We’ve all said it, “I just can’t wait!” We look forward to certain events, both big and small, with eager anticipation. We carefully plan for vacations, family events, a get together with friends, or major purchases like a new car or home. Our minds race, eagerly waiting for that magic moment to arrive.
Anticipation instills excitement and expectation in the present moment with regard to a future event. Anticipation introduces an emotional quotient to an outcome that has yet to be realized. Is “anticipation” an inherent part of the culture where you work? Do you look forward to Monday mornings? Do you create opportunities to experience anticipation? What are some of the events you look forward to? In contrast, what are some of the events you dread?
Putting Metrics in Perspective
Key performance indicators (KPI’s) or metrics are used to measure our progress toward achieving goals and objectives. Overall Equipment Effectiveness is one such key performance indicator used by many companies and provides a means to monitor and improve operational performance. Timely corrective actions and improvement measures should be accompanied by expected outcomes. In other words, we should anticipate increasing returns for our efforts.
Unfortunately when results begin to plateau, a perceived “point of no return” is reached, support on all fronts begins to wane, and apathy sets in. A vision that extends beyond the current “process as we know it” coupled with effective leadership is required to strive for even greater achievements. Some companies use the term “stretch targets” or “stretch goals” to ensure a gap between current and ideal performance exists. For lean practitioners, there is always a gap between the current and ideal state and as a result “pursuing perfection and pure value through the relentless elimination of waste” is a never ending journey.
Kaizen – Continuous Improvement
Daily Kaizen embraces the ideology that there is always a better way and more than one solution. We anticipate improved performance as we continue to understand and learn more from our experiences. We appreciate and learn from our failures and successes recognizing that each brings greater understanding of the process at hand. A missed target is a learning opportunity – whether expectations were exceeded or not.
While some would consider success as exceeding the target, doing so actually demonstrates that we did not fully understand all of the influences or elements of the process. As such, even hitting the target should be cause for review to validate our initial assumptions. We may discover that some elements or combination of elements outside of our initial “assumptions” were actually responsible for hitting the target.
Kaizen is an integral part of a learning environment where lean thinking flourishes. Anticipation brings an element of excitement to the work place that keeps us wanting to come back to do it all over again.
“Anticipation” – Carly Simon sang it right – its keeping me waiting!
EARTH HOUR is now an annual event that is embraced around the globe. For at least one hour, we will have the opportunity to “unplug” ourselves from the world to ponder and increase our awareness of how our “activities of daily living” can make a difference to the environment we live in.
While the benefits of turning off the world for an hour are difficult to measure in the immediate sense, the longer term affect or impact will be determined and governed by our thinking first and actions second.
We have all learned to embrace the three (3) R’s – Reduce, Reuse, Recycle – as evidenced by the blue bins that regularly grace our streets on “recycling” day. We all make a personal effort to painstakingly separate items into various categories of “waste” to better serve the recycling process.
Companies have also taken a greater sense of responsibility for providing “green” or “earth friendly” products although, in many cases, the effort has more to do with the packaging than that of the product itself. Here in Ontario, Canada, our provincial government has imposed “environmental fees” on various products – such as electronics – to further support recycling programs. Locally, in and around the Greater Toronto Area (GTA), plastic bags are subject to a fee of $0.05 each to curb consumers from using them.
From an energy perspective, we have been introduced to fully electric and hybrid cars. Nuclear energy and new sources of electricity such as wind mills and solar panels have replaced coal fired plants. Even my Logitech K750 keyboard is solar powered!
Sporadic record breaking high temperatures have marked this past winter as anything but Canadian. For some, climate change is cause enough to be an Earth Hour participant. I, however, believe that managing our finite resources in a more efficient and effective manner is something to think about and worthy of an hour of my time.
Behaviors must change, however, to do so requires us to first change our thinking. From a lean perspective, Earth Hour serves as a reminder to pursue perfection and pure value through the relentless elimination of waste. We can do so much more and all we need to do is take at least one hour to think about it – starting now. There is always and better way and more than one solution.
Earth Hour will commence from 8:30 pm to 9:30 pm EST on Saturday, March 31, 2012.
I coined the phrase “What you see is how we think” to suggest that the principles of lean thinking are not only embraced by everyone but are also evident throughout the organization. In this context, becoming a lean organization requires effective leadership to create and foster an environment that allows lean thinking to flourish. Just as a teacher establishes an environment for learning in the classroom, leaders carry the responsibility for cultivating a lean culture in their organizations.
So how could it be that Lean Leadership is the missing link? I suspect and have observed that too many leaders have displaced the responsibility for lean into the middle management ranks rather than taking ownership of the initiative themselves. These same leaders often operate on the premise that lean is simply a matter of implementing a collection of prescriptive tools to improve efficiency and cut costs. It is clear they have failed to understand the most fundamental principles and basic tenets of lean. If this sounds familiar, I recommend reading “The Toyota Way: 14 Management Principles from The World’s Greatest Manufacturer” by Jeffrey K. Liker.
So where do we turn?
Toyota is one company that exemplifies what it means to be lean and the lessons learned through their trials, tribulations, and continued successes are well documented. I admire Toyota both through first hand experience as a supplier of products to all of their operations in North America and secondly through their willingness to openly share their experiences with the rest of the world. This is evidenced by the many books and articles that have featured them.
I recognize that Toyota has been the subject of many news stories in recent years, the most notable being the recession of 2008, the extremely high-profile recall crisis for Sudden Unintended Acceleration (SUA) in 2009, and most recently, the Japanese earthquake and tsunami. In turn however, we must also acknowledge and recognize that Toyota’s leadership was instrumental to guiding the company through these crisis and for directly addressing the diverse range of challenges they faced.
A sobering look at the crisis that challenged Toyota’s integrity and leadership as well as the many lessons learned are well documented in “Toyota Under Fire: Lessons for Turning Crisis into Opportunity” by Jeffrey K. Liker and is highly recommended reading. I am further encouraged that Toyota acknowledged that problems did exist and didn’t look to deflect blame elsewhere. Rather, Toyota returned to the fundamental principles of “The Toyota Way” to critique, understand, and improve the company.
“Lean is the pursuit of perfection and pure value through the relentless elimination of waste.”
As every lean practitioner will (or should) tell you, the process begins by defining value. Many companies operate under the false pretense that they are already providing the value that customers want or need. As such, they attempt to improve existing products or services by either adding features or making them faster and cheaper. From the perspective of Lean Thinking, the “secret” to making real change begins by finding:
“… a mechanism for rethinking the value of their core products to their customers.”
Lean Thinking challenges us to consider the value our customers are demanding. Accordingly, we must ensure that our infrastructure, business practices, and methodologies deliver that value in the most efficient and effective manner possible. Only when we focus on value from a customer perspective can we offer a solution that truly meets the customers’ needs.
Apple is one such company that continues to redefine and improve its product offerings to the point of anticipating and creating needs that never before existed. Apple’s iPad is just one example of their unique approach to creating niche products and solutions to address speed, connectivity, portability, and features that we as customers never thought possible.
The Leadership Challenge
Leadership is challenged to define and deliver “value” to the customer in the most effective and efficient manner. This is not as simple as it sounds and having leaders within the company that understand Lean Thinking is a requisite mandate for any company wanting to compete in today’s global market. The challenge exists for leaders to adopt lean thinking to deliver real value at prices we can all afford.
I continue to be frustrated by the notion that the only way to reduce spending is by cutting services. While the demand for change is high, few are willing to challenge tradition and conventional thinking to improve services and increase efficiencies that will enable us to do more with less, find new opportunities, and to create jobs instead of eliminating them.
On a global level, governments continue to grapple with increasing economic pressures brought on by the recession. Rather than demonstrating fiscal restraint however, governments have grown and spending has increased at rates that far exceed that of the public sector. The result is an unsustainable government and services that will either be cut or funded through newly created revenue streams.
Rather than challenging the infrastructure and systems that comprise the delivery of these services, the governments scramble to find new ways to reach further into our pockets to pay for inefficiencies, high paid union labour, and questionable entitlements. In some instances, services have been abandoned only to be properly managed by the private sector.
For example, when we consider the delivery of health care in Canada, we find a system plagued by excessive wait times and ever rising costs. Doctors and specialists continue to operate as a fragmented community of service providers, adding layers of bureaucracy, greater inefficiencies, and more cost.
These inefficiencies are further evidenced by patients who are sent into a frenzied schedule of appointments and tests in various locations without regard for the many inconveniences and disruptions they may incur in their personal lives.
On the other hand, emergency rooms do not present the same constraints and, though some waiting may be required, patients are examined and assessed immediately, a prognosis is determined, priorities are established, and resources are made available on demand as required.
Expedience does not jeopardize the level of care provided. While the emergency room may not present the ideal case, it is radically different from “standard” care.
In stark contrast to the government-political processes that continue to insult our intelligence, I am always encouraged by the innovative and entrepreneurial spirit of individuals who prove that there is always a better way and more than one solution:
The quicker we realize that truly radical changes are necessary, the sooner we can abandon traditional cost cutting practices and apply Lean Thinking to improve society as we know it, not cut it to shreds. My simplified definition of Lean Thinking follows:
Lean is the pursuit of perfection and pure value through the relentless elimination of waste.
As every lean practitioner will tell you, the process begins by defining value. Unfortunately, many governments and companies alike start by falsely assuming that they are already providing the value that customers want or need. As such, they attempt to improve existing products or services by either adding features or making them faster and cheaper. From the perspective of Lean Thinking, the “secret” to making real change begins by finding:
“… a mechanism for rethinking the value of their core products to their customers.”
In this same context, consider how our desire to “travel from Point A to Point B in the shortest time” has evolved and transformed our personal modes of transportation / communication into the following “value” propositions:
Personal: Crawl > Walk > Run > Tricycle > Bicycle
Roadways: Bicycle, Motorcycles, Cars, Buses
Railways: Passenger and Freight Trains
Seaways: Boats, Ships
Airways: Helicopters, Planes, Jets, Rockets
Telephone: Phones, Faxes, Internet (email, social media)
Each mode of transportation presents a unique solution to address a shared common value: “Short Travel Time”. Although changing technologies is inferred, lean does not require an investment in new technologies to be successful. To the contrary, Lean Thinking simply challenges us to consider the value our customers are demanding. Accordingly, we must ensure that our infrastructure, business practices, and methodologies deliver that value in the most efficient and effective manner possible.
Only when we focus on “value” from a customer perspective can we offer a solution that truly meets the customer’s needs. When we consider the premise for this example, the need to travel is implied. It does not answer the question “Why do we travel?
If the reason for traveling is simply to “communicate” with friends and family, then we can see that the telephone becomes a viable solution to eliminate the need to travel at all. From a similar perspective, fax machines and the internet were created to expedite data transfers and to communicate with the world in real-time.
The Challenge is On
It is time for all levels of government, business, unions, and society as a whole to acknowledge that our economy is in a state of crisis and demands real action. Real people are hurting at a time when others are pursuing their own agendas for self-preservation – all at the expense of society. We can not simply assume that everything is “just fine – only more expensive”.
Lean Thinking is a requisite mandate for any company wanting to compete in today’s global market. In this regard, the same challenges exist for governments and businesses alike to adopt lean thinking to deliver real value to the people they serve at prices we can all afford.
Unless government spending is brought under control and services are delivered effectively and efficiently, the system is sure to implode. It’s time for an extreme make over, engaging the best and sharpest minds to bring us to the cutting edge in business and technology, not to the cutting board where nothing remains but shattered hopes and dreams.
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Not too long ago, I was approached by a systems consultant to consider writing an Excel solution to create a weekly production schedule for one of his clients. The reason for using Excel will become clearer in a moment.
The current process
Sales representatives submit a unique Excel spreadsheet / file for each customer order. All orders are saved to a common subdirectory on the company server. Every Monday, an administrator then opens each spreadsheet and extracts information for each individual order and manually enters the relevant data into a “master” spreadsheet. After formatting the entries, the production schedule is then created.
In this case, the client was typically managing 200 to 250 unique orders per week and the time required to create the master spreadsheet could range anywhere from 4 to 6 hours. Since the sales team was already acclimated to using Excel, the client was reluctant to consider an alternative order management process.
I agreed to take a look at the application and after an hour of writing some Visual Basic for Applications (VBA) code, I produced a working model that automatically processed over 200 files and created a production schedule in less than 28 seconds! I also provided functionality to allow access to each file directly from the master as well as a few other bells and whistles!
The client was impressed by (couldn’t believe) the results and, as with any successful effort, requested additional functionality that they also never thought was possible.
Could this be you?
Although Excel is by far one of the most popular spreadsheets on the market, it is perhaps still one of the most underutilized desktop application in business today. Although I can only speculate, I think one of the reasons for this is the overwhelming thought of having to read an ever-growing volume of books having an ever-increasing number of pages with each new release.
I would also suggest that some of Excels functions such as pivot tables and look up capabilities are so powerful that people just assume they must be complicated when this really isn’t the case at all. I can only suggest trying them before making a judgement.
While a number of Excel solutions exist in the form of templates ranging from very specific applications such as our free Excel templates for OEE to the more general and commonly used applications such as dashboards, there are many more applications where “canned” solutions just don’t exist.
Naturally, because many people have access to Excel, they find themselves creating their own solutions “on demand” as was the case with the production schedule above.
An even greater concern is the number of “orphan’ spreadsheets that exist outside the scope of any managed data infrastructure. The danger here is that these solutions may unknowingly compromise the integrity of the current management system.
I contend that orphan solutions eventually become the hidden or “unknown” extension of the existing infrastructure and present a real opportunity yet to be uncovered by many organizations.
For cases where customization is required, someone in the organization is usually tasked with creating a spreadsheet solution. Unfortunately, these same individuals are not necessarily as capable as we may first think. I discussed this concern to some degree in Lean Office with Excel and VBA and also became a topic of discussion at Daily Dose of Excel’s Learn VBA to be Lean.
The result is often a solution that “appears” to meet the requirements – at least on paper. I have found that these same spreadsheet solutions seldom take advantage of even the simplest functions that Excel has to offer including the most basic arithmetic functions such as SUM as suggested by the animated graphic that accompanies this post.
Although the articles referred to above focus on Visual Basic for Applications (VBA), there are many other very powerful functions that can be used to make better use of Excel’s functionality and increase it’s value in terms of providing effective and efficient solutions.
Getting the Knowledge
There are a number of ways to learn Excel ranging from formal training, reading books, and, of course, the internet. Although I have been using spreadsheets since their inception, I still consider myself to be a student in many respects.
With a little knowledge in hand, I recommend visiting the sites that I have learned to trust as listed on our Websites (Excel) page. Each of these sites present powerful solutions to many common problems. They also offer full explanations and practical examples that you can use in your own spreadsheets.
Excel is best learned by doing. Having an application to work on and exploring solutions that may be available to you can be a most rewarding experience. This is especially true when they can be implemented and put to good use with immediate results.
Getting to Lean
Obviously all of this learning isn’t going to happen over night, however, you will be surprised how much can be learned in a relatively short period of time. The time saved by creating a more efficient solution in many cases will offset much of the time spent learning.
The initial challenge is to determine what spreadsheets solutions are in existence and why. The number may surprise you. If your company has an IT department, I would task them with this assignment.
As demonstrated by the case study presented earlier, the hours saved can be significant. The solution I created offers the added advantage of being able to refresh the production schedule at any time, in real-time. In other words, it is now an everyday event, not just a “Monday” event.
Your skills will improve over time and with each application. As you increase your learning, old solutions can be upgraded to reflect even more functionality adding even more value. The more comfortable you become with Excel, the more useful it will be as a tool for data analysis in other areas of the company, including lean initiatives.
I continue to be surprised by the quality of solutions that some companies have created simply because they took the time to understand and learn more about Excel for themselves. In some cases companies have hired outside support to help them in the process.
There are pros and cons for how spreadsheet solutions are developed and you should consider them as you look to develop your own solutions. Of course you can always be the Excel Hero by taking the time to learn Excel for yourself. The added benefit is how much more you may learn about other processes in your company. Finally, you may just be surprised how in demand these skills are.
Speaking of hero’s, I recently added ExcelHero.com to our list of trusted sites and to Daniel Ferry’s credit, it also inspired the title of this post.
I planned to publish this yesterday but for some reason I felt compelled to wait. I doubt it was fate, but as you will see, Toyota once again managed to serendipitously substantiate my reason for it.
I was originally inspired to write this post based on a recent experience I had at a local restaurant.
After I was seated, I ordered a coffee to start things off. The waitress asked, “Would you like cream or milk with your coffee?” I said, “Just cream please.”
A few minutes later my coffee arrived … accompanied by two creams and three milks. So I wonder, why even ask the question? What part of this was routine? Asking the question or grabbing both milk and cream?
Later, when it was time for a refill, the waitress noted the milk containers neatly stacked beside the saucer and said, “Oh, just cream right?” They were quickly removed and replaced.
How many of us are simply going through the motions – say the right words and do the right things without even thinking? In some cases, we may even do the wrong things, like a bad habit, without thinking – like the waitress in the restaurant.
I think we need to be very concerned when our words and actions are reduced to “habits” or the equivalent of meaningless rhetorical questions. We say, “Hi, how are you?” and expect to hear “Fine” or “OK” – whether or not it’s true. Or worse, we don’t even wait for the answer.
When our daily routines become autonomous they essentially become habits – good or bad. How can you pay attention to the details when they have become engrained into the everyday monotony we call routine?
The devil is in the details …
Of concern here is how much waste our habits generate that we’re not even aware of. In business, finding the waste is actually easier than it looks. The cure on the other hand may be a different story.
Layered process audits, and regular visits to the “front line” can be used to identify and highlight concerns but, as with many companies, these process reviews only represent a snapshot in time. To be effective, they need to be frequent (daily) and thorough.
In manufacturing, process flows, value streams, and standard work are tools we use to define our target operating plan. However, we know from experience that a gap typically exists between planned and actual performance.
The sequence of events typically occur as planned, however, the method of task execution varies from person to person and shift to shift. The primary root cause for this variance can be traced to work instructions that do not definitively describe the detailed actions required to successfully complete the task.
Generic work instructions simply do not work. To be effective, our methods must be specific and detail oriented. General instructions leave too much room for error and in turn become a source of variation in our processes.
Quite often, we develop techniques or “tricks” that make our jobs or tasks easier to perform. Learning to recognize and share those “nuances” may be the discerning factors to achieve improved performance.
Worth Waiting For …
As I mentioned at the start of this article, Toyota somehow manages to make its way into my articles and this one is no exception. Earlier this week, I learned that Ray Tanguay, a local Ontario (Canada) resident, is now one of three new senior managing officers for Toyota worldwide.
The Toronto Start published “Farm boy a Toyota go-to guy” in today’s business section that chronicles Ray Tanguay’s rise to power to become the only top non-Japanese executive in the company.
What caught my attention, aside from being born in a local town here in Ontario, was this quote:
“I like to drill down deep because the devil is always in the details“ – Ray Tanguay, Toyota Senior Managing Officer
The article also describes how Ray Tanguay managed to get the attention of Toyota president Akio Toyoda and the eventual development of a global vision to clearly set out the company’s purpose, long-term direction, and goals for employees.
After summarizing Ray Tanguay’s history, the article concludes …
“A few years later, his attention to detail on the shop floor helped the company win a second assembly plant in nearby Woodstock and thousands of more jobs for Canada’s manufacturing sector.”
I note with great interest, “… on the shop floor …” Perhaps, I should have changed the title to “Opportunity: the Devil is in the details!” I still think we were close.
If “Time is Money”, is it reasonable for us to consider that “Wasting Time is Wasting Money?”
Whether we are discussing customer service, health care, government services, or manufacturing – waste is often identified as one of the top concerns that must be addressed and ultimately eliminated. As is often the case in most organizations, the next step is an attempt to define waste. Although they are not the focus of our discussion, the commonly known “wastes” from a lean perspective are:
Correction (Non-Conformance – Quality)
Resourcefulness is another form of waste often added to this list and occurs when resources and talent are not utilized to work at their full potential.
Where did the Time go?
As a lean practitioner, I acknowledge these wastes exist but there must have been an underlying element of concern or thinking process that caused this list to be created. In other words, lists don’t just appear, they are created for a reason.
As I pondered this list, I realized that the greatest single common denominator of each waste is TIME. Again, from a lean perspective, TIME is the basis for measuring throughput. As such, our Lean Journey is ultimately founded on our ability to reduce or eliminate the TIME required to produce a part or deliver a service.
As a non-renewable resource, we must learn to value time and use it effectively. Again, as we review the list above, we can see that lost time is an inherent trait of each waste. We can also see how this list extends beyond the realm of manufacturing. TIME is a constant constraint that is indeed a challenge to manage even in our personal lives.
To efficiently do what is not required is NOT effective.
I consider Overall Equipment Effectiveness (OEE) to be a key metric in manufacturing. While it is possible to consider the three factors Availability, Performance, and Quality separately, in the context of this discussion, we can see that any impediment to throughput can be directly correlated to lost time.
To extend the concept in a more general sense, our objective is to provide our customers with a quality product or service in the shortest amount of time. Waste is any impediment or roadblock that prevents us from achieving this objective.
Indirect Waste and Effectiveness
Indirect Waste (time) is best explained by way of example. How many times have we heard, “I don’t understand this – we just finished training everybody!” It is common for companies to provide training to teach new skills. Similarly, when a problem occurs, one of the – too often used – corrective actions is “re-trained employee(s).” Unfortunately, the results are not always what we expect.
Many companies seem content to use class test scores and instructor feedback to determine whether the training was effective while little consideration is given to developing skill competency. If an employee cannot execute or demonstrate the skill successfully or competently, how effective was the training? Recognizing that a learning curve may exist, some companies are inclined to dismiss incompetence but only for a limited time.
The company must discern between employee capability and quality of training. In other words, the company must ensure that the quality of training provided will adequately prepare the employee to successfully perform the required tasks. Either the training and / or method of delivery are not effective or the employee may simply lack the capability. Let me qualify this last statement by saying that “playing the piano is not for everyone.”
Training effectiveness can only be measured by an employee’s demonstrated ability to apply their new knowledge or skill.
Time – Friend or Foe?
Lean tools are without doubt very useful and play a significant role in helping to carve out a lean strategy. However, I am concerned that the tendency of many lean initiatives is to follow a prescribed strategy or formula. This approach essentially creates a new box that in time will not be much different from the one we are trying to break out of.
An extension of this is the classification of wastes. As identified here, the true waste is time. Efforts to reduce or eliminate the time element from any process will undoubtedly result in cost savings. However, the immediate focus of lean is not on cost reduction alone.
Global sourcing has assured that “TIME” can be purchased at reduced rates from low-cost labour countries. While this practice may result in a “cost savings”, it does nothing to promote the cause of lean – we have simply outsourced our inefficiencies at reduced prices. Numerous Canadian and US facilities continue to be closed as workers witness the exodus of jobs to foreign countries due to lower labor and operating costs. Electrolux closes facility in Webster City, Iowa.
I don’t know the origins of multi-tasking, but the very mention of it suggests that someone had “time on their hands.” So remember, when you’re put on hold, driving to work, stuck in traffic, stopped at a light, sorting parts, waiting in line, sitting in the doctors office, watching commercials, or just looking for lost or misplaced items – your time is running out.
Is time a friend or foe? I suggest the answer is both, as long as we spend it wisely (spelled effectively). Be effective, be Lean, and stop wasting time.
Almost every manufacturing facility has a method or means to measure labour efficiency. Some of these methods may include Earned versus Actual hours or perhaps they are financially driven metrics such as “Labour as a Percent of Sales” or as “Labour Variance to Plan”. As we have learned all too well through the latest economic downturn, organizations are quite adept at using these metrics to flex direct labour levels based on current demand. This suggests that almost every company has access to at least a financial model of some form that can be used to represent “ideal” work force requirements based on sales.
It is not our intent to discuss how these models are created, however, I can only trust that the financial model is based on a realistic assessment of current process capabilities and resources required to support the product mix represented by the sales forecast. At a minimum, the assessment should include the following standards and known variances for each process: Material, Labour, and Rate. You may recognize these standards as they form the basis of our OEE cost model that we have discussed in detail and offer in our Free downloads page.
Analyzing the Data
Many companies use both Labour Efficiency and Overall Equipment Effectiveness to measure the performance of their manufacturing operations. We would also expect a strong correlation to exist between these two metrics as the basis for their measurement is fundamentally common. As you may have already observed in your own operations, this is not always the case in the real world. The disconnect between these two metrics is a strong indicator that yet another opportunity for improvement may exist.
For example, it is not uncommon to see operations where OEE is 60% – 70% while labour efficiencies are reported to be 95% or better. How is this possible? The simple answer is that labour is redirected to perform other work while a machine is down or, in extreme cases, the work force is sent home. In both cases, OEE continues to suffer while labour is managed to minimize the immediate financial impact of the downtime.
Set up and / or change over may be one of the reasons for down time and another reason why there is a perceived discrepancy between labour efficiency and overall equipment effectiveness. Some companies employee personnnel specifically trained to perform these tasks and are classified as indirect labour.
Redirecting labour to operate other machines presents its own unique set of problems and is typically frowned upon in lean organizations. Companies that follow this practice must ensure that adequate controls are in place to prevent excess inventories from building over time. I reluctantly concede to the practice of “redeployment during downtime” if it is indeed being managed.
Some would argue that the alternate work is being managed because the schedule actually includes a backup job if a given machine goes down. If we probe deep enough, we may be surprised to learn that some of these backup jobs are actually “never” scheduled because the primary scheduled machines “always” provide ample downtime to finish orders of “unscheduled” backup work. As such, we must be fully aware of the potential to create the “hidden factory” that runs when the real one isn’t.
Pitfalls of Redirected Labour
This practice easily becomes a learned behavior and tends to place more emphasis on preserving labour efficiency than actually increasing the sense of urgency required to solve the real problem. In all too many cases the real problem is never solved.
Too many opportunities to improve operations are missed because many planners have learned to compensate for processes that continually fail to perform. Experience shows that production schedules evolve over time to include backup jobs and alternate machines that ultimately serve as a mask to keep real problems from surfacing. From a labour and OEE perspective, everything appears to be normal.
Redirecting labour to compensate for Process deficiencies may give rise to excess inventory. “Increased inventory” is an extremely high price to pay for the sake of perceived efficiency in the short-term. Higher inventory has an immediate negative impact to cash flow in the short-term as real money is now represented by parts in inventory until consumed or sold. Additional penalties of inventory include carrying and handling costs that are also worthy of consideration.
Three Metrics – Working Together
You will note that we deliberately used the term labour efficiency throughout our discussion and presents an opportunity to demonstrate that efficiency and effectiveness are not synonymous. Efficiency measures our ability to produce parts at rate while effectiveness measures our ability to produce the right quantity of quality parts at the right time.
Overall Equipment Effectiveness, Labour Efficiency, and Inventory are truly complementary metrics that can be used to determine how effectively we are managing our resources: Human, Equipment, Material, and Time. Our mission is to safely produce a quality part at rate, delivered on time and in full, at the lowest possible cost. Analyzing the data derived through our metrics is the key to understanding where opportunities persist. Once identified, we can effectively solve the problems and implement corrective actions accordingly.
Does your organization focus on results or the means to achieve them? Do you know when you’re having a good day? Are your processes improving?
The reality is that too many opportunities are missed by simply focusing on results alone. As we have discussed in many of our posts on problem solving and continuous improvement, the actions you take now will determine the results you achieve today and in the future. Focus on the means of making the product and the results are sure to follow.
Does it not make sense to measure the progress of actions and events in real-time that will affect the end result? Would it not make more sense to monitor our processes similar to the way we use Statistical Process Control techniques to measure current quality levels? Is it possible to establish certain “conditions” that are indicative of success or failure at prescribed intervals as opposed to waiting for the run to finish?
By way of analogy, consider a team competing in a championship race. While the objective is to win the race, we can be certain that each lap is timed to the fraction of a second and each pit stop is scrutinized for opportunities to reduce time off the track. We can also be sure that fine tuning of the process and other small corrections are being made as the race progresses. If performed correctly and faster than the competition, the actions taken will ultimately lead to victory.
Similarly, does it not make sense to monitor OEE in realtime? If it is not possible or feasible to monitor OEE itself , is it possible to measure the components – Availability, Performance, and Quality – in real-time? I would suggest that we can.
Performance metrics may include production and quality targets based on lapsed production time. If the targets are hit at the prescribed intervals, then the desired OEE should also be realized. If certain targets are missed, an escalation process can be initiated to involve the appropriate levels of support to immediately and effectively resolve the concerns.
A higher reporting frequency or shorter time interval provides the opportunity to make smaller (minor) corrections in real-time and to capture relevant information for events that negatively affect OEE.
Improving OEE in real-time requires a skilled team that is capable of trouble shooting and solving problems in real-time. So, resolving concerns and making effective corrective actions in real-time is as important to improving OEE than the data collection process itself.
A lot of time, energy, and resources are expended to collect and analyze data. Unfortunately, when the result is finalized, the opportunity to change it is lost to history. The absence of event-driven data collection and after the fact analysis leads to greater speculation regarding the events that “may have” occurred versus those events that actually did.
Clearly, an end of run pathology is more meaningful when the data supporting the run represents the events as they are recorded in real-time when they actually occurred. This data affords a greater opportunity to dissect the events themselves and delve into a deeper analysis that may yield opportunities for long-term improvements.
Set yourself apart from the competition. Focus on the process while it is running and make improvements in real-time. The results will speak for themselves.
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As a core metric, Overall Equipment Effectiveness or OEE has been adopted by many companies to improve operations and optimize the capacity of existing equipment. Having completed several on site assessments over the past few months we have learned that almost all organizations are measuring performance and quality in real-time, however, the availability component of OEE is still a mystery and often misunderstood – specifically with regard to Set Up or Tool Changes.
We encourage you to review the detailed discussion of down time in our original posts “Calculating OEE – The Real OEE Formula With Examples” and “OEE, Down time, and TEEP” where we also present methods to calculate both OEE and TEEP. The formula for Overall Equipment Effectiveness is simply stated as the product of three (3) elements: Availability, Performance, and Quality. Of these elements, availability presents the greatest opportunity for improvement. This is certainly true for processes such as metal stamping, tube forming, and injection molding, to name a few, where tool changes are required to switch from one product or process to another.
Set up or change over time is defined as the amount of time required to change over the process from the last part produced to the first good part off the next process. We have learned that confusion exists as to whether this is actually planned down time as it is an event that is known to occur and is absolutely required if we are going to make more than one product in a given machine.
Planned down time is not included in the Availability calculation. As such, if change over time is considered as a planned event, the perceived availability would inherently improve as it would be excluded from the calculation. Of course, the higher availability is just an illusion as the lost time was still incurred and the machine was not available to run production.
If we could change a process at the flip of a switch, set up time would be a non-issue and we could spend our time focusing on other improvement initiatives. While some processes do require extensive change over time, there is always room for improvements. This is best exemplified by the metal stamping industry where die changes literally went from Hours to Minutes.
To remain competitive and to increase the available capacity, many companies quickly adopted SMED (Single Minute Exchange of Dies) initiatives after recognizing that significant production capacity is being lost due to extensive change over times. Overtime through extended shifts and capital for new equipment is also reduced as capacity utilization improves.
Significantly reduced inventories can also be realized as product change overs become less of a concern and also provide greater flexibility to accommodate changes in customer demand in real-time. Significantly increased Inventory Turns will also be realized in conjunction with net available cash from operations.
Redefining Down Time
The return on investment for Quick Tool Change technologies is relatively short and the benefits are real and tangible as demonstrated through the metrics mentioned above. Rather than attempt to categorize down time as either planned or unplanned, consider whether the activity being performed is impeding the normal production process or can be considered as an activity required for continuing production.
We prefer to classify down time as either direct or indirect. Any down time such as Set Up, Material Changes, Equipment Breakdowns, Tooling Adjustments, or other activity that impedes production is considered DIRECT down time. Indirect down time applies to events such as Preventive Maintenance, Company Meetings, or Scheduled IDLE Time. These events are indeed PLANNED events where the machine or process is NOT scheduled to run.
Redefine the Objective
Set up or change over time is often the subject of much heated debate and tends to create more discussion than is necessary. The reason for this is simple. Corporate objectives are driven by metrics that measure performance to achieve a specific goal.
Unfortunately, in the latter case, the objectives are translated into personal performance concerns for those involved in the improvement process. Rather than making real improvements, the tendency is to rationalize the current performance levels and to look for ways to revise the definition that creates the perception of poor performance. Since availability does not include planned down time, many attempts are made to exclude certain down time events, such as set up time, to create a better OEE result than was actually achieved.
Attempts to rationalize poor performance inhibits our ability to identify opportunities for improvement. From a similar perspective, we should also be prudent with. and cognizant of, the time allotted for “planned” events.
It is for this reason that some companies have resorted to measuring TEEP based on a 24 hour day. In many respects, TEEP eliminates all uncertainty with regard to availability since you are measured on the ability to produce a quality part at rate. As such, our mission is simple – “To Safely Produce a Quality Part At Rate, Delivered On Time and In Full”. Any activity that detracts from achieving or exceeding this mission is waste.
Remember to get your OEE spreadsheets at no charge from our Free Downloads Page or Free Downloads Box in the sidebar. They can be easily and readily customized for your specific process or application.
Please feel free to send your comments, suggestions, or questions to Support@VergenceAnalytics.com