Category: Eliminate Waste

Understand the real contributors to waste in all facets of your operation.

OEE, Labour, and Inventory

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.

Until Next Time – STAY lean!

Vergence Analytics

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OEE: The Means to an End – Differentiation Where It Matters Most

A pit stop at the Autrodomo Nazionale of Monza...
Image via Wikipedia

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.

Your feedback matters

If you have any comments, questions, or topics you would like us to address, please feel free to leave your comment in the space below or email us at feedback@leanexecution.ca or feedback@versalytics.com.  We look forward to hearing from you and thank you for visiting.

Until Next Time – STAY lean

Versalytics Analytics
 

OEE: Planned Downtime and Availability

Injection Molding Press
Image via Wikipedia

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.

Switch Time

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

Until Next Time – STAY lean!

Vergence AnalyticsVergence Analytics

The High-Velocity Edge Is Here!

Update:  Steven J. Spear has been awarded the Philip Crosby Medal for his book “The High-Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition” according to a Press release from ASQ—the world’s largest network of quality resources and experts (Milwaukee, WI March 2, 2011).

We have raved about the book “Chasing the Rabbit” written by Steven J. Spear and have just learned that the book has been re-released under a new a title, The High-Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition.  Recognizing that your time is a valuable commodity, we aim to provide information that is relevant to our readers and visitors.  This book provides much more information on certain topics than one could ever hope to achieve through a website or blog – hence our recommendation.

This is perhaps an unprecedented marketing strategy for what was an already very successful book.  In one respect this reflects the wisdom of Peter Drucker who suggested that there is a time to abandon the old (even if it is considered an award winning success) in lieu of the fresh and new.  The following are excerpts from the e-mail we received from Steve that explain the reasons for this change:

Dear Friends and Colleagues,

The High Velocity Edge shows the particular skills and capabilities that lead to broad-based, high-speed, non-stop improvement and innovation.  Master these and you achieve exceptional, rival-beating performance, even if facing intense competition. If you don’t, you watch as someone else wins

The book (and the website supporting it) are replete with examples of how these capabilities are developed and deployed in high tech and heavy industry, in design and production, in services like health care and in manufacturing.

There is Pratt and Whitney’s compression in time and cost of jet engine design, the Navy’s creation of nuclear propulsion  with breath taking speed, Alcoa’s achieving near perfect workplace safety, and the exceptional improvement of care in medical institutions.

Toyota features prominently as an example, both in showing how  successfully cultivating the capabilities introduced and illustrated in The High Velocity Edgeare the source of  tremendous competitive strength and also in showing how the capacity to develop such capabilities can be overburdened.

With the release of The High Velocity Edge, I’m testing new media approaches, being released on its website, to bring the book’s ideas into broader practice more quickly than traditional means alone allow.

Here’s a closer look at what is new.

New Title and Cover: Why a  new name and cover after three awards, versions in four languages, and flattering reviews?  Well, people do judge a book by its cover, and those who didn’t read the reviews or learn of the awards were too often left  wondering what was inside.  Not so with the new.

New material:  You’ll find a new preface and epilogue, drawing lessons about leadership, innovation, and operational excellence from  Toyota’s recent  struggles.

New media: I’m testing ways to  help  people master more quickly and reliably the skills that allow individuals and organizations to achieve broad-based, high-speed improvement and innovation.

On the way are an interactive web-based case study, an ‘open school’ course for those in health care professions, and a series of short tutorials to help people review what they’ve read and to help them teach what they’ve learned to their own students and colleagues. The results will be introduced on the book’s website.

Of course, there will still be postings, applying the principles of leadership, innovation, and operational excellence to current topics.

I certainly hope you find the new look, content, and format useful in pursuing perfection.

Please share your feedback, and let’s talk about how I can help you put these ideas  to use in your own organization.

Thanks!

Steve Spear

A high velocity organization is, in our opinion, a step above and beyond the traditional lean principles that are typical of most text books and seminars on this topic.  The High-Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition will prove to be a worthwhile read and we highly recommend this to any company seriously seeking to take their organization to the next level.  We have also added this book to our recommended reading list.

Until Next Time – STAY lean!

Vergence Business Analytics

Pure Genius: Teach, Build, Model

At first I thought this approach seemed to be a little too simplistic as an execution strategy.  On second thought, however, it seemed to be very appropriate to most situations that we may encounter.  It has certainly been a very practical superview for our current project.

Teach: Teach the concepts, systems, processes, and procedures that are required to achieve a given goal or objective.

Build: Interactive training sessions should provide for feedback and further development of the elements presented.  At this stage, personnel become engaged and help to further develop the systems, processes, and procedures.

Model: Leadership, executive management, and personnel must model the behavior or activities that are required to successfully achieve the desired goal or objective.  Deviations to the planned activities must be discussed and reviewed in real-time with the team.  Revise as necessary but enact or communicate changes in real time.

How far do we go in our pursuit of better systems and data analysis? The true goal is not to build systems that collect data for later analysis, but to build systems that analyze data based on collected data in real-time.  Ideally, the analysis would lead to future projections based on past history and current performance in real-time.  How far we want to go with the analysis is driven by the vision and goals we are seeking to achieve.

For added inspiration as to what can be accomplished with data that is available, we found this video featuring Stephen Wolfram, creator of Mathematica, where he talks about his quest to make all knowledge computational — as able to be searched, processed and manipulated. His new search engine, Wolfram Alpha, has no lesser goal than to model and explain the physics underlying the universe.

This is an amazing video (unfortunately, we can’t embed the video directly into our page) and the WolframAlpha Website is equally impressive to demonstrate what can be done with the right tools and data engines. Click here to visit WolframAlpha. While you’re at the site, you may wish to subscribe to TED. There are many motivating and inspirational videos / talks that cover a diverse range of topics and areas of interest.

We are currently developing a business operating system for a client where informal, undocumented, methods exist.  Our task is to streamline these “methods” into a cohesive system to provide for real-time analysis and reporting for a variety of functional areas in the business.  Essentially, we are creating a bridge from the present day activities to a more rigorous, systems driven, process.  From this perspective, the above three (3) step process has proven to be a very practical means of strategizing the approach as new initiatives are introduced.

Until Next Time – STAY lean!

Flawless Execution – “This Is It” – Practice Makes Perfect

We are often encouraged to look beyond our own business models to expand our horizons or to simply gain a different perspective.  Music is one of my personal areas of interest in the outside world and I have learned to appreciate and value the many genres of music that exist today.  As a lead guitar player for a number of bands over the years and a little recording in my studio, I can only imagine the level of commitment required to perform and record professionally.

I was inspired to write this post after watching Michael Jackson’s DVD, “This is it“.  It is impressive to see how everyone is engaged and intimately involved with every nuance of the performance – from the performers themselves to the people working behind the scenes.  Even more amazing was Michael Jackson’s recall of every note and step of the choreography.  Michael provided extensive direction and leadership to assure a world-class performance could be delivered.

What does this have to do with Lean?

At its core, playing music can simply be described as playing the right notes at the right time.  In many respects, music is analogous to many of our manufacturing processes.  Music has a known process rate (beats per minute).  The standardized work or method is the music score that shows what notes to play and when to play them.  Similarly, the choreography serves as standardized work to document each and every step or movement for each performer.  It can be very obvious (and painful) when someone plays the wrong note, sounds a note at the wrong time, or mis-steps.

Knowing that “This is it” was produced from film during the development of the production also exemplifies how video can be used to not only capture the moment but to improve the process along the way.  The film provides the opportunity to review the performance objectively even if you happen to be in it.  You will note that people are much more engaged and become “self-aware” in a radically different way.

Communication + Practice makes Perfect

It is also readily apparent that many hours of rehearsal are required to produce a world-class performance.  Imagine working for days, weeks, months, or even years to produce a two-hour show for all of the world to see.  How much can one person do to refine and perfect the performance?  How much effort would you be willing to expend knowing that literally billions of people may someday be watching you!

As professionals, individual performers are expected to know their respective roles thoroughly.  They are paid for their expertise and ability to perform with high expectations and demanding circumstances.  The purpose of the rehearsal is not to necessarily practice your part as an individual, but rather to exercise your expertise as part of the team.  Each performer must learn their cues from other performers and determine how they relate and fit in to the overall production process.  Rehearsals provide the basis of the team’s communication strategy to assure everyone is on the same page all the time, every time.

Effective Training

Finally, “This is it” demonstrates the importance of training the whole team.  Although individual training may be required, eventually the team must be brought together in its entirety.  A downfall of many business training programs is that often only a select few people from various departments are permitted to attend with the expectation that they will bring what they learned “back to the team”.  One of the most overlooked elements of training is the communication and coordination of activities between team members.  Group breakout sessions attempt to improve interaction among team members, but this can’t replace the reality of working with the team on home turf.  It seems that some companies expect trained professionals to intuitively know how to communicate and interact with each other.  Nothing could be further from the truth if you are looking to develop a high performance team.

Last Words

Imagine what it would be like if we rehearsed our process and material changes with the same persistence and raw determination that performers and athletes in the entertainment and sports world exhibit.  Overall Equipment Efficiency and more specifically Availability may improve beyond our expectations.  Imagine applying the same degree of standardization to tasks that we perform everyday!  As we strive for excellence, our tolerance for anything less diminishes as well.

Flawless execution requires comprehensive planning, communication, training, practice, measurement, reflection, leadership, commitment, and dedication.

It’s time to play some riffs!

Until Next Time – STAY lean!

Lean, OEE, and How to beat the “Law of Diminishing Returns”

Are your lean initiatives falling prey to the Law of Diminishing Returns?  Waning returns may soon be followed by apathy as the “new” initiative gets old.  For those who have not studied economics or are not familiar with the term, it is defined by Wikepedia as follows:

The law states “that we will get less and less extra output when we add additional doses of an input while holding other inputs fixed. In other words, the marginal product of each unit of input will decline as the amount of that input increases holding all other inputs constant.

In simple terms, continued application of time and effort to improve a process will eventually yield reduced or smaller returns.  The low hanging fruit that once was easy to see and resolve has all but disappeared.  Some companies would claim that they have finally “arrived”.  We contend that these same companies have simply hit their first plateau.

Methods and Objectives

Is it inevitable that a process has been refined to the point where additional investment can no longer be justified financially?  The short answer is “Yes and No”.  As the Olympics are well under way, we are quick to observe the fractions of seconds that may be shaved from current world records.  If you’re going for Olympic Gold, you will need every advancement or enhancement that technology has to offer to gain the competitive edge.  These advances in technology are refinements for existing processes that are governed by strict rules.  Clearly, there are much faster ways to get from point A to point B.  However, the objective of the Olympics is to demonstrate how these feats can be accomplished through the physical skills and abilities of the athletes.

In business our objectives are defined differently.  We want to provide (and our customers expect) the highest quality products at the lowest cost delivered in the shortest amount of time.  How we do that is up to us.  Lean initiatives and tools such as overall equipment effectiveness (OEE) can help us to refine current processes but are they enough to stimulate the development of new products and processes?  Or, are they limited to simply help us to recognize when optimum levels have been achieved?

Radical change versus refinement

Objectives are used to determine and align the methods that are used to achieve a successful outcome.  This is certainly the case in the automotive industry as environmental concerns and availability of non-renewable resources, specifically oil and gas, continue to gain global attention and focus.  The objectives of our “transportation” systems are being redefined almost dynamically as new technologies are beginning to emerge.  At some point, the automotive industry leaders must have realized that continuing to refine existing technologies simply will not satisfy future expectations.  With this realization it is now inevitable that a radical powertrain technology change is required.  Hybrid vehicles continue to evolve and electric cars are not too far behind.

How to Beat the Law of Diminishing Returns

Overcoming the law of diminishing returns requires another look at the vision, goals, and objectives of the company and to develop a new, different, or fresh perspective on what it is you are trying to achieve.  The lean initiatives introduced by Toyota, Walmart, Southwest and many others were driven by the need to find a competitive edge.  They recognized that they couldn’t simply be a “me too” company to gain the recognition and successes they now enjoy.

The question you may want to ask yourself and your team is, “If we started from scratch today, is this the result we would be looking for?”  The answer should be a unanimous and resounding “NO”.  Get out your whiteboard, pens, paper, and start writing down what you would be doing differently.  In other words, it’s time to re-energize the team and refocus your goals and objectives.  Vision and mission statements are not tombstones for the living.  5S these documents and take the time to re-invigorate your team.

Turning a company around may require some new radical changes and we need to be mindful of the new upstarts with the latest and greatest technology.  They may have an edge that we have may just haven’t taken the time to consider.  We are not suggesting that you need to replace all the equipment in your plant in order to compete.  Proven technologies have their place in industry and the competitive pricing isn’t always about speed.  The question you may need to consider is, “Can our technology be used to produce different products that have been traditionally manufactured using other methods?”

While many companies pursue a growth strategy based on their current product offerings and derivatives, we would strongly suggest that manufacturers consider a growth strategy based on their process technology offerings.  What else can we make with process or machine XYZ?  We anticipate that manufacturing sectors will soon start to blend as manufacturers pursue products beyond the scope of their current industry applications.

Be the Leader

Leading companies create and define the environment where their products and services will thrive.  Apple’s “iProducts” have redefined how electronics are used in everyday life.  As these tools are developed and evolve, so too can the systems and processes used throughout manufacturing.  The collective human mind is forever considering the possibilities of the next generation of products or services.

There was a time when manned space flight and walking on the moon were considered unlikely probabilities.  Today we find ourselves discovering and considering galaxies beyond our own and we don’t give it a second thought.  How far can we go and how do we get there?  The answer to that question is …

Until Next Time – STAY lean!