Cost and Value Stream Engineering (CVSE): Unlocking Strategic Cost Management and Process Excellence
ChatGPT says:
“In an increasingly competitive global market, the need for more integrated approaches to cost
management and process improvement has never been greater. Cost and Value Stream
Engineering (CVSE) is a transformative methodology that blends Cost Engineering with the
principles of Value Stream Mapping (VSM) and Value Stream Design (VSD). Further, Lean
approaches may enrich the methodology. It allows organizations to address both financial and
operational challenges holistically, ensuring that every decision balances cost optimization with
value creation.”
That’s a well-crafted and professional introduction to the topic. My personal experience, however, has
been much more hands-on.
About 15 years ago, we encountered an exciting challenge: how to modify a long-established technical
solution. While the proposed modification promised significant improvements in user experience, it
introduced greater complexity and, more critically, offered no visible benefits to the end-user. Would the
end-user be willing to pay a premium for an improvement they couldn’t directly see or appreciate?
Probably not. But with effective marketing, a smaller premium seemed achievable. Even so, bridging the
gap between cost and value was daunting.
This challenge forced us to move beyond traditional cost analysis. While options like altering raw
materials, analyzing cost breakdowns, and engaging suppliers were familiar and provided some
improvements, they were insufficient. We needed a more comprehensive strategy to address the root
causes of cost and value discrepancies across the entire supply chain.
We expanded our approach, questioning every cost-driving factor and stepping out of the long-
established manufacturing paradigms that had defined the existing solution. To achieve this, we
incorporated knowledge of performance improvement and Lean principles into our toolbox.
At that time, Cost Engineers weren’t formally trained in Lean methodologies—that integration came later
as part of our CVSE training program. Instead, we collaborated with performance improvement experts
who joined us for supplier visits, workshops, and Greenfield or Brownfield calculations. To broaden our
horizons, we even visited companies outside our industry to explore innovative solutions and new
perspectives. While some visits proved unnecessary, the expanded network and insights gained eventually
paid dividends in our increasingly relationship-driven world.
Value Stream Mapping became a crucial tool for achieving transparency in the current state of operations.
Collaborative workshops with suppliers and tight, team-oriented interactions with their Industrial
Engineering and Quality Management teams led to innovative manufacturing solutions that incorporated
Lean methodologies from the outset. The term “waste” became a powerful motivator, fostering deeper
collaboration along the supply chain.
Most of our suppliers, being mid-sized companies, had limited expertise in these methodologies. For
them, our collaboration became a hands-on, no-cost learning experience they could apply to other
customer lines. To ensure mutual benefit, we openly agreed on how to handle the outcomes before
entering tighter collaborations. Supplier Management communicated these terms clearly to their teams,
breaking down barriers and establishing trust.
It was a turbulent journey, but it was worth every effort. This work laid the foundation for what is now
known as Cost and Value Stream Engineering (CVSE).
The Role of the CVSE Engineer Across the Product Development Process
The CVSE Engineer plays a pivotal role, guiding projects through the entire product development
lifecycle. From early conceptual stages to the ramp-up of production at suppliers, CVSE bridges the gaps
between cost, value, and operational excellence.
- Early Development and Conceptual Design
At the start of the development process, the CVSE Engineer analyzes the cost structures of key
components or products. This involves identifying high-cost or high-impact elements that demand
attention. Collaborating closely with R&D, the CVSE Engineer explores alternatives in design,
processes, and materials. By connecting these decisions to cost implications, they ensure that
value and affordability are considered simultaneously. - Supply Chain and Industrial Engineering Integration
Once initial concepts are defined, the CVSE Engineer works with Industrial Engineering and Supply
Chain teams to design the most efficient production and supply solutions. This includes
determining appropriate packaging, supply frequencies, and transportation methods. These
recommendations are integrated into the Request for Quotation (RFQ) phase to ensure alignment
with project goals and supplier capabilities. - Supplier Development and Collaboration
Suppliers are integral to CVSE’s success. The CVSE Engineer often leads or participates in
developing supplier capabilities, guiding them to understand their cost structures and improve
their efficiency. Using “Brownfield” insights (data from existing setups), the CVSE Engineer refines
cost breakdowns and identifies inefficiencies. Supplier visits and collaborative workshops provide
opportunities to explore innovative solutions, often incorporating Lean methodologies. - Negotiation and Sourcing
With detailed cost breakdowns and value analyzes, the CVSE Engineer works closely with
Purchasing to strengthen negotiation strategies. Their insights ensure that cost improvements
align with both supplier development goals and broader project objectives. - Production Ramp-Up and Finalization
The CVSE Engineer’s involvement doesn’t end with sourcing. As production begins, they continue
to support suppliers to ensure the delivery of promised cost and value targets. This stage is often
the most critical, as it requires close monitoring of production processes, identifying bottlenecks,
and ensuring adherence to Greenfield or other target state conditions. By being present on the
shop floor, the CVSE Engineer provides hands-on guidance to address challenges in real-time. This
may include optimizing workflows, implementing Lean practices, and resolving quality or process
issues. Their role is to act as a bridge between design intent and manufacturing realities, ensuring
a seamless transition from development to mass production. - Final Handoff and Continuous Improvement
The successful release of processes, components, or products marks a key milestone. However,
CVSE’s value doesn’t stop there. Supporting suppliers during the ramp-up phase ensures a smooth
transition to full production volumes. This phase is essential for meeting cost targets and
delivering on project commitments. By fostering a culture of continuous improvement, CVSE
Engineers help suppliers sustain the gains achieved during the development process.
A Positive Conclusion: The Value of CVSE
The CVSE Engineer’s role, spanning the entire product development process, ensures that cost
optimization and value creation are not isolated goals but integrated outcomes. The journey from concept
to ramp-up at suppliers may be challenging, but it is essential for building resilient, value-driven supply
chains. The focus on collaboration, transparency, and innovation solidifies CVSE as a cornerstone of
modern manufacturing excellence.
Thomas Humbach is an accomplished executive based currently in Spain,
specializing in Cost and Value Stream Engineering (CVSE). He has over 25 years
of international leadership experience in cost engineering, supplier development,
and purchasing across a variety of industries. Currently, he drives global cost-
saving initiatives and strategic factory improvements for a multinational home
appliance manufacturer based in Europe.
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