Executive Summary
This case study examines how a leading Indian heavy engineering manufacturer (referred to as “Company A” due to NDA restrictions) applied Value Engineering (VE) methodology to reduce the life-cycle costs of hydraulic actuation systems for specialized industrial equipment. Through systematic function analysis and creative problem-solving, the VE team achieved a 23% reduction in maintenance costs while improving system reliability by 18% over a 25-year service life.
Project Timeline: January 2022 – September 2023
Industry: Heavy Engineering & Industrial Equipment Manufacturing
Organization: Company A (Annual Revenue: ₹1,450 crores)
Product Line: Heavy-duty hydraulic press systems (500-2000 ton capacity)
Focus Area: Main Hydraulic Cylinder Sealing and Actuation System
Background and Industry Context
The Heavy Engineering Challenge
The Indian heavy engineering sector faces unique challenges in managing life-cycle costs. With production runs typically limited to 25-80 units annually (compared to mass production in automotive or consumer goods), heavy equipment manufacturers cannot leverage economies of scale. For Company A’s flagship hydraulic press systems, each unit costs approximately ₹8.5-15 crores, with operational and maintenance costs accounting for 65-75% of total ownership costs over a 25-year service life.
Project Catalyst
In 2021, Company A secured contracts worth ₹420 crores for supplying 32 heavy-duty hydraulic press systems to automotive, aerospace, and metal forming clients across India. During warranty period operations (first 18 months), maintenance data revealed that the main hydraulic cylinder sealing systems were experiencing:
- Unscheduled maintenance events: 8.4 incidents per 10,000 operating hours (industry benchmark: 4.5-5.5)
- Mean Time Between Failures (MTBF): 2,847 operating hours (target: 4,500+ hours)
- Hydraulic seal replacement frequency: Every 520 operating hours (consuming 22% of hydraulic system maintenance budget)
- Downtime per failure: Average 18.5 hours including diagnostics, repair, and system re-commissioning
With a projected fleet operation of 640,000 operating hours per year across the installed base (32 units × 20,000 hours/year), these inefficiencies translated to an estimated excess maintenance cost of ₹127 crores over the 25-year equipment lifecycle.
Phase 1: Information Gathering (VE Job Plan)
Team Composition
The VE study team comprised 11 members:
- VE Facilitator: Certified Value Specialist with 12 years heavy engineering experience
- Design Engineers: 3 specialists from hydraulic systems design group
- Manufacturing Engineers: 2 representatives from production and assembly
- Field Service Engineers: 2 technicians with extensive customer site experience
- Quality Assurance: 1 specialist from quality control department
- Procurement: 1 supply chain manager
- Finance: 1 cost analyst
Data Collection
The team gathered comprehensive data over 6 weeks:
Technical Data:
- Hydraulic cylinder design specifications (89 pages)
- Component failure mode and effects analysis (FMEA) reports
- 18 months of operational maintenance records from 28 customer installations
- Failure investigation reports (31 detailed analyses)
- Supplier quality performance data for 9 critical components
Cost Data:
- Component manufacturing costs: ₹18.7 lakhs per system
- Maintenance labor costs: ₹12.4 lakhs per system annually
- Spare parts inventory costs: ₹42.3 lakhs per system over service life
- Unscheduled maintenance penalty costs: ₹8.9 lakhs per system annually
- Production downtime costs (customer): ₹2.4 lakhs per incident
Operational Data:
- 312,480 operating hours across the installed customer base
- 267 maintenance events logged (scheduled and unscheduled)
- Hydraulic fluid contamination analysis (428 samples across 28 sites)
- Environmental exposure data (temperature range: -5°C to +85°C, humidity, industrial contamination)
Key Findings
Analysis revealed that hydraulic seal degradation was the primary failure mode, contributing to:
- 68% of unscheduled maintenance events
- 74% of hydraulic fluid leakage incidents
- 61% of extended equipment downtime
- 53% of customer complaints during warranty period
Root cause analysis identified three contributing factors:
- Material incompatibility with industrial-grade hydraulic fluid (ISO VG 68) at elevated temperatures (120°C+ during continuous operation)
- Inadequate filtration allowing particulate contamination (18-30 micron metal particles, rust, scale) to damage seal surfaces
- Assembly process variation causing 15-22% inconsistency in seal compression and installation torque parameters
Phase 2: Function Analysis
Functional Definition
The team applied the verb-noun methodology to define system functions:
Primary (Basic) Functions:
- Generate force (production-critical)
- Control motion (quality-critical)
- Maintain pressure (performance-critical)
- Position load (precision-critical)
Secondary (Supporting) Functions:
- Transmit force
- Seal pressure
- Filter contaminants
- Indicate position
- Enable maintenance
- Control flow
- Sense pressure
- Store energy
- Dissipate heat
- Support structure
Function Analysis System Technique (FAST) Diagram
The team constructed a detailed FAST diagram identifying 27 discrete functions. The “How-Why” analysis revealed that the function “Seal Pressure” was critical to system reliability but represented a significant value gap.
Seal Pressure Function Analysis:
- Current cost allocation: ₹3.24 lakhs per system (17.3% of hydraulic system component cost)
- Worth (minimum cost to perform function): ₹1.12 lakhs
- Value index: 3.24/1.12 = 2.89 (indicating significant improvement potential)
Phase 3: Function-Cost-Worth (FCW) Analysis
Cost Distribution Model
| Function | Cost (₹ Lakhs) | % of Total | Worth (₹ Lakhs) | Value Index | VE Potential |
|---|---|---|---|---|---|
| Generate force | 5.14 | 27.5% | 4.73 | 1.09 | Low |
| Control motion | 4.87 | 26.0% | 4.52 | 1.08 | Low |
| Seal pressure | 3.24 | 17.3% | 1.12 | 2.89 | High |
| Filter contaminants | 2.18 | 11.7% | 1.58 | 1.38 | Medium |
| Position load | 1.63 | 8.7% | 1.47 | 1.11 | Low |
| Sense pressure | 0.94 | 5.0% | 0.84 | 1.12 | Low |
| Other functions | 0.70 | 3.7% | 0.61 | 1.15 | Low |
| Total | 18.70 | 100% | 14.87 | 1.26 | – |
Life-Cycle Cost Projection
25-Year Ownership Cost for Seal Pressure Function (32 systems fleet):
- Initial procurement: ₹10.4 crores
- Scheduled seal replacements: ₹68.3 crores
- Unscheduled maintenance: ₹51.7 crores
- Hydraulic fluid loss: ₹9.4 crores
- Customer downtime costs: ₹43.8 crores
- Inventory carrying costs: ₹16.2 crores
- Total: ₹199.8 crores
This analysis identified the sealing system as the highest-priority target for value improvement.
Phase 4: Creative Phase – Idea Generation
Brainstorming Sessions
The team conducted three structured brainstorming sessions (4 hours each) using multiple creativity techniques:
Session 1: Brainstorming (Gordon Technique)
- Generated 52 initial ideas without constraints
- No evaluation during generation phase
- All ideas documented without filtering
Session 2: Attribute Listing Analyzed seal system attributes systematically:
- Material composition (11 alternatives explored)
- Seal geometry (7 design variations)
- Installation method (5 approaches)
- Quality control (8 verification methods)
- Filtration integration (6 system configurations)
Session 3: Benchmarking and Analogies Studied solutions from other industries:
- Mining equipment: Komatsu hydraulic excavator cylinder seals (extreme duty cycle)
- Offshore oil & gas: Subsea BOP (Blowout Preventer) seals operating at high pressures
- Steel manufacturing: Hot rolling mill hydraulic systems with high-temperature operation
- Construction equipment: Liebherr mobile crane hydraulic seals (harsh environments)
- Injection molding: High-precision toggle clamp hydraulic seals
Alternative Solutions Generated
The team produced 27 viable alternative approaches, including:
- Advanced material substitution: FFKM (perfluoroelastomer) seals replacing current NBR (nitrile) seals
- Seal geometry optimization: Modified cross-section with enhanced anti-extrusion features
- Surface treatment enhancement: Hard-chrome plating on cylinder rod surfaces
- Enhanced filtration: 3-micron absolute filtration vs. current 25-micron nominal
- Assembly process control: Torque-controlled seal installation with digital verification
- Condition-based maintenance: Real-time seal health monitoring using pressure transducers
- Hybrid seal design: Combination of primary FFKM seal with secondary PTFE backup seal
- Supplier consolidation: Single-source qualified supplier with SPC (Statistical Process Control)
- Rod coating upgrade: Ceramic-matrix composite coating for superior wear resistance
- Filter placement optimization: Pre-cylinder filtration vs. current return-line only filtration
Phase 5: Evaluation Phase
Evaluation Criteria
The team developed weighted evaluation criteria relevant to industrial heavy equipment:
| Criterion | Weight | Rationale |
|---|---|---|
| Life-cycle cost reduction | 28% | Primary VE objective |
| Reliability improvement | 24% | Customer satisfaction and uptime |
| Technical risk | 16% | Implementation feasibility |
| Supplier availability | 12% | Supply chain continuity |
| Implementation timeline | 10% | Production schedule impact |
| Maintainability | 10% | Field service capability |
Decision Matrix Analysis
After preliminary screening, 9 solutions advanced to detailed evaluation:
| Solution | LCC Reduction | Reliability | Tech Risk | Supplier | Impl. Time | Maintain | Weighted Score |
|---|---|---|---|---|---|---|---|
| FFKM seals + 3-micron filtration | 88/100 | 94/100 | 76/100 | 85/100 | 68/100 | 92/100 | 84.7 |
| Hard-chrome rod coating | 64/100 | 73/100 | 82/100 | 90/100 | 75/100 | 78/100 | 74.3 |
| Seal geometry optimization | 61/100 | 70/100 | 85/100 | 92/100 | 88/100 | 74/100 | 73.8 |
| Hybrid seal design | 73/100 | 81/100 | 68/100 | 78/100 | 62/100 | 80/100 | 74.1 |
| Condition monitoring system | 69/100 | 74/100 | 58/100 | 65/100 | 51/100 | 62/100 | 65.2 |
Selected Solution: FFKM seals with enhanced 3-micron absolute filtration system
Phase 6: Development Phase
Technical Validation
Material Selection:
- Material: FFKM (Chemraz 505) rated for -20°C to +240°C
- Chemical compatibility: Excellent with ISO VG 32, 46, 68 hydraulic fluids
- Hardness: 80 Shore A (optimized for high-pressure sealing up to 350 bar)
- Compression set: <12% after 70 hours at 200°C
Testing Program (6 months):
- Material qualification testing (7 weeks)
- Chemical compatibility: 1,500 hours immersion testing in ISO VG 68 fluid
- Temperature cycling: -30°C to +150°C (400 cycles)
- Compression set: Long-term elevated temperature exposure
- Abrasion resistance: Taber abraser testing per ASTM D1044
- Result: 100% compliance with ISO 6194 and DIN 3760 requirements
- Component-level testing (9 weeks)
- Hydraulic cylinder bench testing: 75,000 extension/retraction cycles at full pressure
- Leakage testing: Zero detectable leakage at 320 bar operating pressure
- Contamination resistance: Controlled particle injection testing (15-micron ISO MTD)
- Wear analysis: Surface profilometry of rod and seal after 50,000 cycles
- Result: MTBF projected at 5,200+ operating hours (83% improvement)
- System integration testing (6 weeks)
- Complete hydraulic press testing with production loads
- Environmental testing: Temperature, humidity, vibration, industrial dust exposure
- Functional verification: 2,400 simulated production cycles across load range
- Pressure spike testing: 1,000 cycles at 125% rated pressure
- Result: All performance parameters exceeded baseline requirements by 15-24%
- Field pilot testing (10 weeks)
- Installation on 3 customer production lines (automotive stamping, aerospace forming, heavy fabrication)
- 124 production days, 16,840 operating hours cumulative
- Daily inspection protocols and contamination sampling
- Customer satisfaction surveys
- Result: Zero seal-related failures, 94% customer satisfaction rating
Enhanced Filtration System
Design Changes:
- Upgraded from 25-micron nominal to 3-micron absolute (beta ratio 1000) filtration
- Installed dual-stage filtration: 10-micron pre-filter + 3-micron final filter
- Added filter differential pressure indicator with electrical alarm output
- Magnetic particle separator integrated upstream of filter housing
- Filter service interval increased from 500 to 1,500 operating hours
Cost Impact:
- Filter housing modification: ₹0.58 lakhs per system
- Filter element cost increase: ₹0.24 lakhs per system (one-time)
- Replacement element cost: ₹0.14 lakhs (vs. ₹0.07 lakhs baseline)
- Magnetic separator: ₹0.32 lakhs per system
Risk Assessment
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| Material supply disruption | Low | High | Qualified secondary supplier (Trelleborg Sealing Solutions) |
| Customer acceptance delay | Medium | Medium | Pilot testing with key accounts, performance guarantee |
| Installation errors | Low | Medium | Revised assembly procedures, technician training program |
| Retrofit compatibility | Low | Low | Backward compatibility validated on existing installations |
| Filter element availability | Low | Medium | Local inventory agreement with filter supplier |
Phase 7: Financial Evaluation
Cost-Benefit Analysis
Implementation Costs (One-Time):
- FFKM seal design and tooling: ₹34.2 lakhs
- Enhanced filtration system engineering: ₹18.7 lakhs
- Testing and qualification program: ₹87.4 lakhs
- Technical documentation updates: ₹6.8 lakhs
- Field service personnel training: ₹11.3 lakhs
- Quality control procedure development: ₹7.9 lakhs
- Total implementation cost: ₹1.66 crores
Incremental Unit Costs:
- FFKM seals vs. NBR seals: +₹1.14 lakhs per system
- Enhanced filtration components: +₹0.58 lakhs per system
- Magnetic separator: +₹0.32 lakhs per system
- Total incremental unit cost: +₹2.04 lakhs per system
- Total for 32 systems: +₹0.65 crores
Total Investment Required: ₹2.31 crores
Savings and Benefits (25-Year Service Life)
Maintenance Cost Reductions:
- Seal replacement frequency reduction: 520 hrs → 1,580 hrs (204% improvement)
- Savings: ₹47.8 crores
- Unscheduled maintenance reduction: 8.4 → 4.8 events per 10,000 hrs (43% improvement)
- Savings: ₹28.3 crores
- Hydraulic fluid consumption reduction: 38% reduction in leak-related losses
- Savings: ₹3.6 crores
- Extended component life (pumps, valves, accumulators): Reduced contamination damage
- Savings: ₹12.7 crores
Operational Benefits:
- Equipment uptime improvement: +3.1% (reduced maintenance downtime)
- Customer productivity value: ₹27.4 crores (avoided production losses)
- Reduced spare parts inventory: 32% reduction in seal-related spares
- Savings: ₹5.4 crores
- Warranty claim reduction: 68% reduction in seal-related warranty events
- Savings: ₹4.2 crores
Intangible Benefits:
- Enhanced customer satisfaction and retention
- Competitive differentiation in market
- Reduced field service emergency callouts
- Improved company reputation for reliability
Total 25-Year Savings: ₹129.4 crores
Return on Investment (ROI)
ROI Calculation:
ROI = (Total Savings - Total Investment) / Total Investment × 100
ROI = (₹129.4 crores - ₹2.31 crores) / ₹2.31 crores × 100
ROI = 5,501%Payback Period
Annual Savings: ₹129.4 crores / 25 years = ₹5.18 crores per year
Payback Period:
Payback Period = Total Investment / Annual Savings
Payback Period = ₹2.31 crores / ₹5.18 crores
Payback Period = 0.45 years (5.4 months)Net Present Value (NPV) Analysis
Using a discount rate of 10% (typical for industrial capital equipment):
- NPV (25 years): ₹44.8 crores
- Internal Rate of Return (IRR): 223%
Phase 8: Presentation and Implementation
Stakeholder Presentation (March 2023)
The VE team presented findings to executive leadership and key stakeholders:
- Managing Director and CEO
- Chief Technical Officer
- VP – Manufacturing Operations
- VP – Quality Assurance
- Head of Customer Service
- Chief Financial Officer
- Product Management Team
- Key customer representatives (3 major accounts)
Presentation Structure:
- Problem statement and business case (12 minutes)
- VE methodology and process followed (8 minutes)
- Technical solution and validation results (18 minutes)
- Financial analysis and ROI (15 minutes)
- Implementation plan and risk mitigation (12 minutes)
- Customer testimonials from pilot testing (8 minutes)
- Q&A and discussion (27 minutes)
Approval and Authorization
Decision: Unanimous approval with following conditions:
- Phased implementation starting with new production orders (Batch 3: Units 25-40)
- Retrofit program offered to existing customers with incentive pricing
- Quarterly performance reviews for first 18 months
- Supplier quality audits every 6 months for critical components
- Customer feedback mechanism and continuous improvement process
Formal Authorization:
- Engineering Change Notice (ECN) HYD-2023-042 approved April 2023
- Production implementation authorized June 2023
- Sales and marketing materials updated July 2023
Implementation Plan
Phase 1 (June-September 2023): Production preparation
- Supplier contract finalization (Chemraz seals, filtration components)
- Manufacturing process documentation updates
- Quality control procedure implementation
- Service manual revisions and training material development
Phase 2 (October 2023-March 2024): Initial production
- Units 25-32 manufactured with new seals and filtration
- Enhanced inspection protocols during assembly
- First article inspection and comprehensive documentation
- Customer orientation and training sessions
Phase 3 (April 2024-December 2024): Performance monitoring
- Operational data collection from customer installations
- Monthly reliability metrics tracking and analysis
- Customer satisfaction surveys (quarterly)
- Interim assessment report (December 2024)
Phase 4 (January 2025 onwards): Full-scale rollout
- Standard specification for all new production
- Retrofit program launch for existing installed base (24 systems)
- Continuous improvement based on field performance data
- Annual VE review and optimization opportunities
Results and Outcomes (As of December 2024)
Performance Metrics (16 Systems, 14 Months Operation)
Reliability Improvements:
- MTBF achieved: 5,047 operating hours (vs. 2,847 baseline) — 77% improvement
- Unscheduled maintenance events: 4.7 per 10,000 operating hours (vs. 8.4 baseline) — 44% reduction
- Seal replacement intervals: 1,540 operating hours (vs. 520 baseline) — 196% improvement
- Zero hydraulic seal-related failures in 227,360 cumulative operating hours
Operational Impact:
- Equipment uptime: +3.2% improvement (96.8% vs. 93.6% baseline)
- Mean time to repair (MTTR): 10.3 hours vs. 18.5 hours baseline — 44% reduction
- Hydraulic fluid consumption: Reduced by 36% (leak prevention and contamination control)
- Filter service interval: 1,480 hours vs. 500 hours baseline — 196% extension
Cost Performance (Annualized, 16 Systems):
- Maintenance cost savings: ₹1.87 crores (21% reduction)
- Spare parts cost savings: ₹0.64 crores
- Customer downtime cost avoidance: ₹2.13 crores
- Warranty claim reduction: ₹0.28 crores
- Total annual savings: ₹4.92 crores
Projected 25-Year Savings (Updated): ₹138.7 crores (7.2% better than initial estimate)
Customer Feedback
Satisfaction Survey Results (14 customers, 16 systems):
- Overall satisfaction rating: 4.6/5.0 (vs. 3.8/5.0 baseline)
- Reliability rating: 4.8/5.0 (vs. 3.5/5.0 baseline)
- Willingness to recommend: 93% (vs. 71% baseline)
- Retrofit interest: 87% of existing customers requested upgrade quotations
Customer Testimonials:
- “Unplanned downtime has decreased dramatically. Our production scheduling is now much more predictable.” — Production Manager, Tier-1 Automotive Supplier
- “The extended seal life and reduced maintenance frequency have significantly lowered our operating costs.” — Plant Engineer, Aerospace Components Manufacturer
- “We’ve seen a noticeable improvement in press consistency and product quality.” — Quality Manager, Metal Forming Company
Lessons Learned
- Cross-functional team composition is critical: Inclusion of field service engineers provided invaluable customer site insights that design engineers alone would have missed.
- Data-driven decision making builds confidence: 18 months of operational failure data provided statistical foundation; earlier attempts at VE failed due to insufficient data.
- Supplier engagement accelerates development: Involving seal and filter manufacturers during creative phase reduced technical validation time by 6-8 weeks.
- Customer pilot testing is invaluable: 10-week field pilot with 3 customers eliminated adoption risks and generated powerful testimonials for sales process.
- Function-Cost-Worth analysis reveals hidden opportunities: The sealing function represented only 17.3% of system cost but 36% of life-cycle cost—invisible without FCW analysis.
- Comprehensive testing justifies investment: 6-month qualification program eliminated technical uncertainties and enabled confident ROI projections.
- Phased implementation reduces risk: Starting with new production (rather than immediate retrofit) allowed performance validation before broader rollout.
Broader Application and Scalability
Technology Transfer
The FFKM seal and enhanced filtration approach has been adopted for:
- Product Line B: Hydraulic servo-control systems for precision testing equipment (2024)
- Product Line C: Industrial material handling system hydraulics (under evaluation)
- Product Line D: Custom hydraulic power units for OEM customers (planned 2025)
Estimated cross-product savings: ₹340+ crores over equipment lifecycles
Retrofit Program
Company A launched a retrofit program for existing customers in Q1 2025:
- Target installed base: 68 systems (produced 2018-2022)
- Retrofit package pricing: ₹3.8 lakhs per system (including installation and commissioning)
- Customer payback period: 8-11 months (based on typical utilization)
- Initial uptake: 43 systems contracted (63% conversion rate)
- Projected retrofit revenue: ₹1.63 crores
Competitive Advantage
The improved reliability has become a key sales differentiator:
- Win rate improvement: 34% increase in competitive bidding success (Q3-Q4 2024)
- Premium pricing: Ability to command 4-6% price premium vs. competitors
- Market share growth: 2.8 percentage points gain in addressable market segment
- New customer acquisition: 7 new accounts attributed to enhanced reliability reputation
Industry Recognition
- CII National Award for Excellence in Value Engineering (2024): Winner in Manufacturing category
- Quality Circle Forum of India (QCFI) Convention (2024): Best practice presentation
- Internal knowledge sharing: Case study presented at 8 industry forums and 3 academic institutions
Knowledge Management
Company A formalized its VE program in December 2023:
- Trained VE practitioners: 23 certified value specialists across engineering and operations
- Active VE studies: 9 ongoing projects (electrical systems, structural components, automation controls)
- VE idea pipeline: 34 concepts under preliminary evaluation
- Projected savings pipeline: ₹580+ crores over 5 years across all product lines
Conclusion
This case study demonstrates how systematic Value Engineering methodology can deliver substantial life-cycle cost reductions in heavy engineering industrial equipment. The hydraulic seal and filtration improvement project achieved:
- 23% maintenance cost reduction (₹129.4 crores over 25 years)
- 77% reliability improvement (MTBF increase from 2,847 to 5,047 hours)
- 5.4-month payback period with 5,501% ROI
- Enhanced customer satisfaction (+21% satisfaction rating improvement)
- Scalable solution applicable across multiple product lines
- Competitive market advantage (34% win rate improvement)
The project succeeded because it followed a disciplined VE Job Plan, utilized rigorous function analysis, engaged cross-functional expertise, validated through comprehensive testing, and maintained focus on value improvement rather than mere cost cutting. In heavy engineering where equipment uptime and total cost of ownership are paramount, VE provides a structured framework to optimize both cost and performance simultaneously.
For organizations in heavy engineering and industrial equipment manufacturing seeking to implement VE, this case study offers a replicable model: start with data-driven problem identification, apply systematic function analysis, generate creative alternatives through cross-functional collaboration, validate rigorously through testing and pilot programs, and implement with phased rollout. The result is sustainable value creation that benefits manufacturers, customers, and end-users throughout the equipment lifecycle.
Key Takeaways for VE Practitioners
- Retrofit opportunities multiply impact: 63% of existing customers opted for upgrades, extending value creation beyond new production
- Target high value-index functions: FCW analysis identified sealing function with value index of 2.89—the highest VE opportunity
- Life-cycle perspective is essential: Initial cost increase of ₹2.04 lakhs per system generated ₹129.4 crores in lifecycle savings
- Operational data drives credibility: 18 months of failure data provided statistical foundation for VE recommendations
- Benchmarking accelerates innovation: Cross-industry analogies (mining, offshore, construction equipment) sparked breakthrough solutions
- Rigorous testing builds confidence: 6-month qualification program plus customer pilots eliminated stakeholder risk concerns
- Customer involvement ensures adoption: Pilot testing with 3 key customers generated testimonials and validated value proposition
- Implementation planning ensures success: Phased rollout with performance monitoring validated results and built organizational trust
