OEE and LEAN

Incorporating and tracking performance using Lean metrics doesn’t make a company Lean any more than tracking weight puts you on a diet.  Measurements are like decisions, nothing changes unless actions are taken.

How does this apply to OEE?  How does OEE apply to LEAN?  As we’ve mentioned in previous posts, many companies invest a significant amount of time, money, and effort to develop exorbitant OEE data collection systems.  Data collection and analysis methods are in place, improvement / action plans are developed and executed, and the measurement cycle continues.

To some, this process may appear to be correct.  More formally, a Plan-Do-Check-Act (PDCA) or Define-Measure-Analyze-Improve-Control (DMAIC) process improvement methodology may be used.  So what is wrong with this picture?

OEE Improvements are RELATIVE

OEE does not distinguish between poorly designed and well designed processes.  A poorly designed process may have significant flow constraints and excessive labour but still yield a high OEE index.  The reason for this is simple, the base line or process standards are based on the current known process.  Standard cycle times and quality expectations are based on the current “achievable” performance standards that the process can provide.

Changes to the current process, rates, and quality levels will be reflected in the OEE index.  However, LEAN is not necessarily concerned with effective asset utilization.  The focus of LEAN is to increase or optimize the value added to the product or service being provided while reducing the time required to achieve it.

Implementing OEE is not LEAN

Racing cars and regular street cars may each perform at 100% of their optimum performance levels but clearly they could not compete in a race against each other.  From a LEAN perspective, the racing car will certainly out-perform a regular street car in a head-t0-head speed contest.

Similarly, OEE can provide insight into the performance of the current process, however, it does not provide an indication of how LEAN the process actually is.  A process that is plagued with multiple stations and inherent Work In Progress inventory will never compete against a properly balanced single piece flow process.

The OEE index for any group of processes may be above 85% as defined by design, it doesn’t mean they are equally lean.  Lean should aspire us to achieve a 100% value added process, safely producing the highest quality product in the shortest amount of time.  Although this could never be achieved in the today’s manufacturing environment, VALUE STREAM mapping is the technique used to evaluate our current capabilities in this regard and to determine what a lean future state process could achieve.

So why measure OEE?

OEE measures how effectively an asset or group of assets is being utilized as defined or described by the current standards and process constraints.  Of course, we want to make sure that we are utilizing our assets effectively.  The message here is simple.  Don’t confuse effectiveness with efficiency – they are not the same.

Even efficiency can mean different things to different people.  As we’ve mentioned in previous posts, understand WHAT you are measuring and WHY.  Metrics don’t make a company LEAN although many can help you achieve increasing levels of LEAN.

OEE is an excellent tool to help manage and improve our processes and even more so when the process is optimized using LEAN principles.

The next time someone says they are going LEAN, listen closely.  Usually the statement is met with the typical, “We did 5S and we’re working to improve our OEE.”  The real LEAN practitioner may just share the plan to reduce the cash to cash time and increase or improve the percentage of Value Added activity.

Until Next Time – Stay LEAN

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