compliment all of you for your The major reductions we made were in the have not been telling people about it, I would diligence and your commitment to it. There is accounting and administrative areas. I said suggest to this organization to stop hiding its little doubt in my mind that the world is going "we are going to stop counting beans and light under a bushel basket and start telling through- a difficult period in time in which make more of them." And we significantly people the accomplishments of the Value more and more you hear about "protec­ reduced what I consider to be the ad­ Engineering Program. I think maybe you tionism". That is of no value to anybody. ministrative part of business. I have been ser­ ought to think a little bit more about com­ "Protectionism" is the refuge of people who monizing for sometime on this whole issue munications. You might think about deliver­ have not done their job of making sure that and I think our Company really understands it ing talks or papers that would sell the concept they provide superior values to their audience now. I really believe they do. I say to you of Value Engineering. Above all, there's little of users. Whatever form it takes, that is a fact. again, for whatever it's worth, that wealth is doubt in my mind that you've really got to And Fair Trade is the right way to go. I believe only created in designing, making, selling, stop talking to yourself. One of the great there is a big difference between Fair Trade and servicing products. There is no other things about these kinds of meetings is and Free Trade, but that isn't the purpose of wealth created. And energies and resources, everybody sits down and you talk about how this discussion. You have a large task, an im­ both financial and human, ought to be great Value Engineering is and you're talking portant task! You have an exciting task directed towards that area; more people and to somebody who already agrees with you. It's because you involve people and it is as ex­ better people designing and making and more like looking in the mirror. One of the things citing to see a group of people from different and better people selling and marketing and you folks have to do is to get to top manage­ disciplines come together and really get servicing products. That's where we're focus­ ment and let them know what it is you've got turned on, and have positive results because ing our energies. I have a very simple to offer. of their efforts. That's what life is all about. philosophy. Number one, the most important That's what business is all about. So to all of thing I have to work with is our people. If our You need a champion. The truth of the mat­ you from me, thanks for listening to me. I people feel that we have a set of common ter is the only thing that I really provide to the wish you lots of luck in this conference. I goals and common values and if they believe Value Engineering Program at our Company hope you go back wiser, with more en­ that what I stand for is consistent with their is that everybody knows that I'm a champion thusiasm, and then do something about it. value system, we will be enormously suc­ for it. Now, I don't force Value Engineering And make sure if you don't have support cessful and if they don't, we won't. So my down the throats of any operating division if within your organization that you rattle the core point and philosophy is to serve they don't want to use Hoshang's services. If walls until you get the support you need. customers and only to serve customers. And I they don't want to go into this program, I think American business, and for that matter believe that sooner or later they're going to business abroad, has gotten fouled up in wor­ pay the price and the way they are going to Good Luck! rying about that part of business which pay the price is because they're not going to doesn't create wealth and forgetting that we provide a better value than their competitor. It Mr. Jack F. Reichert is the President and survive only if we provide a value to the end- isn't that I audit my operating divisions and C.E.O. of Brunswick Corporation, and a user at a profit. Therefore, I've refocused our say ' 'how many times has Hoshang been up to member of its Board of Directors. He is a efforts and said to our people, the customer see you last month?" That's none of my trustee of Carroll College in Waukesha, must come first in every respect and every business in a decentralized operation, and Wisconsin; a member of the University of endeavor and in everything that we do in truly we are decentralized. But when I look at Wisconsin Business School Advisory Coun­ business . . . and that means we must provide costs and values within that operation and cil; a director of McCormick Theological better values. find that our competition is threatening to Seminary in Chicago, Illinois; a trustee of the provide a better product at a lower cost, my First Presbyterian Church of Lake Forest in response is "What have you done about it and And finally I must talk about quality. We Lake Forest, Illinois; and a director of what are you planning to do about it?" I think have a very effective "cost of quality" pro­ TNROADS/Chicago, Inc. gram that is spread throughout the Company that's the way in which Value Engineering by that same technology organization who ought to be measured. At the SAVE Conference in Chicago, the sold value analysis. We may have been late title of "Honorary Vice President of the comers into Value Engineering, but Hoshang It's great to expand the value of this society, Society of American Value Engineers" was has kind of pulled us -up by the boot straps to but the fundamental responsibility that all of awarded to Mr. Reichert in recognition of his be where we are today, and I think we are go­ you have is first to make sure that you support personal committment to and active support ing terrifically well! In the same way, I think the viability of your company. And that of an active value program at Brunswick we are ahead of most American companies in viability will only come if in fact you can pro­ Corporation. terms of quality and the cost of quality pro­ vide better values than your competition. grams that we've put in. We have an obliga­ Value Engineering fits well with one of my MURPHY'S LAWS tion to do that, because if you don't know very favorite rules for running a business: "when IF MORE THAN ONE PERSON IS much about Brunswick, I must tell you that you have a problem, fix it." American com­ we are a leader in virtually every market we RESPONSIBLE FOR A MISCALCU­ panies constantly criticize Washington, DC serve and we plan to stay there. Now I don't LATION, NO ONE WILL BE AT and the bureaucracy there. But when you look think you needed that sermon on Brunswick at the bureaucracy which they have within FAULT. but I do think it has some application to Value their own organizations, it's stifling. Engineering and Value Analysis because one IN CASE OF DOUBT, MAKE IT of the best things about your program is the So they can find the problem with the other SOUND CONVINCING. involvement of lots of people towards a com­ person, but they can't see their own problem. mon cause. In my opinion that's what makes We believe at Brunswick if we have a problem NEVER ARGUE WITH A FOOL, it successful, and that's what makes it ex­ we ought to fix it and if we have a problem in PEOPLE MIGHT NOT KNOW THE citing, and that's what makes me like it as cost in a good product area, we're going to ad­ DIFFERENCE.

Value World October/December 1983 17 EASTERN SHORE REVISITED

A Society Insight by Tom King

* ' .3*"***^. , ***J, £ ....

Easton, on the Eastern Shore - Maryland

TIME: Early morning - September 23

Nostalgia for Breakfast thing to do with my lack of enthu­ board meetings. All other meet­ Five years have slipped by. As I siasm for the name - IRVING. ings are held in hotel-like settings turn the corner past the rustic Going from Smyrna, Georgia to often in conjunction with sched­ SEDGEFIELD signpost, leading to Southfield, Michigan, and on to uled conferences on business mat­ the Miles estate, my pulse quick­ Irving, Texas, in just a few short ters. ens. How nice it is to be again years was disruptive but all in all, You see, Eleanor understands invited to the autumn SAVE na­ necessary. cooking and she also understands tional board meeting, regularly I wonder if peacocks are good people. Earlier, perhaps during hosted by Larry and Eleanor Miies. to eat? The flock has now edged more critical times for the society, Peacocks temporarily halt my off the lane and I continue into she had observed some opportuni­ further progress down the lane the Miles parking circle. Most ties for improving board member leaving a moment for reflective vividly one can recall the feasts interaction via a team building thought. When last here things served up by Eleanor on previous process. were quite different for SAVE; visits here: roast duck, peach She reasoned that a pleasant and perhaps for me also. The board cobbler, crab quiche, and damson atmosphere, coupled with some had then contemplated and ap­ plum brandy graced the menu. extra clock time for building rap­ proved the business office move While not generally known, port among members could greatly from Michigan to Texas. It was actually it was Eleanor Miles, wife enhance the effectiveness of the not an easy decision to make. of the father of Value Analysis- team. She was right. And that is However, as a board member at Larry Miles, who first suggested how the annual autumn trek to that time I had vetoed the move. the lovely Sedgefield resort retreat the Eastern Shore became an insti­ In retrospect, I think it had some­ type setting for the autumn SAVE tutional process for the society.

At Sedgefield: A Colloquy with L.D. Miles, Father of Value Analysis Recently an employment agency What credentials or qualification principal perhaps, with some added called my office in search of a would the most ideal candidate bank teller experience. As an qualified value engineer to fill an possess? adder it would be helpful if he/ important job opening. During the Hesitating not a moment, I re­ she had somehow managed to get discussion the agent inquired the plied, "Look for a college major in a B.S. degree in electrical engineer­ following: education, a former high school ing, ultimately became a buyer.

18 Value World October/December 1983 BOARD ACTIVITY

and finally, consider it a big plus if buyers or whomever in Value techniques not only builds better his/her birthplace was the state of techniques. The VE development products which cost less, value Nebraska." process always makes participants techniques build people; ie, the The person that I am describing more valuable contributors to people who participate in work­ is of course - Larry D. Miles, the their company." shops and other VE projects. It father of the Value Engineering During the first VA workshop builds people during that job discipline. held at the Edison Club in Sche­ (workshop) and every job there­ Larry is a most important con­ nectady, New York, in October, after. The impact is far reaching. tributor to the autumn SAVE 1952, Larry addressed the group The VE process teaches people board meeting; his remarks ever this way, "Gentlemen; we are ex­ to think; it helps people with timely and imaginative. pecting each of you to at least important decisions to make. Con­ "You know," Larry begins in double your value to General cluding his remarks to me, Larry a reflective tone, "The Value Electric and possibly yourself dur­ adds, "The proof and evidence Analysis technique is not for every­ ing the next thirty days. We expect of VE's staying power is out there. body. It is a technique for smart, you without exception to be able VE is being used throughout the effective, productive people. Just to earn ten to twenty-five dollars world. People are becoming so give them the technique and they for every dollar it takes to support much more competent through can go to town. you and your office." the VE process that they have to "After all," Larry continues, And they did. The first VE make progressive changes just to "Even champions need coaching. workshop, a milestone in VE absorb the extra competency. The greatest golf heroes still have history, lasted four weeks and in­ One could go on and on about a coach, the same with tennis pros, cluded about sixty people. Larry Miles, but not now. skating champions, and the like. Larry Miles is adamant about So it is with training engineers. one philosophical point. Value

Board Meeting Activity Beach for the 1986 confer­ • Arranged for news correspon­ To my pleasure I found the pre­ ence, and then beyond - dent to represent SAVE at vailing style of SAVE board meet­ perhaps New York. SJVE Tokyo conference and ings efficient; productive, and • Early conference registration the presentation of the annual imaginative. SAVE has matured. will be rewarded with a choice L.D. Miles award. Sub-committees now perform the of books from NBO. Systems detail work that formerly sapped Financial • Reviewed and approved the much of the Board's critical meet­ • Reviewed and approved new chapter effectiveness ing time. report of 1982/1983 finan­ manual. The atmosphere is candid and cial results. Reviewed and • Described methods for Na­ open. Short and long-term plan­ approved 1983/1984 budget. tional Society to assist deter­ ning seems tied to strategies; and • Arrangements are being made iorating chapters. the strategies in turn are supported so that members can use by goals and action plans. credit cards for conference In addition to these agenda Had it not been for the severe fees and dues payments. items the SAVE board brain- economic downturn one imagines Communications stormed the subject of - that the growth of the Society • Appointed Jim Vogl as Tech­ "How can SAVE better pro­ would have been dramatic. nical Editor of Value World vide for the wants of Corpor­ Some significant happenings in addition to Interactions ate executives?" occurred during the autumn meet­ and conference papers. What a full two days. One gets ing: Outreach the feeling through observation Conferences • Arranged the distribution and that the Board activities are up­ • Selected San Antonio/Marr- use of new video tapes, beat and an even better situation ott Hotel for the 1985 SAVE "Miles, The Story of Value lies ahead. • annual conference; Miami Analysis."

Value World October/December 1983 21 WINDOW ON VALUE

COST AND VALUE Employee Suggestions Pay Off cumulator could start as tubing for the sides, ENGINEERING SERVICES inertia-welded to a forged end cap. This Savings and rewards came in record design and method would use metal only Charles L. Mason, recently announced the numbers this year for Northern Telecom where it is actually needed, helping reduce formation of a new value engineering com­ Canada's suggestion awards program. unnecessary material costs. pany in Acton, MA. Mason, President of Cost and Value engineering Services, will be The $2.3 million Northern Telecom saved This idea is actually just one of 19 produced specializing in certified value engineering, was the highest in the program's 40-year by the most recent Value Analysis Team design to cost and cost reduction. history. It also meant employees received a Study conducted at the Aerospace Hydraulics record $416,000 for their suggestions, which Division. The team, consisting of members G.K.S., INC. reached an all-time acceptance rate of 77 per from planning, manufacturing, engineering, cent. purchasing, product engineering, costing, contracts and quality control, began meeting Russ Brannen, SAVE Fellow, reports that a The suggestion awards program pays May 14th, 1982 on a regular weekly basis. small business he represents, G.K.S., Inc. has employees $25 for an adopted suggestion, and Since the accumulator is relatively simple, just received acceptance of a Value Engineer­ a further 20 per cent of the amount of money the team originally decided that their study ing Change Proposal thru the Army Tank the suggestion saves Northern Telecom in one would last six to e^ght weeks. As they delved Command, Warren, Michigan. The saving to year. further into the study, however, they Spare Parts Procurement amounts to $240,000 developed several longer range ideas which over a 3 year period. This is a first submission consumed more evaluation and implementa­ by this Company to the Army. It's a program whose benefits are priceless, according to one of its former administrators, tion time. Before the team knew it, 22 weeks Ed Cavanaugh, who retires this year after 35 and 22 meetings had passed since its incep­ NORTHERN TELECOM years with the communication cable plant in tion. Lachine, Quebec. Value Management Stressed The time, however, was well spent. From He told winners at the banquet: "I would the 19 ideas the team produced, five were recommend to all suggestors here tonight, costed to determine potential savings. After Northern Telecom Canada is expanding its and especially the executives, to encourage careful evaluation, these five ideas provided value management program to include key the suggestion plan because it's a very pro­ over a 20 percent reduction in the unit's costs! supplier companies. The program will use VE fitable institution." and VA techniques (the components of value All of these Team Study ideas helped the management) to explore ways in which pro­ product achieve its design targets at the least ductivity can be improved and costs reduced. NTC president David G. Vice, also urges employees to keep thinking of ways to im­ possible costs, without reducing quality or prove efficiency and productivity. In a reliabity. The team's biggest advantage dur­ D.E. Knox, director, purchasing, for North­ message to employees, Mr. Vice said this ing the study was that the VA effort started ern Telecom Canada said the objectives of the year's performance "reflects a realization that before the production of the first unit; in fact, seminars will be to improve long-term pro­ in today's highly competitive marketplace, it started before the prototypes were built! ductivity; generate funds for NTC's Open our future depends on our ability to become World project and its associated research and more efficient and more productive, as in­ This is a real advantage to any study, since development; improve Northern Telecom's dividuals and as a company." implementation of the ideas requires only competitive position in the marketplace, and changes in the paperwork, such as the blue make better use of assets and resources. — Network, Vol. 4, No. 2 prints and routings, and not any changes in expensive production tooling. Within the Northern Telecom cannot achieve its object­ Aerospace Sector, this advantage is even more ives unilaterally, he said, especially when PARKER HANNIFIN important, since any changes would require suppliers contribute 70 percent of the com­ expensive recertification testing which could ponents of manufactured cost of sales. CORPORATION offset any potential savings. With the cost of making the changes kept to a minimum, the NTC, he said, will supply the training and Team Study Saves 20% KC-135 VA Team Study maximized its ability expertise that suppliers can then apply in to deliver a reliable, quality product at the their own operations. Not only will their par­ If you made a butter churn, you wouldn't right time at the right price. ticipation lead to a sharing of the ultimate start with a solid log and whittle away benefits, he added, but the seminars will pro­ everything but the sides and bottom. You'd — by Dave Foland, VA & CR Mgr., vide information that will allow them to probably use slats for the sides and a round Hydraulics Branch "Dollars & Sense", Bruce initiate in-house value management pro­ plug for the bottom and use the wood only Roberts, Editor grams. where you needed it.

NTC has already conducted a pilot seminar A hydraulic accumulator could be com­ with a Montreal firm that supplies its analog pared to a butter churn. Traditionally, an ac­ and radio division. This program achieved a cumulator starts as a forging, where metal is 20 percent cost improvement factor and the removed to make the cylindrical shape similar benefits were shared equally with the to the housing for the butter churn. By incor­ supplier. porating a new process, however, an ac­

22 Value World October/December 1983 UNIVERSITY OF The name change is consistent Issues was released in August by In­ WISCONSIN-EXTENSION with other changes within the dustrial Engineering and Manage­ organization, including a shift in ment Press, a division of the In­ Value Engineering Specialist corporate objectives and direction, stitute of Industrial Engineers. Diploma Program according to Bill Lenzer, VEI's The second edition includes up­ The Department of Engineering founder and president. "Many fac­ and Applied Science, University of tors entered into the decision to dated information on the scientific Wisconsin, Madison has granted its change the company's name," approach to organizing, scheduling first diploma as a VE Specialist to Lenzer said, "not the least of which and managing projects. The new Andrew V. Rushing, Physical Plant is a certain level of confusion sur­ material keeps pace with changes Director, Mid-America Nazarene rounding the terminology and con­ and developments since the book College, Olathe, Kansas. Started in cept of VE." was originally published in 1976 the academic year of 1978-1979, the and is targeted at those who work VE Specialist Diploma Program In the recent past the company has with project management and as a presently has 25 enrollees. The ob­ encountered various difficulties in text for company training programs, jectives of the program are to business dealings, due to different college classes and education educate individuals in the latest VE interpretations of the term, "value seminars. Techniques, understand the fun­ engineering''.,Many people have the Productivity Today, An Inside damentals of organization as it opinion that VE consultants only Report relates to the VE activity, carry out conduct workshops and seminars or are constantly immersed in an individual VE Independent study This survey was based on 723 analytical detail," Lenzer said. "It project, and expand knowledge in responses which were the result of finally became apparent that our related subjects. 2500 questionnaires mailed to US name had become somewhat of a members of the Institute. The program requires 45 Continu­ detriment to the firm's future ing Education Units (CEUs) where development. Following our For further information on the each CEU represents 10 hours of analysis of our organization and a above items contact: IIE, 25 classroom or assigned study. Five re­ decision to redirect our efforts, the Technology Park/Atlanta, Norcross, quired courses totaling 36.6 CEUs, 6 name became the first item for GA 30092 404/449-0460. CEUs of electives in related subjects change on our agenda." SME and 2.4 CEUs for preparation and successfully passing a final exam VEI has also shifted to a greater SME announces a new video tape make up the 45 required units. emphasis on marketing and business cassette service called "The SME Twenty-five of the CEUs are of the development by identifying and pur­ Video Magazine" featuring panel independent study type and can be suing new markets and potential discussions with manufacturing taken at home or in a person's place clients. The firm projects a planned leaders on new technology develop­ of business. pattern of growth over the next five ments. For further information, con­ years. tact SME Video Communications Presently two series of courses Department, Society of Manufactur­ leading to the VE Specialist Diploma VEI was founded in 1975 as Value ing Engineers, One SME Drive, PO are available, one for individuals in Engineering Inc. It has shown con­ Box 930, Dearborn, MI 48121 or call industry or services and one for sistent growth since its inception Steve Bollinger 313/271-1500, ext those in design and construction. and has reached the point when cor­ porate officials feel the Company is 402. Participants can transfer up to at a cross-roads. "VEI represents eleven CEUs. Completion of the pro­ more than a name change," Lenzer gram must be within a four year commented. "It represents the first Plan to attend period and all transferred courses step of a philosophical and market­ must be within the four year time ing re-direction which we believe 1984 frame. A minimum of 37.5 CEUs will result in a very bright future for SAVE should represent courses receiving a the organization." satisfactory. International Conference — Viewpoint, Vol. 1, No. 1 May 6-9 VEI, INC IIE Sacramento, California Dallas-based Value Engineering and celebrate Inc., an internationally recognized, Project Management multi-disciplinary engineering and SAVE's consulting firm, has announced a A revised, expanded version of 25th Anniversary new corporate identity and name, Project Management: Techniques, VEI, Inc. Applications, and Managerial

Value World October/December 1983 23 VALUE ANALYSIS SHARED EFFORT (VASE)

METHODOLOGY: Following are two abstracts from a series by The Hospital Council of VALUE ANALYSIS POLICY STATEMENT Western Pennsylvania. For further in­ The value analysis technique was selected The purpose of this Value Analysis Shared formation contact: Mr. T. Robert for its systematic approach in analyzing a pro­ Effort (VASE) study is to present members Sankey, Director, Research and duct function, determining function necessity of The Hospital Council of Western Penn­ Development, The Hospital Council of and developing the most economic alternative sylvania with the latest health care Pennsylvania, 500 Commonwealth without sacrificing quality patient care. technology. The information is based on a Drive, Warrendale, PA 15086 (412) review of medical, legal and technical 776-6400. Copies of the abstracts are INFORMATION GATHERING literature, related government sources and available for $10.00 each and a 350 studies conducted by the VASE commit­ The Project Committee conducted an in- tees. page full report backup to the abstracts depth review of relevant literature and is available for $75.00. Where an author is named in a review, research studies on this subject, existing pro­ editorial, article or letter, the material cedures in member hospitals and the products cited reflects the author's views and such presently used. views are not necessarily those of The Project Abstract Number One Hospital Council of Western Pennsylvania From this review, the team developed an or the VASE committeee members present­ URINARY CATHETER CARE understanding of the controversy that sur­ ing this study. The Hospital Council of rounds the urinary catheter care issue. Britt, Western Pennsylvania is not responsible URINARY CATHETER CARE et al, reported that twice daily meatal cleans­ for adverse consequences which may STUDY INDICATES A POTENTIAL ing with a povidone-iodine solution, followed result from reliance on such information COST AVOIDANCE by the application of a povidone-iodine oint­ and the quality and validity of such infor­ ment, failed to reduce the infection incidence mation. If there is any concern about the OF of catheter-associated bacteria. reliability of the quoted information, $1,304,576 reference should be made to the original FOR THE 98 MEMBER HOSPITALS Cleland, on the other hand, studies the ef­ source. In addition, consideration may be given to other options. OF THE HOSPITAL COUNCIL fect of no catheter care, except what the pa­ No part or reference to this study may be OF tient did independently, without any teaching, versus a variety of perineal care used for any commercial use, promotional WESTERN PENNSYLVANIA regimens. He concluded from his data material or advertising. VASE abstracts and reports are printed by perineal care does reduce the frequency of A detailed evaluation revealed daily meatal The Hospital Council of Western Penn­ bacteriuria regardless of the protocol used. sylvania for the sole purpose of informing care using a regimen of soap and water with member hospitals of the studies completed an application of antimicrobial ointment In addition, the team found a variety of pro­ by VASE committees who represent a around the meatus/catheter junction provides cedures being performed in hospitals. Some variety of different professional health care effective patient care at a fraction of the cost of hospitals have no catheter care procedure. A disciplines. Further information is commerical catheter care kits. The study variety of potential products were reviewed; available from: Director of Research and shows a potential cost avoidance of $1.03 per soap and water, povidone-iodine scrub, Development, The Hospital Council of procedure, or $20,600 a year for the hospital isopropyl alcohol, peroxide, chlorhexidine Western Pennsylvania, 500 that implements this recommendation and gluconate, tincture of green soap, povidone- Commonwealth Drive, Warrendale, PA performs 20,000 procedures annually. iodine ointment, triple antibiotic ointment 15086. STUDY ASSIGNMENT and a variety of sterile and nonsterile kits. However, no correlation could be drawn be­ elude its enexpensiveness and availability. The VASE Steering Committee selected a tween the regimen or products used and the Either a wrapped or unwrapped bar of soap value analysis study of urinary catheter care, related number of urinary tract infections due may be used as long as it is not maintained in as recommended by a member hospital. A to the many variables examined. a moisture containing environment that preliminary study conducted by that hospital allows bacterial growth. The bar may be revealed a potential avoidance of $73,392 per INVESTIGATION stored on an absorbent paper towel. year by eliminating the use of a The Team investigated the feasibility of An antimicrobial ointment was selected to manufacturer's kit. In addition, there is con­ each of the potential solutions derived in the provide a physical barrier, blocking the siderable controversy over the efficacy of Evaluation Phase. The investigation involved migration of bacteria along the catheter daily meatal care. Based on the potential sav­ consulting with other professionals, Steering through the meatus. Povidone-iodine oint­ ings and controversy, the Steering Committee Committee, vendors and other member ment is a broad spectrum antimicrobial with a recommended a Project Team consisting of a hospitals. In addition, a cost analysis was per­ low rate of allergic reations (less than 2 per­ urology nurse, epidemiologist, pharmacist, formed for each alternative. management engineer, central supply direc­ cent). It is effective against gram-positive and tor and materials manager to conduct the Criteria for the investigation of product gram-negative bacteria, fungi, viruses, pro­ study. The Committee felt a multidisciplin- alternatives included the effectiveness, ad­ tozoa and yeasts. The ointment lubricates the arian approach would lead to a solution based vantages/disadvantages (e.g., drying proper­ meatus/catheter junction, reducing irritation on all points of view, involving all related ties, pragmatism of application, etc.), packag­ of the mucous sheath. A triple antibiotic oint­ professionals in the program. ing options and costs. ment may be substituted for patients with allergic responses to povidone-iodine at ap­ The Project Team was to review the Soap was selected for its ability to reduce proximately the same cost. However, triple available information on urinary catheter surface tension, which allows the freeing up antibotics have a narrower scope of an­ care, draw from their individual as well as of microbial skin flora. The friction produced timicrobial effectiveness and have a potential collective expertise and develop guidelines by the washcloth can then remove the super­ for neomycin sensitivity for neomycin and recommendations for member hospitals. ficial flora. Other advantages of using soap in- nephrotoxicity and ototoxicity.

24 Value World October/December 1983 A further regimen option for meatal care is in the risk of infection from that site. following routine A.M. care and thereafter as the application of povidone-iodine solution, Therefore, daily meatal care is warranted. needed to maintain cleanliness of the catheter but only used when following the removal of and perineal area. gross contamination with soap and water. The It is strongly recommended a procedure A further regimen of povidone-iodine solu­ solution provides an uncertain degree of pro­ replacing the use of an antimicrobial cleanser tion can be used, but only following the phylaxis to the area and the manufacturer's with a simple soap and water cleansing removal of gross contamination with soap and claim states antimicrobial activity exists as around the meatus, followed by application of water. Povidone-iodine prep pads provide the long as the reddish brown color can be seen. povidone-iodine ointment around the most effective and economical means for ap­ However, the presence of moisture and uric meatus/catheter junction be used. Since this plying this antiseptic. The use of routine floor acid tend to dilute the length of povidone- procedure is merely an extension of routine stock items, instead of a kit, is the most iodine's activity. Povidone-iodine is relative­ daily care and does not constitute an invasive economical means of procurement. ly inexpensive, readily available and comes in procedure, it should be regarded as a clean a variety of packaging. Other antiseptics rather than a sterile procedure. As a conse­ It is recommended this proposal be submit­ reviewed had narrower scopes of an­ quence, minimal skill is needed and all levels ted to the hospital's infection control and pro­ timicrobial effectiveness, higher rates of of nursing personnel can be taught the proper duct evaluation committees, with full ad­ allergic responses and were more costly. technique. It is further anticipated the ministrative support, for implementation. simplicity of the procedure will tend to pro­ The full documentation of the study and in­ It was determined only one nonsterile exam mote its frequency of performance. Address­ vestigative techniques is available at The glove is necessary for the soap and water pro­ ing the question of frequency, the Team Hospital Council of Western Pennsylvania for cedure. This glove should be used for apply­ recommends the protocol be performed daily, a fee. ing the ointment bead. Two gloves may be used in the providone-iodine procedure to prevent the hands from being stained and to EXHIBIT A apply the ointment bead. URINARY CATHETER CARE COST Most patients with indwelling catheters have an underpad beneath the linen. The COMPARISONS underpad could also be used for disposing of URINARY CATHETER CARE METHODS used supplies. If the soap and water pro­ IN-HOUSE VENDOR VARIOUS VARIOUS cedure is performed during routine A.M. care RECOM- OPTIONAL ASSEMBLED ASSEMBLED COMMERCIAL COMMERCIAL and linen change follows, the expense of us­ PRODUCT MENDED POVIDONE- KITS. KITS. KITS. . KITS. ing an additional underpad can be COMPONENTS PRODUCTS IODINE NONSTERILE NONSTERILE NONSTERILE STERILE eliminated. Wrapper, Disposable X A separate washcloth should be used ex­ Plastic Bag X X X clusively for meatal care. The washcloth can Plaslic Tray X X be reusable or disposable. The cost per use of Drape, Patient (Top) X either type is about the same. However, the Drape, Patient (Bottom) X X disposable washcloth has been found to pro­ vide less friction. Also, the hospital which Underpad X X presently uses reusable washcloths incurs ad­ Povidone-iodine Solution X X ditional inventory and distribution costs for Providone-iodine Pad (4) X x X the disposable cloths. Providone-iodine Swab

Stick X X The cost analysis, including materials and Cotton Tip Applicators labor, indicate the most economical means of X X supplying the required products for meatal Cotton/Rayon Balls X X care is to use the floor stock already available Gauze Sponge . X X on the nursing unit (Exhibit A). In addition to Washcloth X X X X the initial savings on the purchase price of the Towel, Disposable X X kit, only the required quantities of supplies Glove, Exam are used for each patient. Furthermore, the Nonsterile (1) X use of existing floor stock items allows the same products to be used for a number of pro­ Glove, Exam Nonsterile (2) X X X cedures other than urinary catheter care while X X avoiding the additional costs of stocking Ointment, Antimicrobial X x X X X X specialized kits containing similar items. The Soap x x X X additional time spent collecting supplies from Labor: In-house Kit a centralized location is insignificant when Assembly compared to obtaining a kit from the same (CS Tech 30sec/kit) X area. AVERAGE TOTAL In the investigation, the Team also noted COST/PROCEDURE $.17 $.34 $.40 $.79 $.59 $1.20 that the current guidelines issued by the SAVINGS Center for Disease Control state no particular Per Procedure - .17 .23 .62 .42 1.03 meatal care regimen is currently endorsed. Annual Procedures: RECOMMENDATION 10,000 $ 1,700.00 $ 2,300.00 $ 6,200.00 $ 4.200.00 $10,300.00 15,000 2,550.00 3,450.00 9.300.00 6.300.00 15.450.00 Having completed all phases, the Team 20,000 3,400.00 4,600.00 12,400.00 8,400.00 20.600.00 developed the following premises: the reduc­ tion of microbial contamination at a particular 35,000 5,950.00 8,050.00 21,700.00 14.700.00 36,050.00 site normally leads to a subsequent decrease 50.000 8,500.00 11,500.00 31.000.00 21.000.00 51,500.00

Value World October/December 1983 25 PRICING: EXHIBIT B 6.1 Wipe each side of the labia and the URINARY CATHETER CARE meatus with one downward Washcloth: stroke, rinsing the washcloth after Reusable: $.04/use includes initial cost, PROCEDURE each wipe. laundering and replacement. (Soap and Water) 6.2 Rinse the washcloth and rewipe area. Disposable: $.035 ea. 9% x 13Vi" To be performed following morning bath 6.3 Pat dry. or A.M. perineal care. Glove, nonsterile latex exam: $ .049 ea. 7. Wipe catheter with one downward 1. Assemble supplies. stroke from meatus to catheter/tubing Ointment, antimicrobial, % oz.: .055 ea. 2 2. Wash hands thoroughly. juncture. Soap, bar, 1 oz. unwrapped: .02/use 3. Spread underpad beneath patient to 8. Don glove. protect bedding. Povidone-iodine prep pad: .03 ea. (4) 9. Apply iodine ointment bead around 4. Saturate washcloth with soapy water. catheter where it enters the urethra. CS tech labor cost: $6.00/hr. + 5. Grasp penis with one hand and retract 10. Remove glove and place on underpad. 25% fringe benefits foreskin for male patient. 11. Dispose of underpad and glove by roll­ divided by 5.1 Wipe around the meatus in a cir­ ing up underpad and discarding in ap­ 120 kits/hr. cular motion with washcloth. propriate receptacle. 5.2 Rinse the washcloth and rewipe 12. Discard dirty water, replace washcloth Kits: Average cost of HCWP contract pricing area. and rinse basin. and survey of noncontract vendor pricing. 5.3 Pat dry. 13. Visually inspect intact system. 6. Spread the labia with one hand for 14. Wash hands thoroughly. female patient. 15. Chart procedure.

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26 Value World October/December 1983 Project Abstract Number Three INVESTIGATION units for patients who do not already have their own. They feel the additional cost of a The objective of the investigation phase was fluoridated dentrifice is not necessary for the to investigate the feasibility of each potential PERSONAL CARE ITEMS acute care patient with an average patient stay solution derived in the evaluation phase. This of seven days and a small tube is adequate. investigation involved consulting with other ROUTINE PERSONAL professionals, including the Steering Com­ Oral swabs (disposable toothbrush) consist CARE ITEMS mittee, vendors, recognized authorities and of a ribbed sponge on a stick and a foaming FOR ACUTE CARE ADMISSION other member hospitals. In addition, a final dentrifice. They are used to loosen gross SHOWS A POTENTIAL cost analysis was performed for each alter­ debris in the mouth and freshen breath. Sup­ COST AVOIDANCE native. ported by a random survey of hospitals, the OF Team does not find this product to be effective $3,478,286 Mouthwashes are generally defined as in performing its intended function. A tongue FOR THE 98 MEMBER HOSPITALS medicated liquid used to cleanse the mouth or blade wrapped in guaze is suggested for a OF for treating diseased states of the oral mucous substitution of this product if needed. membrane. Many of' the commercial THE HOSPITAL COUNCIL mouthwashes are used for rinsing the mouth Lemon glycerine swabs are used to moisten OF WESTERN PENNSYLVANIA and providing a pleasant taste or odor. the lips and mouth of postoperative patients AND ASSOCIATED HOSPITALS EST Mouthwashes designed only for cosmetic pur­ who are not able to take fluids orally, elderly WEST VIRGINIA, OHIO, poses are not included in the Council on Den­ patients with limited oral intake and occa­ MARYLAND AND NEW YORK tal Therapeutics' (CDT) acceptance program. sionally for unconscious patients who are on A two percent solution of sodium bicarbonate mechanical ventilation. The swabs also REPORT SUMMARY or a warm hypertonic sodium chloride solu­ soothe tissue, freshen the breath, lubricate the A detailed analysis of 57 different personal tion is often recommended following in­ gums and comfort the patient. The team felt care items issued to patients in various admis­ strumentation and in the treatment of acute this product contributed to patient care and sion kits revealed only six items are routinely inflammatory reactions. CDT also does not could find no substitute. It is recommended required and replaced periodically for all pa­ presently recognize any substantial contribu­ these swabs be available on the nursing unit tients, and alternative channels already exist tion to oral health in the unsupervised use of and used as required for patient care. in the hospitals for more economical distribu­ mouthwashes by the general public. CDT tion of these supplies. The study shows a feels the need for therapeutic mouthwash and Body lotions contain emollients which potential cost avoidance of $3.57 per admis­ its degree of usefulness should be ascertained soothe and moisturize dry, irritated skin and sion or $71,400 a year for the hospital that im­ by a dentist or physician. Mouthwashes that reduce odor. The Team found most plements these recommendations and has do overcome mouth odors may be masking nonmedicated body lotions sold to hospitals 20,000 routine acute care admissions a year the real problems of poor oral hygiene or an to be acceptable, except those containing using the average admissions kit (see Exhibits oral systemic disease. In light of the CDT posi­ parabens which may cause allergic reactions. A and B). tion on mouthwashes, the Team does not Parabens, mainly methyl and propyl recommend the routine distribution of any parabens, are used to prevent bacterial STUDY ASSIGNMENT mouthwash to patients. Therapeutic growth. A four-ounce bottle was determined mouthwashes should be controlled by the to be adequate for the average patient stay and For several reasons, the Value Analysis pharmacist and issued upon physician order. should be disbursed only by prescription from Shared Effort (VASE) Steering Committee nursing floor stock to avoid unnecessary selected a study on personal care items tradi­ costs. tionally found in admission kits for the Toothbrushes were felt to be required for routine acute care admission. A substantial good oral hygiene as they contribute to qual­ Body powder containing talc was found to cost avoidance had been reported by a ity patient care. A substitute could not be be one of the most popular personal care items member hospital who had eliminated found that provided the friction needed to issued to patients and is used to absorb ex­ distribution of admission kits. As was also remove gross debris from crevices bet­ cessive body moisture and reduce friction suspected, many of the items found in these ween the teeth and oral cavity. The Team feels against the skin. Commercial talcum powder kits were not needed by all patients and may toothbrushes are relatively inexpensive and is a mixture of talc (hydrous magnesium even have a harmful effect on patient care, recommends toothbrushes be available on the silicate) and other silicates which have been further contributing to rising health care nursing unit for those patients who do not reported to cause pneumoconioses, lung costs. Additional investigation was required already have one. Routine proper brushing is cancer and cancer of the pleura' and as to the efficacy of using disposable plastic recommended over the use of mouthwashes gastrointestinal tract. Numerous cases of in­ utensils in the hospital. and can also be used for cleaning dentures. fantile powder aspiration have also been reported to cause severe bronchiolear obstruc­ From various member hospitals, the Steer­ Toothpaste (dentrifices) used in conjunc­ tion leading to respiratory distress and ing Committee selected a project team con­ tion with a toothbrush does decrease the in­ ultimately death. Talc is milled soapstone sisting of two nurses, a pharmacist, manage­ cidence of dental caries and gum disease, which chemically resembles asbestos and is a ment engineer, director of housekeeping, cen­ reduces mouth odors and enhances personal mixture of particulate and fibrous material. tral supply supervisor and materials manager appearance by intensifying the scrubbing The latter, much like asbestos and some talc, to conduct the study. The committee adopted power of the toothbrush in the removal of contains silica. There is some uncertainty the value analysis philosophy that a stains, debris and dental plaque on the tooth regarding which component of talc is respon­ multidisciplinary approach would lead to a surface. Most dentrifice formulations contain sible for pulmonary fibrosis. The asbestos-like solution based on all points of view and in­ the same types or classes of agents, principal­ fibers are the most important fibrogenic por­ volve all related professionals in the program. ly abrasives, foaming agents and flavoring tion of talc. mixtures in addition to water, thickening The Project Team's task was to review and agents or binders. Low abrasion dentrifices or analyze the function of all personal care items The Team also noted powder presents n water should be used by patients with expos­ furnished patients, determine the contribu­ safety hazard if allowed to spill on the floor ed root surfaces, cementum, dentin or softer tion of each product toward quality patient where a patient may slip on it. Powder has restorative materials. care, determine the frequency of product re­ also been found to cause vaginal irritation. quirements and provide recommendations for Based on its effectiveness, the Team recom­ In view of the abundance of evidence that our member hospitals. mends dentrifice be available on the nursing talc may be hazardous to the patient, tho

Value World October/December 1983 27 Team does not recommend the disbursement ditional tissues from floor stock, as required, • Only six functional areas were identified re­ of body powder by the hospital. or have tissues brought in by the family. quiring items routinely used by all patients Since corn starch has many of the negative Soap is required by all patients. Alter­ and distribution channels presently exist in qualities of talc and provides a good media for natives were reviewed for this function, in­ most hospitals for the disbursement and bacterial growth, it is not recommended as an cluding bar soap and liquid soap in con­ control of these items. Refer to Exhibit C for acceptable substitute for talc. Use of talcum tainers. Since several cases of contamination recommended channels of distribution for and starch based products should be only by were cited for soap in containers, and the cost these six items and other personal care prescription at the discretion of the physician. per use is higher than bar soap, the Team items. recommends one lVi ounce unwrapped bar Bath oil is an all-over skin moisturizer soap be issued to patients through the • Items supplied in addmission kits are also valuable in the treatment of dry skin and mild housekeeping department. The bar of soap distributed in other areas of the hospital, skin irritations. However, it is not considered should be stored on an absorbant paper towel duplicating carrying costs for the same a routine personal care item, due to the hazard to reduce the possibility of providing a items. it presents by causing the patient to slip in the medium for bacterial growth. Bar soap can • Admission kits are frequently broken down bathtub, we recommend this be a prescription then be replaced as needed during housekeep­ for additional supplies required by patients; item dispensed by the pharmacy. ing's daily rounds. these kits are then incomplete and cannot Towelettes, premoistened and individually be used for a new admission. Toothbrush holder alternative recommend­ packaged, are routinely supplied by several ed is wrapping the toothbrush in a paper • The existence of an admission kit within hospitals, to avoid unnecessary cost, it is towel and placing it in the patient's drawer. the hospital promotes the introduction of recommended either a moistened washcloth, Concealed moisture is a medium for bacterial other personal care items into the kit that facial tissue or napkin, which are already sup­ growth, but the paper towel will not facilitate may not be economical to the patient or plied, be used in place of towelettes. such growth through absorption if discarded hospital. In several cases these kits do not Slippers (disposable) are an item hospitals daily. contribute to effective patient care for all frequently supply to patients who need them, patients receiving these items. Denture cup alternatives were reviewed, in­ while other hospitals have reported they in­ cluding those made of waxed cardboard. It is Distribution of a standardized admission kit clude them in an admission kit. The most recommended a hard plastic denture cup be does not necessarily contribute to quality pa­ popular slipper is a foam anklet style. The used with a tight fitting lid. Due to the high tient care and does increase health care costs Team reviewed alternatives, including flat expense of repairing dentures which may to the hospital and ultimately to the patient. paper "pocket style" slippers. In view of the crack upon impact with the floor and relative "nonskid" safety feature of foam slippers, the It is recommended this proposal be submit­ low cost of plastic denture cups, the Team Team recommends no substitutes. This item ted to the product evaluation/standardization concluded the additional expense of the should be supplied only upon request and be committee or cost containment committee for plastic was justifiable. This item should be distributed from floor stock. review and implementation with full ad­ available as needed from the nursing floor ministrative support. Pencil ( a two or three-inch) is a routinely stock. needed item provided in most kits for mark­ Sanitary napkin and tampon disbursement ing the dietary menus, the Team recommends was reviewed. In light of the implications that this item be distributed by the dietary staff tampon use may be associated with toxic CITY OF PHILADELPHIA during their clinical interview. The issuance shock syndrome, they should not be supplied; WATER DEPARTMENT of a pencil during the interview promotes pa­ however, tampons may be brought in by the tient contact with dietary, which is felt to patient if so desired. In lieu of tampons, the WATER POLLUTION facilitate quality patient care. In order to Team recommends standard obstetrical pads ABATEMENT PROGRAM reduce potential cross-contamination, this be made available as requested from par stock In an ongoing effort to update and ex­ pencil should not be reused by another or cart exchange. patient. pand a previously established Pre­ Utensils (reusable), as noted in an extensive qualified Procurement List for Value Washcloths (disposable) are included in cost analysis, are considerably less expensive Engineering Services, the Water some admission kits. The cost per use of a to reprocess than the purchase, stocking and Department of the City of Philadelphia disposable washcloth is about equal to that of distribution of disposable utensils, such as is soliciting Statements of Qualifica­ a standard reusable. However, the Team did bedpans, urinals and wash basins (see Exhibit tions from interested consulting firms. not feel disposables provided friction as effec­ B). The study also indicated at this time the Consultants may submit Statements of tively as reusables. The disposables also incur cost difference between using stainless steel Qualifications by returning a com­ additional carrying costs when reusable or reusable plastic-nylon utensils was in­ pleted Water Pollution Abatement Pro­ cloths are used elsewhere in the hospital, and significant. The complete cost analysis is part gram Standard Qualification Form for disposables have been reported to clog the of the original report and is available through Value Engineering Services to the plumbing when disposed of in the toilet. The Research and Development Department Water Department. These forms may be Reusable washcloths are recommended over of The Hospital Council of Western obtained only upon written request to disposables and should be routinely Pennsylvania. Mr. Leonard K. Bernstein, P.E., Design distributed with other linen. Coordinator, Philadelphia Water Facial tissues, used mainly for absorbing Department, 1180 Municipal Services secretions, were felt to be required for most Building, Philadelphia, PA 19107. patients. A sample study revealed a signifi­ RECOMMENDATION Consulting firms presently listed on the cant number of additional boxes of tissue Having completed all phases of value Water Department's Prequalified Pro­ were still needed, in addition to the admiss­ analysis with emphasis on function and curement List for Value Engineering ion kit, requiring backup stock on the units, evaluation of viable alternatives, the Project Services may submit supplemental in­ the Team, therefore, recommends a box of 50 Team developed the following recommenda­ formation if desired. Minority-owned (five by eight-inch) tissues be routinely supp­ tion: personal care items for the routine acute and Women-owned firms are encour­ lied by the housekeeping department to pa­ care admission should not be distributed via aged to submit Statements of Qualifi­ tients upon admission. Patients with admission kit. This recommendation is based cation. voluminous secretions should be supplied ad­ on the following premises:

28 Value World October/December 1983 EXHIBIT A EXHIBIT B ROUTINE PERSONAL CARE ITEMS COST AVOIDANCE SUMMARY

FOR THE ACUTE CARE ADMISSION PRICING:

Contract Pricing^ COST COMPARISONS Components Through HCWP HCWP Tissues $ .15 HOSPITAL "A" HOSPITAL "B" RECOMMENDED Emesis Basin . 10 COMPONENTS PURCHASED KIT PURCHASED KIT ITEMS Water Pitcher .33 Mouthwash X X Tumbler .05 Toothbrush X X Soap . 14 Pencil _X)2 Toothpaste X X

Comb X X $ .79

Tissues X X X ^Includes inventory carrying costs

Emesis Basin X X COST AVOIDANCE PER 785,521 ADMISSIONS

Water Pitcher X X X Hospital "A" Hospital "B" 5 Tumbler X X X MAl + $2 73 -$3.57 '^T^ ' x 785.521 = $2,804,310- 2 :• of Adm. Kit) Powder x X

Soap x X X 'Cost avoidance by not using admission kit

Wash Basin X X

Draw String Bag X X COST AVOIDANCE PER UTENSIL CHANGE FOR 785,521 ADMISSIONS:

Pencil X Cost Comparisons

Body Loton X X Utensils Disposable Reusable Cost Avoidance $5.20 $3.52 $.79 Urinal $ .85 $ .32 $ .53 COST AVOIDANCE Bedpan 2.16 .42 1.74 PER ADMISSION $4.41 $2.73 Wash Basin .46 .39 .07 1,Include. s inventory carrying cost Annual Admissions Cost Avoidances o Stainless/Plastic-Nylon purchase and reprocessing 10,000 $ 44,100.00 $ 27.300.00 Cost No. Admissions % Use of 15,000 66,150.00 40.950.00 Utensils Avoidance In W. Pa. Admissions Potential Savings 20,000 88,200.00 54,600.00 Urinal $ .53 785,521 20 $ 83,265 35,000 154,350.00 95,550.00 Bedpan 1.74 785,521 40 546,722 50,000 220,500.00 136.500.00 Wash Basin .07 785,521 80 43.989

$673,976

COST AVOIDANCE PER 785,521 ADMISSIONS $2,804,310 COST AVOIDANCE PER UTENSIL CHANGE FOR 785,521 ADMISSIONS 673,976

TOTAL COST AVOIDANCE $3,478,286

Substantial additional cost avoidance can be realized when those items identified fn Exhibit C are transferred with proper notification to the gift shop for distribution. EXHIBIT C (continued) EXHIBIT C Thermometer Holder Floor stock Not personal care item Toothbrush Floor stock Facilitates infection control

Toothpaste Water Floor stock ADA fluoridation in den­ trifice is not comparable to Baking soda fluoride in water. Use mildly PERSONAL CARE ITEMS abrasive with no sugar sweetners. 3A oz. RECOMMENDED CHANNELS unfluoridated Towelettes Wet Floor stock As required OF DISTRIBUTION washcloth Urinal Floor stock Reusable stainless wrapped by cp. Distribution Washbasin Floor stock Reusable stainless wrapped Item Alternative Channel Comments by cp.

ROUTINE DISTRIBUTION NOT TO BE DISTRIBUTED BY HOSPTIAL

Emesis Basin Disposable/ Body Powder Causes pneumoconioses, Reusable Floor stock Disposable lung cancer, makes floor slippery. Vaginal irritation Facial Tissue Housekeeping Housekeeping replaces as potential needed daily. Approximate­ ly 5x8" Dental Floss Gift Shop Personal preference item

Pencil Dietary Golf pencil — Dietary inter­ Denture Adhesive Gift Shop Personal preference item view Denture Cleaner Toothbrush/ Gift Shop Personal preference item Soap Housekeeping Distribute upon discharge paste Per­ and daily rounds. 1.5 oz. oxide unwrapped Tube or Tablet Tumbler/Cup Housekeeping Disposable Deodorant Soap and Gift Shop Personal preference item Water Pitcher Disposable/ Floor stock Inservice of patient care Water Reusable personnel required Electric Shaving Gift Shop Personal preference item Preparation

Hair Brush Gift Shop Personal preference item PHYSICIAN ORDER Lip Balm Cold cream, Gift Shop Personal preference item Bath Oil Pharmacy May cause slipping in tub lemon/glyc­ erine swabs Mouthwash Brush teeth Pharmacy Physician prescription; ADA does not endorse; unproven Sanitary Belt Not necessary effectiveness: should not be used on dental patients. 4 Shampoo Soap and Gift Shop Personal preference item Water oz. Shaving Cream Soap and Gift Shop Personal preference item p.r.n. Water

Bedpan Housekeeping Reusable stainless wrapped Shower Cap Gift Shop As required by central processing Tampons Gift Shop Personal preference item

Toothbrush Holder Paper towel Use paper towel in room Body Lotion Petrolatum Floor stock Should be nonmedicated. Only medicated when Toothettes Gauze padded Does not perform function it prescribed by doctor. May tongue blade was designed to do be eliminated if bath oil already prescribed by physi­ cian. 4 oz. bottle Tray Paper towel Use paper towel in room Comb Floor stock As required ELIMINATED FROM SCOPE OF STUDY Denture Cup Floor stock Hard plastic with tight cap Diaper Emery Board Floor stock As required Disposable Ashtray Lemon/Glycerine Swab Floor stock Should not contain sugar Nail Polish Remover Manicure Stick Floor stock As required Nursing Pad Petrolatum Floor stock As required Paper Towels Razors Prep shaver Floor stock As required Perinea! Cleansing Pad Sanitary Napkin Floor stock Do not recommend tampon Rubbing Alcohol Sanitary Napkin Bag Floor stock As required Soap Dispenser Slippers Floor stock Use sponge for antiskid Toilet Tissue Straw Floor stock As required Dietary Underpads

Thermometer Floor stock Not personal care item Washcloths MANAGER, VALUE ENGINEERING Already a world leader in digital switching, Ideally you will have a minimum of 10 Northern Telecom has evolved into a new years design/manufacturing experience in era where communications technology is an industrial environment coupled with an Increasing the world's capacity to engineering degree. Certification in Value accumulate, absorb and integrate Engineering is a prerequisite as you will be information. In this competitive business involved in the leading of workshops or environment, Northern Telecom has an sponsoring of the same. The successful increasing commitment to productivity candidate must possess leadership improvement. qualities, be both highly motivated and motivating, and able to communicate To further this commitment, we now effectively at all levels within the require a Manager, Value Engineering to organization. assist in planning, promoting, organizing In addition to a competitive salary and and controlling the application of comprehensive benefits including productivity generating techniques to tap relocation assistance where necessary, we the synergistic potential of Northern offer in-house training and development, Telecom Canada Limited. and performance based progression. Based at our Toronto Headquarters, you Please send your resume, in confidence, will contribute significantly to the to: Cynthia J. Yano, Staffing Manager, attainment of major financial targets and Northern Telecom Canada Limited, potential improvements measured in tens 304 The East Mall, Islington, Ontario, of millions of dollars annually. Canada M9B 6E4 (416) 232-2000

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Value World October/December 1983 CALENDAR OF EVENTS

SAVE CHAPTER MEETINGS November 14-17 Annual Meeting of the Materials Research Society, 027 - Chesapeake - Contact President Frank J. Elia 301/824-5483 Boston, MA. Contact MRS Secretariat, 110 November 16 Tour, Smithsonian Institution Materials Research Lab, University Park, PA December 14 Management Night, Value Analysis in Electronics 16802. November 14-17 International Congress on the Application of January 18 Joint Meeting, National Institute of Government Lasers and Electrooptics, San Francisco, CA, Purchasers sponsored by the Laser Institute of America. 044 - Central Indiana - Contact President Neal Parmenter Contact LIA 5151 Monroe Street, Toledo, OH 317/927-4574 43523 419/882-8706. November 10 Marcis Daiga, "Computer Aided Graphics", E.I. Institute of Industrial Engineers, 25 Technology Park/Atlanta, Brown Co. Norcross, GA 30092 404/449-0460 December 8 Christmas Special, Naval Armory November 10-13 "Work Measurement Techniques Workshop January 12 Homer Lane, "Cost Avoidance With VA/VE", Series", (1) Western Electric November 11-12 "Material Handling System Design", (1) 045 - Central Ohio - Contact President Walter C. Roehrs "Increasing Your Personal IE Effectiveness", (1) November 8 FAST Diagrams November 11-13 "Productivity Measurement & Improvement January 10 Cost Models Strategies & Techniques", (1) "Automation, Computer Aided Manufacturing", 067 - Dallas/Fort Worth - Contact President Mike Deming 214/266-4780 (1) November 12 "Improving IE Productivity with November 10 Management Night Microcomputers", (1) December 9 Social November 12-13 "Maintenance Management for Productivity", (1) January 12 Sports or Humorous Speaker "Simulation: A Management Tool", (1) 094 - Sacramento Pony Express - Contact Julian Pennello November 13 "Improving IE Productivity with 916/440-3476 Microcomputers", (1) November 13-16 "1983 Fall Industrial Engineering Conference" November 10 Joint Value Management Symposium with Defense (1) Contract Administration Services Management December 4-7 "5th International Conference on Automation in Area, San Francisco Warehousing" Sheraton-Atlanta Hotel, OTHER ITEMS OF INTEREST Atlanta, GA Federation of Materials Societies (1) The Sheraton Centre, Toronto, Ontario, Canada November 1-3 First International Conference on Automated Welding. Contact Lana M. Loar, American Society for Metals, Metals Park, OH 44073 216/338-5151. A SAVE SERVICE TO MEMBERS

THE PROFESSIONAL SOCIETY VS. THE DRINKING GLASS by A. E. Mudge, CVS For too many years to mention I have run taken out only after it has been put in. It has Yes, the output of a professional society is into a disturbing, sometimes mind-boggling been said that nothing can have value unless directly controlled by the input of its situation in regard to professional society it has both an input and an output. These in­ members. If everyone puts in their bits and membership. A situation which I would like dividuals forget or fail to hear and understand pieces of knowledge and experience, the out­ to discuss with you. the first part of this bit of wisdom. put will be a vast amount of meaningful ex­ Many individuals, after paying their dues, posure and feedback and knowledge for all its It is also important to consider the input in immediately and for the tenure of their members. all its aspects. If the input is singular, so must membership, sit back and say, "What is this be the output. Whereas if the input is multi­ In essence, we should be taking to heart a society doing for me?" The longer the time ple, so will be the output. If, in the case of the slight modification of President Kennedy's from joining to the present, the angrier they drinking glass, only water is put in, only that famous statement, i.e., ask not what your become because they don't see a return on one basically tasteless element can be taken society is doing for you, but what you can do their investment. out. But if ice and other liquids are put in with for your society. They fail to realize that with the society, the water, a more refreshing, tasteful com­ like the drinking glass, something can be bination can be taken out.

TOW 1.9 1.7:170 6A3 ORM 3!;:i'f7 Society of American Value Engineers FOWLER 220 N. Story Rd. Bulk Rate 2308 CHAPEL. DR Suite 114 U.S. Postage Paid FAIRBORN OH 45324-272-i} Irving, TX 75061 Dallas, Texas RETURN TC) SENDER DHL- Permit No. 8293 ADDRESS CORRECTION REQUESTED

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