Value World: Process and Product Optimization Using Value Engineering/Value Management
Value World: Process and Product Optimization Using Value Engineering/Value Management
Value World: Process and Product Optimization Using Value Engineering/Value Management
Contents:
2
Editors Comments
M. A. Berawi, Ph.D.
A. K. Medallah, AVS
11
Best-in-Class: An Executive
Level Application of the Value
Methodology
19
26
Process
and Product
Optimization
Using Value
Engineering/Value
Management
Check the SAVE International Web site for conference updates: www.value-eng.org.
V A L U EW O R L D
Keywords
Problem Statement
Introduction
VE is a problem solving methodology which magnies
problems by determining basic functions of project/product
and emphasizing symptoms with potential qualitative enhancements. VE is a systematic team analysis approach focusing on life cycle costs improving functions, qualities and beyond doubt costs (Al-Youse, 1998). Recently, in large rms
in Saudi Arabia the application of VE studies becomes a mandatory procedure for projects exceeding a certain cost.
The essence of VE workshops is to have a participative
team eort which enhances creative solutions to problems
with all concerned parties involved. VE workshops are peopleincentive and have to be controlled with full regard to peoples
backgrounds, cultures and intents. To motivate people in VE
workshops the management has to understand their behavior. In fact, management has to set their own procedures in
how to motivate and encourage people to be creative in VE
workshops. Many contemporary theories are focusing on hu4
The intention of this paper is to identify intrinsic measurements in how to motivate people and make them more committed to VE workshops by non-monetary outcomes. This was
done by searching for cognitive problems rather than explicit
ones aecting the performance of members coming from positive and negative expected outcomes. The survey tested 21 VE
practitioners to measure how they perceive their own capability and the expected outcomes, measuring that against their
level of experience. The results are to enlighten managements
to understand a better approach for managing VE workshops
with concentration on people not the process.
V A L U EW O R L D
Participating Members
The project understudied determines who is usually involved in the workshop. A facilitator is in charge of leading
the workshop, members perform the analyses and idea generations, and stakeholders may assign a representative to validate
results. It is not always recommended that only the bothered
[sic] project teams are the ones working in the workshops
although their contribution is essential. Involving people
outside the project team may allow a room for thinking outside-the-box which will enlighten the project team with more
alternatives and possible gaps to study. A facilitator should allow a room for controlled discussions and avoid members that
will modify the description of the problem of the project to
comfortably t his discipline (Kaufman, 1998). This involvement of multi-disciplinary teams with dierent backgrounds
from inside or outside the organization can inuence the implementation of ideas and the way the ideas being criticized
and generated.
Management Role
V A L U EW O R L D
Facilitator Role
A facilitator administers a well planned strategy in dierent problem situations before and during the workshop (Norton & McElligot, 1995). Certainly, the skill of facilitator with
the methodology of the job plan provide a solid foundation
for success (Miles, 1972). The selection of a facilitator for a
VE study should be inuenced by the candidates ability to
empathize with the social, emotional, intellectual, and technical content of the workshop (Woodhead, 1998). Woodhead
presented a model that can be used to design a job specication for the selection of the appropriate facilitator to suit a
particular workshop. Some of them where:
The facilitator must have an adequate capability to maintain team creativity-borne behavior,
Create a synergic environment and allow for quality contributions from members,
He is also responsible in the early beginning of the workshop to explain to members how they will not be aected
by others especially their actual work supervisors.
Motivation Methods
Expectancy Theory
Expectancy Theory expresses that the more attractive the
performance of a task, the more motivated the worker will be
to perform it (Maloney, 1986). The greater the challenge in
the hardness to identify basic functions of problems or nding other alternatives induced in a VE workshop, the greater
the motivation that the member will perceive to do the job
and come up with new solutions. Expectancy Theory suggests
that a highly motivational work climate requires strong expectancies, instrumentalities and valance. Lawler divided the
concept of expectancy into two specic types in the mind of
the individual. First, each behavior has associated with it an
expectancy or belief about the probability of success. Second,
certain outcomes associated with every behavior. The nal element in the expectancy model is that the attractiveness or va6
lence of outcomes (Laufer, 1983). The question is how attractive or unattractive it is to an individual is determined by the
particular set of values an individual holds and reects many
factors in the individuals life. Expectancy Theory argues that
it is important to measure the attitudes individuals have in order to diagnose motivational problems. In Laufers hypothetical model to measure motivation:
M = (EP) [(P O)(V)] . (1)
Where,
M = Motivation level of workers
E = Eort exerted by workers
P = Performance level measured from outputs
O = Outcome received form eort exerted
V = Valance of the outcome perceived by workers
Laufer (1983) included in his study on labors (bricklayers) that the work motivation scores are determined by multiplying the strength of the belief that the eort leads to performance by the sum of the beliefs that the performance leads
to outcomes weighted by the attractiveness of the corresponding outcomes. Every VE member believes that an eort spent
leads to performance expected, and each performance has an
associated outcome that will vary in its valance depending on
each members own perception; i.e., a member who is generating 10 eective and creative ideas believes that it took him to
do some hard eort to produce these ideas; thus, he performs
very well during the workshop, so he, in return, expects a nonmonetary outcome in the form of praise from the facilitator,
which he perceives as a valuable compliment he intrinsically
needed to feel he has accomplished a goal or that he has contributed positively to the success of the project.
V A L U EW O R L D
This paper classies the sample based on years of experience and studies their capabilities, relating them with motivational impacts, existence and valance from the VE outcome.
To identify how intrinsic measurements of motivation will be
measured, the Laufer model will be used to determine peoples
productivity in VE workshops by measuring the perceived capability of the members and measuring the motivational outcomes that are more likely to exist at the organization with the
valance of these outcomes. In 2007, 50 questionnaires were
distributed to employees of the organization under consideration hand-by-hand or via e-mail. The questionnaire had three
sections:
rst section was scaling the rate of occurrence of all the variables in Table 1.
Supervisor parsing
Higher points in SAVE
Skill development and learning
Negave
Paper Methodology
11
=
4,
10
6
=
3,
less
than
5
=
2,
1
idea
=
1.
ometimes desirable = 4, often desirable = 3, usually desirable = 2, always desirable
= 1.
= 1.
Functional analysis: this is also measured by a scale of
The second part, rated the valance of negative outcomes
quantity, where, more than 15 = 5, 15 11 = 4, 10
as,
never
desirable = 5, sometimes desirable = 4, often desirable
ults
6 = 3, less than 5 = 2, 1function analyzed = 1.
= 3, usually desirable = 2, always desirable = 1.
Producing alternatives: this is measured by a scale
ranging
fromwith
always
do = 5, values
usuallywhich
do = 4,
often
= 3,net response
dback came from 21
engineers
no missing
mean
42%
rate.
Results
sometimes = 2, never = 1.
jority of the sample as shown in Figure 1 is from 4 12 years of experience. All of the
The feedback came from 21 engineers with no missing
3) Motivation: this section contains some possible negative
ents were working for the same governmental organization 7 Civil, 4 Architectural,
4 meant a 42% net response rate. The majority of
values,
which
and positive outcomes that might exist and measures the
ical, 3 Electrical, 1 Bio Med, 1 Computer, and 1 Systems Engineers showing in Figure
2. One as shown in Figure 1 (below) has 4 12 years of
the sample
valance of each outcome is perceived by all members Taexperience.
was a Consultant
Value Specialist CVS, another one was not certified at all and the rest of the All of the respondents were working for the same
ble-1.
governmental organization: 7 civil, 4 architectural, 4 mechaniwas all Associate Value Specialists AVS. This indicates that the sample size should be well
cal, 3 electrical, 1 bio med, 1 computer, and 1 systems engiThis section was split into two: one to measure the outwith the VE
methodology
and what
amount
of work expected
fromofthem.
neers showing in Figure 2 (previous page, bottom). One of
come
expected and
the other
to measure
the valance
it. The
Figure 3 below shows clear variation on the extent of how members perceive themselves cap
V A L U EW O R L D
Volume
Numberespecially
2, Summer
2009
7
generating ideas with almost
little32,
variations
in mid
ages to analyze functions
or p
alternatives. The group of less than four years of experience perceives a mid capability range
The group of 13 20 years of experience perceives a mid range of idea generation and functional
Table 2 Capability analysis
analysis
with a high range of producing alternatives. The last group from 20 30 years of experience
Idea
Functional
Alternatives
generation
Analysis
generation
Comments
perceives a high range in idea and alternatives generation but low functional analysis capability.
Years
Experience
Idea
Generaon
1-3
Mid
4-7
High
members. It is
classified
as group
positive
and negative
factorson
onofmembers:
Low
Mid
This
is lowering
the percep
their own capability in
analyzing funcons, but can sll think outside the box
8 - 12
Mid
Mid
High
Mid
Mid
perception of both expected outcomes rating in Table-1 times the desirability rating perceived
13 - 20
Mid
Mid
High
As previous.
20 - 30
High
Low
High
0.5 and below = Low, 0.5 - 0.69 = Mid, 0.7 and above = High
Idea Generaon = Capability of throwing large number of ideas (quanty, not quality); this depends on thinking outside the box.
Funconal Anlaysis = Capability of analyzing funcons of the product or project; this depends on level of experience or products or projects under study.
Alternaves Generaon = The Capability of replacing a product or project parts or as a whole by other alternaves; this capability depends on knowing other similar
products or projects.
V A L U EW O R L D
Capability
Posive
Impact
Negave
Impact
1-3
Mid
Low
Mid
4-7
Mid
Mid
Mid
8 - 12
Mid
Mid
Low
13 - 20
Mid
Mid
Low
20 - 30
High
Low
Low
They produce hard work and they dont care what happens.
Comments
Capability: 0.5 and below = Low, 0.5 - 0.69 = Mid, 0.7 and above = High
Posive Impact: 0.5 and below = Low, 0.5 - 0.69 = Mid, 0.7 and above = High
Negave Impact: 0 - 0.19 = High, 0.2 - 0.39 = Mid, 0.4 and above = Low
Conclusion
References:
V A L U EW O R L D
Jones, Gareth R. & George, Jennifer M. (2008). Contemporary Management, 5th edition, McGraw-Hill, New York,
USA.
Vroom, V. (1964).Work and Motivation, Wiley, New York,
USA.
Van Eerde, W. and Thierry, H. (1996). Vrooms expectancy
models and work-related criteria: a meta-analysis, J. Appl.
Psychol. 81, pp. 575586.
Lawler, E. (1971). Pay and Organizational Eectiveness, McGraw-Hill, New York.
Volume 32, Number 2, Summer 2009
Kaufman, J. Jerry (1998). Value Management: Creating Competitive Advantage. USA. Thomason Crisp Learning.
Woodhead, R., M. (1998). Can Any Facilitator Run a value
engineering Workshop? School of Construction & Earth
Sciences, Oxford Brooks University, UK.
Norton, B.R. and Mcelligott, W.C. (1995). Value Management in Construction, MacMillian Press, London, UK.
Miles, L.D. (1972). Techniques of Value Analysis and Engineering, McGraw-Hill, p295.
Maloney, William F. (1986). Understanding Motivation,
American Society of Civil Engineers, Journal of Management in Engineering vol.2 No. 4.
Amabile, & Teresa, M. (1983). Motivation and Creativity: Effects of Motivational Orientation on Creative Writers, Paper presented at the Annual Convention of the American
Psychological Association, USA
Name
Job Title
Company
Mailing Address
City
State/Province
Postal Code
Country
Telephone
Fax
Visa
American Express
SAVE International
136 South Keowee, Dayton, OH 45402 USA
T (937) 224-7283 / F (937) 222-5794
info@value-eng.org www.value-eng.org
V A L U EW O R L D
Best-in-Class:
An Executive Level Application of the Value Methodology
Ronald J. Tanenbaum, Ph.D., PE, CVS, GE, F.ASCE and Gordon Johnson, PE
Abstract
Sometimes we, as value methodology practitioners, do not
see all of the opportunities to which the methodology, or even
selected components of the methodology, can be successfully
applied. Then, along comes a forward-seeing agency that has
a goal to self inspect its operating procedures and to change
these procedures in its quest to become the Best-in-Class in
their arena of practice and service to the public. This was the
case with the Metropolitan Water District of Southern California who approached Value Management Strategies, Inc. to
lead a series of unique workshops addressing three critical areas
where the District saw opportunities to improve: Alternative
Delivery Methods, Engineers Cost Estimates, and Construction Change Order Management. This paper will address the
following:
Goals
In identifying the Best-in-Class processes for each of the
three topic areas, Metropolitan encouraged each team member to focus on general, holistic, best in class methods utilized
in industry, specically the water industry, and not on the
specic practices of Metropolitan. Metropolitan assessed the
proposals generated at a later date, and determined how best
to adopt those proposals oering the most opportunity for
improvement of services. Below is a list of goals or suggested
objectives that were utilized to stimulate the creative thoughts
of the teams.
The paper will conclude with recommendations for performing successful Best-in-Class workshops for any agency
that shares a goal to self inspect their operations, accept change,
and possess a sincere desire to be better, if not the best.
Dene what other leading agencies/companies (the industry) are doing to provide the best practice in each area.
Introduction
Through the methodology of facilitated workshops conducted with respected industry consultants known to have a
wide degree of exposure and experience working with leadingedge companies, the Best-in-Class Benchmarking Initiative
Process Analysis (PA) study sought to identify best business
practices and/or procedures that can be adopted by Metropoli-
V A L U EW O R L D
11
State of Practice
Alternative Project Delivery Methods
The traditional model for developing and operating public capital works in the United States has been the design-bidbuild-operate model. Three basic parties constitute this model: designer, constructor, and owner/operator of the facility.
Today, however, cities, towns and special districts across the
country are faced with the unenviable task of delivering capital
projects with budgets that are not always in line with project
requirements, time lines that are signicantly shortened, or
risk proles that do not align with owner capacities. While
the traditional model is well understood, it has some inherent
advantages, and is the basis for much of the public works law
across the country. There are shortcomings that owners have
addressed by turning to a variety of alternative project delivery
methods.
These organizations are looking for new, more innovative
means of project delivery, that range from construction management at risk to design-build and design-build-operate to
turnkey solutions that incorporate nancing and ownership.
Accordingly, there are many variations of alternative delivery
that may be applied by organizations to meet their capital project needs. Owners must choose what best meets their need; a
need that is not necessarily static. Requirements and context
vary from project to project and many owners nd that a tool
box of solutions is the best approach to maintain exibility
12
V A L U EW O R L D
Despite the ne eorts of Owners to dene project requirements, and design professionals to produce complete,
accurate and reliable construction projects, virtually every
project experiences the need to modify, add to, or otherwise
alter the project after opening the bids. Changes during construction are a routine occurrence within the water industry,
where projects often involve modications to existing complex
facilities (such as water treatment plants) or involve subsurface
construction projects that, by their nature, carry some inherent risk and uncertainty (subsurface construction such as pipelines and tunnels). Change orders (i.e. alterations considered
within the scope of the original contract) may be necessary
to incorporate contractor suggestions, respond to unforeseen
site conditions, or correct errors and omissions in the plans or
specications.
Even the most successful projects have change orders.
What often separates successful projects from unsuccessful
projects is how construction change orders are managed. Over
the last several decades the water industry marketplace participants including owners, designers, construction managers and
contractors have developed industry standard practices, procedures and tools to help manage construction change orders.
Leading agencies and companies in the water industry that
design and construct projects have developed best practices
which improve the eectiveness and eciency of managing
construction change orders. Some of these best practices include improvements in design procedures, construction contract writing, construction records management and tracking,
construction management stang, and improvements to construction management roles and responsibilities. During the
construction change order management Best-in-Class benchmarking workshop, many of these best practices were identied, rened and recommended for potential implementation
on future Metropolitan projects.
After an intense three days, the three independent workshop value engineering teams generated numerous recommendations for consideration by Metropolitan. A total of 211 ideas (62 ADP; 69 ECE; and 80
Identify a team of Metropolitan personnel that would be specically charged with dening and chartering potential alliancing projects.
Prioritize a list of potential Metropolitan projects to be delivered under an alliance contract. The approach requires eort
and probably cannot be justied for all projects.
The Quick Hit Proposals were evaluated to be immediate-
Selected
Proposals
Not Selected
Proposals
Current
Metropolitan
Pracce
Total
Proposals
15
28
22
31
27
10
23
46
86
Performance Area
TOTAL
V A L U EW O R L D
13
Perform a closeout
review and recommendaons document to idenfy the
pialls and posive
lessons learned on the
project.
Maintain budget to
perform this task.
If a proposal contained benets which appeared to outweigh the cost of resources anticipated
If there was a legal impediment, that is the current regulatory framework of the State of
If a proposal was already partly or completely implemented, it was so identied and not selected for further development.
14
Status
Current documentaon
provides the Project
Manager and Designer
with infomaon about
the changes and issues
that are occuring on the
contract. As-built drawings
also indicated what had to
be changed in the eld.
Date of Compleon
Ancipated
Actual
2007
Completed
Of the Quick Hit Proposals, three have been implemented, one is pending, four are anticipated to be completed by
winter 2009 and two remain undecided. Of the 23 Selected
Proposals, three have been completed, ve are anticipated to
be completed by winter 2009, no decision has been made regarding 12 proposals, two are classied as being on-going, and
one has now been considered to no longer be applicable due to
cost concerns to the District if they were implemented.
One accomplishment that came out of the best practices
process was that Metropolitan created a prequalication list
for urgent pipeline repair projects. That was covered under
one of the proposals (16 & 17-QH below) that suggested the
creation of such a prequalication list. Successfully making
this change has created more exibility in contracting for these
repairs. It is believed that this single accomplishment is a big
V A L U EW O R L D
SP
Selected Proposals
NS
CP
PROPOSAL
NO.
PROPOSAL
STATUS
Acvely Seek Statutory Authority for Design/Build; Issue Aggressive Legal Interpretaon of Exisng Status; Study
Statute of Other States (Arizona); Use Caltrans Model to Establish Statute Authority
2-NS
Structural Design/Build Delivery Model that Fits Metropolitan and Industyr Constraints
3-SP
Sept. 2009
4-SP
Use Alliance Contracng (Australian Model)/Form Joint Venture Between Metropolitan and Private Industry
Undecided
5-NS
Consider Appropriate Involvement of Third-party Advisors, Consultants, and Program Managers to Facilitate
Successful Negoaons and Delivery of Projects
6-NS
Form Joint Powers Authority with Agencies that Have Design/Build Authority
7-QH
Survey Member Agencies and Private Water Companies to Understand How They Deliver Contracts
8-NS
9-NS
Develop Alternave Project Delivery Methods (APDM) Implementaon Team; Organize Separate Organizaonal Unit
within Metropolitan for APDM
Sept. 2009
10-QH
Sept. 2009
11-SP
Undecided
12-QH
Dene Dierent Criteria for Lifeline versus Non-Lifeline Facilies; Use Design/Build in Non-Process Facilies
Undecided
13-NS
14-SP
Dene the Opmum Risk Allocaon that Meets its Needs and Conforms to Best Pracces in the Industry
Undecided
15-SP
Undecided
16 & 17-QH
Consider Task Order-Based Contracts for Small Projects and Develop List of Pre-Qualied On-Call Contractors and
Design-Builders
Sept. 2009
18-SP
Idenfy Small Business Enterprise Opportunies and Challenges with Alternave Project Delivery; Ulize MentorProtogee Program with Small Business Enterprise Program
Undecided
19-SP
Ulize Incenve Contracng to Improve Project Delivery and Overall Performance of Delivery Teams
Undecided
20-NS
21-NS
Use Design/Build for Plant Modicaons with Mulple Measurement and Payment Provisions; Ulize Flexible
Measurement and Payment Provisions for Rehabilitaon Work
22-NS
Do Not Use Design/Build for Projects that Will Employ Unproven Technology
23-SP
Tie the Delivery Approach to Programmac Use of Building Informaon Systems or Three-Dimensional Models or
Asset Management
24-NS
Ulize Design/Build/Operate
25-NS
Ulize Cost Reimbursable Contracng with Fixed Fee for Complex Facilies
26-NS
27-NS
28-NS
Use Guaranteed Maximum Price Approaches with Shared Savings and Allowances
V A L U EW O R L D
Undecided
15
SP
Selected Proposals
NS
CP
PROPOSAL
NO.
PROPOSAL
STATUS
16
July 2009
Completed
Completed
On-going
N/A
On-going
June 2009
Completed
June 2009
V A L U EW O R L D
SP
Selected Proposals
NS
CP
PROPOSAL
NO.
PROPOSAL
STATUS
Perform Formal Risk Analysis of Design Documents; Idenfy Undened Scope Items
61-NS
62-CP
63-NS
Communicate the Reality of Change Orders to the Board of Directors and Research Industry Standards
64-NS
65-NS
Include Unit Price Costs in Contract for Change Orders (for High-Risk Items)
Current Pracce
Current Pracce
66-SP
67-NS
68-SP
Form Internal Instrumentaon and Control Review Plan Check Team or Consider Commissioning a Task Force
Aimed at Reducing Electrical and Instrumentaon and Control Change Orders
Undecided
69-SP
Metropolitan to Develop Construcon Standard Review Checklist for Use During Design Review (30%, 60%,
90%) and Maintain to Keep Current
Undecided
70-QH
71-QH
72-CP
Construcon Schedules: Establish Realisc Owner Goals and Mandate the Baseline Schedule; Ulize the Full
Contract Duraon
73-NS
74-CP
75-NS
76-CP
Current Pracce
77-CP
Current Pracce
78-SP
Undecided
79-QH
Undecided
80-SP
Completed
81-SP
Iniate Designer Evaluaon; Perform Contractor Evaluaon (i.e., Model Both Aer Corps of Engineers Format)
Undecided
82-SP
Undecided
83-CP
Idenfy Hazardous Materials Pre-Bid and Contract On-Call Services for Remediaon Services
84-SP
85-NS
86-NS
V A L U EW O R L D
Undecided
Pending
Completed
Current Pracce
Current Pracce
Current Pracce
Completed
17
Future Actions
Once the assessment of all of the proposals has been completed by Metropolitan, it is planned that the results will be
shared with all of Metropolitans member agencies. In this
way, each of the member agencies will be able to benet from
the lessons learned in this process analysis workshop so that
the implementable Best-in-Class concepts would benet all of
the agencies operations. The member agencies would not be
required to implement the same or all of the concepts accepted
by Metropolitan, but could pick and choose those most appropriate to their operations. In the long run, a more consistent
operating procedure among the various agencies may evolve
and would facilitate better communications and more uniform contracting, estimating and construction monitoring.
The Best-in-Class Process Analysis Study is considered by
Metropolitan to be a living document, that is, as new ideas
and approaches are implemented and tested to improve the
Districts practices, changes may be made to the document
to keep it up to date. These changes may come in the form of
altering a selected proposal to better meet the new needs of the
District, selecting a previously unselected proposal because of
changed conditions (for example new regulations that permit actions previously prohibited), and removal of previously
selected proposals because they are no longer deemed necessary or economical or they have been superseded by improved
methods.
18
Author Information
Ron Tanenbaum is a senior value engineer with Value Management Strategies, Inc., and president of GeoVal, Inc. With over 40
years of teaching and consulting experience in geotechnical and
civil engineering, Tanenbaum is actively involved in value engineering, having participated in and/or facilitated over 100 VE
workshops of which over 40 have been for the U.S. Army Corps
of Engineers, 30 for transportation-related projects, and the balance mostly for water/wastewater systems. As a member of SAVE
International, he serves as the San Diego Chapter vice president
of membership and is a Certied Value Specialist.
Gordon Johnson is the chief engineer for the Metropolitan Water
District of Southern California. Johnson has responsibility for all
engineering activities, including management of a $4 billion capital improvement program. Johnson is aliated with the American
Water Works Association, the International Ozone Association,
and the American Water Resources Association.
V A L U EW O R L D
Abstract
Introduction
Essentially, the supply chain may be seen as several processes linked together. Hungarian and international experience
shows that value methodology (VM) can be used eectively
in the analysis of particular processes (technologies, services,
administrative processes, etc.). We have seen that in addition
to enhancing the eciency of certain stages of processes VM
can produce excellent results in linking these stages together.
Both Hungarian and the foreign experts have conrmed that
managers are mostly interested in the eective operation of the
part of the process they oversee and are often little concerned
about the problems how successive phases of these processes
can be linked together. The problem is further worsened by
the fact that the linkage between each vertically related unit is
controlled by traders, and the main criteria include time of delivery, price, payment method, as well as a guarantee for quality set forth in the relevant documents (standard, specication by the buyer, administrative specications, international
agreements, etc.) Experimental projects (leather and footwear
industry, furniture industryconstruction industry, bridge
building - tinning industry, etc.) all demonstrate that it would
be important to ensure more ecient cooperation between
each vertically related unit in the case of delivery contracts or
even in the case of R&D activities and the planning of investments. Commercial agreements can not prescribe any technical conditions that would facilitate eective further processing.
In our view Vertical Value Analysis/Value Engineering can
signicantly facilitate the more ecient operation of the entire
vertical structure. Each unit in the vertical structure should
recognize that under globalized circumstances the chances of
long-term survival can be greatly enhanced by successfully
connecting to a supply chain. Economic-nancial analyses
also need to be changed considerably. Companies often prematurely stop producing marketable but high cost products.
However, VM can often make these products protable. Relying on the results of several previously successful projects we
will present several alternative solutions. We did not intend to
present entire projects but we wished to call attention mostly
to some methodological solutions.
The economic crisis makes the market position of companies increasingly more critical. With markets growing narrow
competition continues to intensify. The most recent economic
research demonstrate that corporate problems should be investigated within the framework of the supply chain (SC). It
appears that in the case of a large number of products it is not
the individual products that compete but the supply chains.
We have already seen cases in Hungary when a Hungarian
product with excellent quality was not accepted by the SC,
despite the fact that its price was much lower than the market price. Most countries support innovative processes. When
creating and developing support schemes, the emergence and
explosive development of SCs must denitely be taken into
account.
The Management Institute of the College of Dunajvros
considers the research into SC as a major eld. Within the
framework of this research our goal is not only to learn more
about SC but to work out solutions that enable us to further
develop it.
Part of our research is also to explore the application of
value methodology in the eld of SC.
In what follows we will summarize the most important
information about SC. According to Mentzer et al. (2001):
V A L U EW O R L D
A supply chain is dened as a set of three or more entities (organizations or individuals) directly involved in
the upstream and downstream ows of products, services,
and/or information from a source to a customer.
Encompassed within this denition, we can identify three
degrees of supply chain complexity: a direct supply chain,
an extended supply chain, and an ultimate supply chain.
A direct supply chain consists of a company, a supplier, and a
customer involved in the upstream and/or downstream ows
of products, services, nances, and/or information (Figure 1 a,
next page). An extended supply chain includes suppliers of the
immediate supplier and customers of the immediate customer,
all involved in the upstream and/or downstream ows of products, services, nances, and/or information (Figure 1b). An ultimate supply chain includes all the organizations involved in
all the upstream and downstream ows of products, services,
Volume 32, Number 2, Summer 2009
19
CUSTOMER
ORGANIZATION
FIGURE 1 a. DIRECT SUPPLY CHAIN
SUPPLIERS
SUPPLIER
SUPPLIER
ORGANIZATION
CUSTOMER
USTOMERS
CUSTOMER
SUPPLIER
ORGANIZATION
FINANCIAL
PROVIDER
CUSTOMER
ULTIMATE
CUSTOMER
MARKET
RESEARCH FIRM
The emergence of SCM presents a new challenge for managers, since it is no longer enough to solve the problems of
their own company; they need to negotiate processes with the
other participants of the SC when establishing their own strategy.
According to the Hungarian and international literature,
SCM is concerned in short with the creation and development of the following processes:
20
Management processes
Information technology processes
Volume 32, Number 2, Summer 2009
Logistic processes
Alignment of technological processes
After studying the most recent literature it can be established that there has been enormous development in the eld
of logistics, warehousing and information technology partly
with a view to developing SC. We have found relative little in
the literature on connecting technologies and on the alignment of R&D activities.
V A L U EW O R L D
Subsidiary
Subsidiary
Subsidiary
Integrator
1.
Integrator
1.
Integrator
1.
Level 2
Supplier
Level 2
Supplier
Level 2
Supplier
Within the materials, parts and products process: procurement of materials, manufacturing of basic materials,
manufacturing of parts and products as well as technology
development,
Establishing and developing logistic systems,
Establishing and developing warehousing systems,
Establishing and developing IT processes,
Et cetera.
V A L U EW O R L D
21
Analysis Projects
The material of the work wear did not keep size (after
washing a gown 20 to 25 times it shrank by some 10 to
15 cm).
Certain components of the chemical agents used in washing accumulated in the fabric and could irritate the skin.
The company under investigation is a signicant Hungarian meat industry company with a professional history of
90 years. As a private company, it was nationalized in 1949,
just like every other private company, and became a stateowned company. In 1992 it was transformed into private limited company. Today it employs nearly 1,300 people. It was
the rst company in Hungary to receive the MSZ EN ISO
9001certicate in 1992. Its major export markets include the
USA, South Korea, Japan, Spain, Germany, Sweden, Poland
and Slovakia.
Exploration of the problem: Providing workers with protective clothing is a sensitive issue at the company. Due to the
technology used at the company the workers continuously get
dirty, so the continuous supply of good quality work clothes
is crucial. Due to the high rate of the washing cycle, the work
clothes quickly got damaged and costs were constantly increasing. The procurement department could not solve the
problem; they said they purchased the cheapest work clothes
and the problem was most likely caused by the washing technology. To increase the eciency of the supply of work clothes
we launched a value analysis project.
When preparing the project, we explored the following
potential causal factors:
Work wear
Machines and equipment
Workforce
Washing technology
The washing technology met demands and similar technologies could not improve the quality of the supply of
work wear.
Deviaon
Washing Costs
26
26
24
10
-14
Total
50
36
-14
Note: The unit price of the proposed work wear was 25%
higher than that of the currently used work wear. The higher unit
price was oset by the signcant decrease in waste.
Mention must also be made of certain false assumptions
concerning costs. The general attitude: Lets buy the cheapest materials, parts, etc. When examining the procurement of
materials at companies we established that there is no cheap
or expensive material; it is only function cost that can determine the framework of eective resource utilization.
V A L U EW O R L D
Preserves quality
Ensures supply
of work wear
Resists stress
Keeps size and shape
Ensures repair
Ensures an aesthec
outlook
Uses decoraon
Carries an adversement
Idenes a company
V A L U EW O R L D
23
business relationships. Utility values are the economic components of business relationship value, while motivation values
are the social components of business relationship value. The
two value types are in close, dialectic interaction with each
other. In addition to this close interaction, there are determining economic values.
If we wish to work eectively in the SC system, it seems
appropriate to get acquainted with the Value of business relationship in detail and align it with our VM activities.
Summary
SC is a new type of economic structure that changes the
former competitive situation. It is not the individual products
but rather the individual SCs that compete with one another.
Our analyses show that the eciency of the SC can be signicantly enhanced by the application of VM. One important
precondition for eective R&D activity is to ensure the acceptance of results through negotiations with the decision-makers
of the SC even before work begins. Getting acquainted with
the SC seems to be quite feasible. According to our experi-
References
Adam, Eric, Value Management, Longman Professional,
Melbourne, Australia, 1993.
Adams, M. S. and Lenzer, W. F., Facets of FAST, SAVE In-
IMPORT
EXPORT,
LEASED WORK
FOOTWEAR FACTORIES
ASSEMBLY OF FOOTWEAR
ASSEMBLY OF UPPERS MANUFACTURING OF SOLES PARTS
CUTTINGS OF LEATHERS CUTTING SOLES (INNER SOLE)
PROCUREMENT (SOFT LEATHERS, PARTS, AUXILLARY MATERIALS)
SUPPLIER COMPANIES
LEATHER FACTORIES MANUFACTURERS OF PARTS MANUFACTURERS
OF AUXILLARY MATERIALS SERVICE PROVIDERS
RAW LEATHERS
V A L U EW O R L D
Parker, D.E., Value Engineering Theory Lecture outline and reading supplement
supplement, The Lawrence D. Miles Value Foundation,
Washington, D.C., 1975.
Clancy, D. F. and L. M. Dennnis, The Innovation and Application of the Value Based Design Charette Start Your
Project Right to Ensure a Successful Completion, SAVE
International Conference, 2004.
Ferenc Ndasdi is a certied mechanical engineer, certied industrial engineer, and professor of the College of Dunajvros where
he delivers lectures on value management in a semester. During
the past 25 years, he participated in about 500 value methodology
projects as head of theme, head of team, member of team, expert,
thesis consultant, etc. Ndasdi has written more than 100 studies, professional articles, and books. He is the vice president of the
Society of Hungarian Value Analysts.
Hoer, Ilona and Lux, Victoria, Possible means to consensual decision making, International Value Engineering
Conference 2008, Society of Hungarian Value Analysts
SAVE International, Budapest, Hungary, April 10-11,
2008.
Hoer, Ilona and Plinks, Jnos, Value Driven Management at BVM PELEM Ltd., International Value Engineering Conference 2008, Society of Hungarian Value
Analysts SAVE International, Budapest, Hungary, April
10-11, 2008.
Ivnyi, Attila Szilrd and Ilona Hoer, Development of Business and Innovation, Budapest, Hungary, 2002.
Kaufman, J. J. and Woodhead, R., Stimulating Innovation in
Products and Services with Function Analysis and Mapping
Mapping,
Wiley Interscience, USA, 2006.
Kaufman, J.J., Value Engineering for the Practitioner, North
Caroline State University, 1990.
Lavingia, N. J., Pacesetter Project Perfomance with Value
Improving Practices, SAVE International Proceedings,
1997. 148-150. pp.
Mandjk, Tibor and Simon, Judit, An Integrated Concept on
the Value of Business Relationships. How could it be useful? 20th Annual IMP Conference, Copenhagen.
Mentzer, John T., DeWitt William, Keebler, James S., Min,
Soonhong, Nix, Nancy W., Smith, Carlo D., Zacharia,
V A L U EW O R L D
Author Information
Value World
Is Accepting Submissions
Value World is seeking scholarly papers
about the value methodology (value
analysis, value engineering, value
management). Do you have a new
application, a new innovation, a case study?
Send your paper to SAVE International at
info@value-eng.org
Your paper will be forwarded to the Value
World editor for a peer review.
25
Abstract
Layout design, in connection with material handling in a
storage area, aects the delivery time and cost eciency. Genetic algorithm approach is investigated to determine materials position in a chromosome, and allocate them in the most
ecient location. Genetic algorithm in layout design gives the
most ecient way to relocate the materials and seeks for the
shortest path to unload materials.
This paper aims to nd an optimum total distance for a
crane to lift materials. The optimum total distance makes the
stacking managable and the materials easily lifted. A number
of previous studies support the correlation between optimization and Value Engineering. This paper disclosed the values
obtained from Genetic Algorithm to be applied in the real
storage condition.
Keywords
genetic algorithm, optimization, layout design of storage
area, value engineering
Introduction
Layout design for facility purposes generally relates to material handling and storage area, which signicantly aected
the delivery time to customers (Tomkins, et al, 2003). The
importance of faster delivery, for instance, has been studied
in outbound logistics which includes the warehouse management, transportation, and distribution, and consequently, has
a signicant inuence on the eciency of the time-to-market
of the supply chains (Lee and Leu, 2006). Therefore, most of
material handling studies focus on time-to-deliver the materials to customers. According to Ballou (1999), the eciency of
material handling may be increased in four ways; capacity of
usage, layout, storage equipments, and transportation.
In terms of layout, material handling is related to stacking
problems (Dekker et al, 2006). The study focused on simulation studies and used algorithm as a method of calculation.
Furthermore, genetic algorithm was also used in Layout Design of Deng, Lai, and Wu (2006), without considering the
various dimensions of materials. Based on this background,
this paper deals with storage design for dierent types of ma26
V A L U EW O R L D
Type of
Plate
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SS41
SM490
SM490
SM490
SM490
SM490
SM490
SM490
SM490
SM490
SM490
SM490
EH360
HS780
HS780
HS780
HS780
HS780
HS780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
SHT 780
Wear Plate
Wear Plate
Wear Plate
Wear Plate
Wear Plate
Wear Plate
Wear Plate
Wear Plate
Thickness Width
(mm)
(mm)
V A L U EW O R L D
4,5
5
6
6
8
8
9
9
10
12
12
16
19
22
25
40
6
8
10
12
16
20
25
32
50
60
65
8
10
12
16
20
25
32
8
9
10
12
16
20
25
32
40
50
60
80
90
120
6
8
10
12
16
20
25
32
C
1524
1524
1524
1829
1524
1829
1524
1829
1524
1524
1829
1524
1524
1524
1524
B
A
1524
1524
1524
1524
1524
1524
1524
1524
1524
1524
1524
2500
2500
1524
1524
1524
1524
1524
1524
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
2500
Length
(mm)
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6096
6000
8000
6096
6096
6096
6096
6096
6096
8000
8000
8000
8000
8000
8000
8000
8000
8000
8000
8000
8000
8000
8000
6000
6000
6000
6000
6000
6000
6000
6000
Weight/Unit
(Kg)
74,65
328,18
364,64
437,57
525,15
583,43
700,19
656,36
787,72
729,29
875,15
1050,29
1166,86
1385,65
1604,44
1823,22
653,23
840,00
2917,16
437,57
583,43
729,29
875,15
1166,86
1458,58
1823,22
2333,72
3646,44
4375,73
7653,75
1256,00
729,29
875,15
1166,86
1458,58
1823,22
2333,72
1256,00
1413,00
1570,00
1884,00
2512,00
3140,00
3925,00
5024,00
6280,00
7850,00
9420,00
12560,00
14130,00
18840,00
706,50
942,00
1177,50
1413,00
1884,00
2355,00
2943,75
3768,00
Liing Intensity/
Month
(pcs)
135
150
20
150
100
150
100
60
0
20
40
0
20
8
8
8
2
1
2
170
180
44
39
33
36
33
3
1
1
1
20
2
4
3
2
4
1
33
4
24
60
24
19
9
1
4
3
1
1
4
1
219
32
111
122
159
75
12
5
Area
(m2)
2,97
9,29
9,29
9,29
11,15
9,29
11,15
9,29
11,15
9,29
9,29
11,15
9,29
9,29
9,29
9,29
2,97
2,97
9,29
9,29
9,29
9,29
9,29
9,29
9,29
9,29
9,29
9,29
9,29
15,00
20,00
9,29
9,29
9,29
9,29
9,29
9,29
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
20,00
15,00
15,00
15,00
15,00
15,00
15,00
15,00
15,00
Weight/Area
(kg/m2)
25,12
35,33
39,25
47,10
47,10
62,80
62,80
70,65
70,65
78,50
94,20
94,20
125,60
149,15
172,70
196,25
219,80
282,65
314,00
47,10
62,80
78,50
94,20
125,60
157,00
196,25
251,20
392,50
471,00
510,25
62,80
78,50
94,20
125,60
157,00
196,25
251,20
62,80
70,65
78,50
94,20
125,60
157,00
196,25
251,20
314,00
392,50
471,00
628,00
706,50
942,00
47,10
62,80
78,50
94,20
125,60
157,00
196,25
251,20
Maximum
Stack
Height
(s)
(Unit)
358,28
0,38
254,78
0,59
229,30
0,09
191,08
0,79
191,08
0,52
143,31
1,05
143,31
0,70
127,39
0,47
127,39
1,00
114,65
1,00
95,54
0,42
95,54
1,00
71,66
1,00
60,34
0,13
52,11
0,15
45,86
0,17
40,95
0,05
31,84
0,03
28,66
0,07
191,08
0,89
143,31
1,26
114,65
0,38
95,54
0,41
71,66
0,46
57,32
0,63
45,86
0,72
35,83
0,08
22,93
0,04
19,11
0,05
17,64
0,06
143,31
0,14
114,65
0,02
95,54
0,04
71,66
0,04
57,32
0,03
45,86
0,09
35,83
0,03
143,31
0,23
127,39
0,03
114,65
0,21
95,54
0,63
71,66
0,33
57,32
0,33
45,86
0,20
35,83
0,03
28,66
0,14
22,93
0,13
19,11
0,05
14,33
0,07
12,74
0,31
9,55
0,10
191,08
1,15
143,31
0,22
114,65
0,97
95,54
1,28
71,66
2,22
57,32
1,31
45,86
0,26
35,83
0,14
Total Stacks
Stack(s)
Needed
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
2
3
2
1
1
66
27
Hn max
Txtxwx1
Wn
. . . . . . . . . . (1)
roundup
Pn
Hn max
. . . . . . . . . . (2)
N P xD
n
n=1 n
. . . . . . . . . . (3)
=
=
=
=
=
=
=
=
=
=
n =
N =
Numerical Example
A case study for this paper is performed at a heavy equipment manufacturer in Jakarta which integrates their two
plants into one. As the consequence, they have to provide a
new storage to accommodate all materials of the two plants
in one single area. This study aims to design a new stock plate
28
storage area layout using the facilities provided by the company, focusing in designing the most ecient layout based on
the total distance required by crane to unload all materials.
The experimental conditions are as follows.
1) Type of plate
2) Material specication of each variant of each type of
plate.
3) Lifting intensity of each variant of each type of plate.
4) Ground tonnage = 9000 kg/m2
5) Stock plate storage area = 84 m x 25 m
The data of (1), (2), and (3) are shown in Table 1 (previous page).
Every plate has a unique dimension. In this method every
plate is interchangeable in order to nd the most ecient position. All plates are assumed to have the same dimension as the
biggest one (8 m x 2.5 m). Some of SS41 variants, however,
are too small to be converted, i.e. plate A, B, and C,, so they
are grouped into new dimension as shown in Table 2 (below).
In the proposed layout, the layout must have a room between
each plate with minimum of 0.5 m. Also, in the centre of the
area there should be a 7 m space for allowing transportation.
In this case, the company uses lorry to move the plate outside
the storage. If all the plates size is converted, the area cannot
accommodate all 66 plates with this particular dimension. As
a result, the area is temporarily expanded (84m x 26.5m). After all plates have been positioned, the area will be returned to
the normal dimension (8 m x 2.5 m).
Table 2. Group of SS41
Group
Type of
Plate
Dimension
Liing
Intensity
Thickness
(mm)
Width
(mm)
Length
(mm)
SS41
36
1219
2438
SS42
50
1219
2438
SS43
60
1219
2438
SS44
75
1219
2438
SS45
28
1219
2438
SS46
32
1219
2438
SS47
45
1219
2438
SS48
3,2
1219
2438
150
SS49
1219
2438
120
V A L U EW O R L D
Type
Average Liing
Intensity
Stack(s)
Inial soluon 1
: 1-2-3-4-5-6-7-8-9-10-11-12
Inial soluon 2
: 9-6-12-4-5-1-3-11-10-2-7-8
Inial soluon 3
: 12-5-8-1-2-3-11-4-10-9-6-7
SS41
46,64
20
SM490
49,18
12
EH360
20,00
Inial soluon 4
: 5-7-12-11-6-8-1-10-9-2-4-3
HS780
2,67
Inial soluon 5
: 1-7-2-3-12-10-4-11-6-5-9-8
SHT780
13,43
14
Inial soluon 6
: 8-2-4-6-7-1-5-10-9-3-11-12
Wear Plate
91,88
13
Inial soluon 7
: 4-9-12-2-11-10-7-5-8-1-3-6
Dummy
Dummy
Inial soluon 8
: 9-6-4-2-3-7-8-5-1-12-10-11
Dummy
Inial soluon 9
: 10-6-5-7-8-1-3-12-11-2-9-4
10
Dummy
Inial soluon 10
: 11-3-6-4-8-9-12-5-2-7-1-10
11
Dummy
12
Dummy
Total
72
V A L U EW O R L D
29
12-|5-8|-1-2-3-11-4-10-9-6-7
P7
4-|9-12|-2-11-10-7-5-8-1-3-6
C1
7-|5-8|-1-3-6-4-9-12-2-11-10
C2
7-|9-12|-5-8-1-2-3-11-4-10-6
Conclusions
Genetic algorithm in this study is used to compare solutions for optimal layout, and the best solution will be used,
and the worst one will be eliminated. To optimize the process,
crossovers and mutations are applied to seek for a better solution with better tness value. The correlation between optimization and Value Engineering is shown at the values obtained
from Genetic Algorithm to be applied in the real storage condition.
The focus is designing new optimal layout with the shortest distance to unload all the plates inside the storage. The layout is successfully designed with the unloading distance equals
to 78655.9 m. This result is the output of Genetic Algorithm
optimization model, which has been adjusted to the real condition in the plant. This model optimizes the stock plate storage area having various types of plates, and every single plate
has a unique dimension and lifting intensity.
Acknowledgement
This research was conducted with the support of PT
United Tractors Pandu Engineering, Cikarang, Indonesia. The
authors thank to all the United Tractors sta for the support
during this study.
V A L U EW O R L D
Dummy
SS41
SS41
WearPlate
WearPlate
SHT780
SHT780
Dummy
SM490
SS41
SS41
WearPlate
WearPlate
SHT780
SHT780
Dummy
SM490
SS41
SS41
SS41
WearPlate
SHT780
SHT780
HS780
SM490
SS41
SS41
SS41
WearPlate
SHT780
SHT780
HS780
SM490
EH360
SS41
SS41
WearPlate
SHT780
SHT780
HS780
SM490
SM490
SS41
SS41
WearPlate
SHT780
SHT780
HS780
SM490
SM490
SS41
SS41
WearPlate
SHT780
SHT780
HS780
SM490
SM490
SS41
SS41
WearPlate
WearPlate
Dummy
HS780
SM490
SM490
SS41
SS41
WearPlate
WearPlate
Dummy
Dummy
ID - 47
ID - 51
Dummy
fID - 39
g ID - 49
Dummy
ID - 12
ID - 17
ID - 28
a ID - 9
ID17
ID - 1
26 Dummy
ID - 18 ID12 ID - 10
ID ID58
-6
ID54
ID - 56
ID47
ID - 43 ID51
ID - 45DummyID - 35
ID - 2
23 ID28
ID - 16 ID9 ID - 8ID14
ID ID58
-6
ID56
ID - 56
ID39
ID - 40 ID49
ID - 46DummyID - 34
ID - 3
20 ID26
ID - 31 ID18 ID - 5ID10
ID -ID6
2
ID56
ID - 52
ID43
ID - 41 ID45
ID - 44 ID35 ID - 33
ID - 4
25 ID23
ID - 21 ID16 ID - 11ID8
ID -ID6
4
ID56
ID - 52
ID40
ID - 38 ID46
ID - 50 ID34 ID - 36
ID - 5
27 ID20
ID - 21 ID31 ID - 13ID5
ID -ID2
1
ID52
ID - 55
ID41
ID - 42 ID44
ID - 48 ID33 ID - 32
ID11
ID - 6
29 ID25
ID - 22 ID21 ID - 15
ID -ID4
7
ID52
ID - 55
ID38
ID - 57 ID50
DummyID36 HS780
ID - 7
30 ID27
ID - 24 ID21 SS41ID13
ID1
SS41
8
9
ID - 14 c
ID - 58d
IDe- 56
Dummy
ID55
ID42
WearPlate
WearPlate ID48
DummyID32Dummy
ID29
ID22
ID15
ID7
ID55
Figure 4.
Result of the second
part
ID57
Dummy
ID37
ID30
ID24
ID19
ID59
Dummy
Dummy
ID3
ID53
31
References
Ballou, Ronald H., (1999), Business Logistics Management
Management,
th
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Ahoy, Mateys!
Dont miss these deadlines for the SAVE
International 2010 Annual Conference!
September 1: Calls for pre-conference
workshops and presentation abstracts
begin; conference logo contest begins.
October 31: Conference logo contest
ends.
November 30: Calls for pre-conference
workshops and presentation abstracts
end.
January 31: Workshop and presentation
selections announced.
April 1: Early registration begins.
April 30:
30 Early registration ends.
May 28:
2 Online registration closes. Walkin registrations will be accepted.
SAVE International
2010 Annual Conference
June 6 - 10, 2010
J
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