Debating value engineering

Davie Duan.
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Few issues divide industry opinion as intensely as so-called ‘value engineering’. We talk to suppliers, contractors, designers and manufacturers to try and predict whether the practice will only become more ingrained as budgets get tighter

Few phrases elicit as strong a response from the design community as value engineering. A practice abhorred by some, tolerated by many and promoted by a few, value engineering is the inevitable consequence of an eternal quest to boost the bottom line.

A point of contention even in boom times, the practice is only set to intensify as clients become increasingly price conscious. Suppliers and manufacturers of mid- to high-end goods, who more often than not find themselves on the front lines of this particular fight, are bracing themselves for what is widely seen as inevitable. As budgets are tightened, the chances of their products being specified and then replaced with ‘more affordable’ alternatives has significantly increased.

“We’ve been a victim of it,” noted Shahriar Khodjasteh, group marketing director of Al Aqili Furnishings. “We see certain products, such as the Dolmen desk, a product designed by i4mariani 30 years ago, copied and produced in China a lot. We have other products, Havana chairs from the Sitia collection in Italy, for example, which are copied not only in Asia but by local manufacturers. You are never going to get rid of this problem because if there is a way,
imitators will find it,” he maintained. 

“It will definitely become more of a problem now,” he added. “In certain areas people will want more quality for the money they are spending, so prices will need to come down. However, if prices don’t come down far enough and affordability becomes an issue, people will look to copy more.”

The process is already well underway, said Sunil Prabhakaran, CEO of Interiors Quotient, who is seeing growing demand for cost-effective, value-for-money solutions. “Value engineering is more relevant today than ever before – it is not only the UAE that is going through a recession, but the whole world. Every client today realises the importance of conserving money. But, at the same time, they don’t want to compromise on quality.”

Prabhakaran called on the example of a design consultant who is currently being asked to bring down the cost of an interior fit-out by two thirds. “I have a leading design consultant whose client has asked them to bring the fit-out cost of their hotel project in Jordan down from about $9 million to $3 million. That definitely is not feasible but every client is clearly looking at value more than ever before. It is entirely different from the scenario that existing a few months ago.”

He drew comparisons between clients who were willing to invest heavily in their office premises not so long ago – but are today cutting corners wherever they can. “Companies used to splurge. They wouldn’t bat an eyelid at spending AED1 million ($272,000) on an ordinary fit-out. Now, things are different. They’ll say, ‘Instead of using veneer wall panels, why don’t we go for laminate. It has a similar effect and is much less expensive’. And then, ‘I don’t want an Italian laminate, get me an ordinary Chinese laminate, the end result is the same’,” Prabhakaran said.

Most manufacturers recognise that this is a phenomenon that will always exist. And many remain confident that if they offer quality products, at reasonable prices, this will not affect their bottom line too acutely.

“Being copied is a normal thing but we believe that the know-how is the most important part, as well as the quality. If you keep offering a proper quality product and proper service for your client, you’ll stay in the market. Any product can be copied, but not to the same quality or with the same continuity of production. We give a guarantee to our clients that every product we sell we’ll keep in continuation for ten years,” said Hani Al Qasem, managing director of Red, a recently-launched local manufacturer.

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Prabhakaran agreed. “If you give value to your client and price your products reasonably, why would they go to China, or anywhere else? If something is exorbitantly priced, I expect them to go to elsewhere, provided they are happy with quality that they get.

“It’s all about value – and the next two or three years will be all about value engineering. Everybody will be looking for alternatives. That is the prerogative of the client. You can’t escape the fact that this happening and I think it is important to be prepared,” he stated.

Part of being prepared is knowing the competition – and not making the mistake of blaming China for all of the industry’s ills. “China gets a bad rap because they are known for it,” said Khodjasteh. “But they aren’t the only ones. It happens all over the place. In some cases, yes, they are the culprit but copying also comes out of Turkey, or even Italy itself. You will always get people who want to imitate rather than innovate because it is easier,” he commented.

Manufacturers within China who design and produce original, high-quality goods are consistently tarred with the same brush as their less conscientious counterparts, and the industry as a whole suffers as a result. “There is a problem with the perception that goods from China may be of a lower quality. All we can do is show people the best quality we can provide,” said Davie Duan, marketing manager of China’s Zhejiang UE Furniture.

“We’re in contact with leading companies around the world. We also have ISO 9001 accreditation for quality management and ISO 14001 for environmental management standards. We have absolutely no problem passing these standards. We’re the leading office chair company in China, with a turnover of around US$70 million in 2008.”

“It is wrong to term everything made in China as cheap,” Prabhakaran agreed. “There is some excellent quality stuff coming out of China. It is a question of aligning with the right partner. If you are good at quality control and you know your technologies and your processes well, you can manufacture in any part of the world,” he said.

If anything, he maintained, China has dramatically improved its quality standards over the last decade or so – although there are some areas where they have yet to excel. “Kitchens, for example; they can’t manufacture the kind of kitchens that Italians can. There is still a lack of high-quality or scratch-proof finishes. These are things are still out of reach of the Chinese, but I am sure that they are going to get there,” said Prabhakaran.

In an area crowded with generalisation and misconception, and plagued with contradictory definitions – after all, one man’s quest for value is another man’s rip off – designers have a role to play. It is their responsibility to educate clients, to talk them through the selection process and make them aware of the rationale behind certain choices.

“It is really down to education and making the client aware of the origin of a product, or your reasons for choosing it. And when it comes down to it, most executives don’t want to sit on a copy,” insisted Chris Fleckney, managing director of Broadway Interiors.

Ultimately, agreed Khodjasteh, there will always be people who insist on quality, and who demand original products.

“There are people that will go for that imitation product and there are people that will go for quality and a recognisable brand. Executives in large organisations that understand quality and understand brand value, and must carry their heads high, they will always go for the real McCoy,” Khodjasteh concluded.

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