Tag: Calculating OEE

OEE in the Automotive Industry

The automotive industry appears to be rebounding at a faster rate than most (if not all) experts may have anticipated.  Many OEM’s and their suppliers are attempting to boost production to replenish inventories and support renewed demand for their products.  Reduced inventories throughout the supply chain are creating demand that is difficult to replenish at the rate required.  Short runs to bootstrap the “pipeline” are taking their toll on OEE rates but also provide the opportunity to identify new improvement initiatives.

General Motors and Toyota have both announced that increased demand for their product is anticipated for the next few months.  The increases are exciting for all involved, however, the ramp up to recovery may be more painful to achieve for some.  How is your company performing?  Those with fixed “cells” or processes may not be experiencing the same degree of frustration as those having flexible processes running multiple part numbers.

Overall Equipment Effectiveness (OEE) typically suffers during these times due to the frequent changeovers and short volume runs.  If there was a time when you can’t change over or setup and run fast enough, this may be it.  Hang on and enjoy the ride.

Until Next Time – STAY lean!

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OEE For Manufacturing

We are often asked what companies (or types of companies) are using OEE as part of their daily operations.  While our focus has been primarily in the automotive industry, we are highly encouraged by the level of integration deployed in the Semiconductor Industry.  We have found an excellent article that describes how OEE among other metrics is being used to sustain and improve performance in the semiconductor industry.

Somehow it is not surprising to learn the semiconductor industry has established a high level of OEE integration in their operations.  Perhaps this is the reason why electronics continue to improve at such a rapid pace in both technology and price.

To get a better understanding of how the semiconductor industry has integrated OEE and other related metrics into their operational strategy, click here.

The article clearly presents a concise hierarchy of metrics (including OEE) typically used in operations and includes their interactions and dependencies.  The semiconductor industry serves as a great benchmark for OEE integration and how it is used as powerful tool to improve operations.

While we have reviewed some articles that describe OEE as an over rated metric, we believe that the proof of wisdom is in the result.  The semiconductor industry is exemplary in this regard.  It is clear that electronics industry “gets it”.

As we have mentioned in many of our previous posts, OEE should not be an isolated metric.  While it can be assessed and reviewed independently, it is important to understand the effect on the system and organization as a whole.

We appreciate your feedback.  Please feel free to leave us a comment or send us an e-mail with your suggestions to leanexecution@gmail.com

Until Next Time – STAY lean!

OEE for Batch Processes

Coke being pushed into a quenching car, Hanna ...
Image via Wikipedia

We recently received an e-mail regarding OEE calculations for batch processes and more specifically the effect on down stream equipment that is directly dependent (perhaps integrated) on the batch process.  While the inquiry was specifically related to the printing industry, batch processing is found throughout manufacturing. Our more recent experiences pertain to heat treating operations where parts are loaded into a stationary fixed-load oven as opposed to a continuous belt process.

Batch processing will inherently cause directly integrated downstream equipment (such as cooling, quenching, or coating processes) to be idle. In many cases it doesn’t make sense to measure the OEE of each co-dependent piece of equipment that are part of the same line or process. Unless there is a strong case otherwise, it may be better to de-integrate or de-couple subsequent downstream processes.

Batch processing presents a myriad of challenges for line balancing, batch sizes, and capacity management in general.  We presented two articles in April 2009 that addressed the topic of  where OEE should be measured.  Click here for Part I or Click  here for Part II.

Scheduling Concerns – Theory of Constraints

Ideally, we want to measure OEE at the bottleneck operation.  When we apply the Theory of Constraints to our production process, we can assure that the flow of material is optimized through the whole system.  The key of course is to make sure that we have correctly identified the bottleneck operation.  In many cases this is the batch process.

While we are often challenged to balance our production operations, the real goal is to create a schedule that can be driven by demand.  Rather than build excess inventories of parts that aren’t required, we want to be able to synchronize our operations to produce on demand and as required to keep the bottleneck operation running.  Build only what is necessary:  the right part, the right quantity, at the right time.

Through my own experience, I have realized the greatest successes using the Theory of Constraints to establish our material flows and production scheduling strategy for batch processes.  Although an in-depth discussion is beyond the scope of this article, I highly recommend reading the following books that convey the concepts and application through a well written and uniquely entertaining style:

  1. In his book “The Goal“, Dr. Eliyahu A. Goldratt presents a unique story of a troubled plant and the steps they took to turn the operation around.
  2. Another book titled “Velocity“, from the AGI-Goldratt Institute and Jeff Cox also demonstrates how the Theory of Constraints and Lean Six Sigma can work together to bring operations to all new level of performance, efficiency, and effectiveness.

I am fond of the “fable” based story line presented by these books as it is allows you to create an image of the operation in your own mind while maintaining an objective view.  The analogies and references used in these books also serve as excellent instruction aids that can be used when teaching your own teams how the Theory of Constraints work.  We can quickly realize that the companies presented in either of the above books are not much different from our own.  As such, we are quickly pulled into the story to see what happens and how the journey unfolds as the story unfolds.

Please leave your comments regarding this or other topics.  We appreciate your feedback.  Also, remember to get your free OEE spreadsheets.  See our free downloads page or click on the file you want from the “Orange” box file on the sidebar.

Until Next Time – STAY lean!

Vergence AnalyticsVergence Analytics

OEE: Frequently Asked Questions

We added a new page to our site to address some of the more frequently asked questions (FAQ’s) we receive regarding OEE.  We trust you will find this information to be of interest as you move forward on your lean journey.  We always appreciate your feedback, so feel free to leave us a comment or send an e-mail directly to LeanExecution@gmail.com or Vergence.Consulting@gmail.com

We have had an incredibly busy summer as more companies are pursuing lean manufacturing practices to improve their performance.  OEE has certainly been one of the core topics of discussion.  We have found that more companies are placing a significant emphasis on Actual versus Planned performance.  It would seem that we are finally starting to realize that we can introduce a system of accountability that leads to improvements rather than reprimands.

Keep Your Data CLEAN

One of the debates we recently encountered was quantity versus time driven performance data when looking at OEE data.  The argument was made that employees can relate more readily to quantities than time.  We would challenge this as a matter of training and the terminology used by operations personnel when discussing performance.  We recommend using and maintaining a time based calculation for all OEE calculations.  Employees are more than aware of the value of their time and will make every effort to make sure that they get paid for their time served.

Why are we so sure of this?  Most direct labour personnel are paid an hourly rate.  Make one error on their pay or forget to pay their overtime and they will be standing in line at your office wondering why they didn’t get paid for the TIME they worked.  They will tell you – to the penny – what their pay should have been.  If you are paying a piece rate per part, you can be sure that the employees have already established how many parts per hour they need to produce to achieve their target hourly earnings.

As another point of interest and to maintain consistency throughout the company, be reminded that finance departments establish hourly Labour and Overhead rates to the job functions and machines respectively.  Quite frankly, the quantity of parts produced versus plan doesn’t really translate into money earned or lost.  However, one hour of lost labour and everyone can do the math – to the penny.

When your discussing performance – remember, time is the key.  We have worked in some shops where a machine is scheduled to run 25,000 parts per day while another runs a low volume product or sits idle 2 of the 5 days of the the week.  When it comes right down to the crunch for operations – how many hours did you earn and how many hours did you actually work.

Even after all this discussion we decided it may be an interesting exercise to demonstrate the differences between a model based on time versus one based (seemingly) only on Quantitative data.  We’ll create the spreadsheet and make it available to you when its done!

Remember to take advantage of our free spreadsheet templates.  Simply click on the free files in the sidebar or visit our free downloads page.

We trust you’re enjoying your summer.

Until Next Time – STAY Lean!

Vergence Business Associates

OEE Training – Online

Getting Started

Online Training is more rampant now than ever.  If you want to learn about OEE and how to calculate it correctly then we have all the information you need right here.  Simply click on the categories of interest to you and research your specific topic or Click Here to get started.  This is the first article that got us started in November of 2008.  All of our online content is presently available at no charge.

Free Spreadsheet Templates

We offer several OEE Spreadhseet Templates that are available at no cost to our visitors and clients. Feel free to click on the “Free Downloads” template on the sidebar.  This is a new feature and trust that you will find this a much easier solution that provides immediate access to our documents.  If you can’t find what you are looking for, contact us by e-mail (leanexecution@gmail.com) or leave a comment with your suggestions for other templates that you would like to see available on our site.

Advanced Visitors

We trust that the content presented here is of interest to you as well.  We have provided many articles of interest related to OEE and Lean.  Simply review the categories and posts available or visit our pages for more information.  Our articles present detailed discussions and best practices applicable to the featured topic.

If you have any questions, comments, or suggestions for a future topic, simply leave a comment or send an e-mail to leanexecution@gmail.com or vergence.consulting@gmail.com.  We respect your privacy.  We will not share, disclose, sell, or distribute your e-mail or personal information with any third parties.  Your e-mail will only be used to contact you at your request.  You will not be subject to any advertising or marketing campaigns.  See our privacy policy for more details.

Until Next Time – STAY lean!

Vergence Business Associates

OEE and the Quality Factor

Many articles written on OEE (ours being the exception), indicate or suggest that the quality factor for OEE is calculated as a simple percentage of good parts from the total of all parts produced.  While this calculation may work for a single line part number, it certainly doesn’t hold true when attempting to calculate OEE for multiple parts or machines.

OEE is a measure of how effectively the scheduled equipment time  is used to produce a quality product.  Over the next few days we will introduce a method that will correctly calculate the quality factor that satisfies the true definition of OEE.  The examples we have prepared are developed in detail so you will be able to perform the calculations correctly and with confidence.

Every time a part is produced, machine time is consumed.  This time is the same for both good and defective parts.  To correctly calculate the quality factor requires us to start thinking of parts in terms of time – not quantity.

If the cycle time to produce a part is 60 seconds, then one defective part results in a loss of 60 seconds.  If 10 out of 100 parts produced are defective then 600 seconds are lost of the total 6000 seconds required to produce all parts.  Stated in terms of the quality factor, 5400 seconds were “earned” to make quality parts of the total 6000 seconds required to produce all parts (5400/6000 = 90%).  Earned time is also referred to as Value Added Time.

As we stated earlier, for a single line item or product, the simple yield formula would give us the same result from a percentage perspective (90 good / 100 total = 90%).  But what is the affect when the cycle times of a group or family of parts are varied?  The yield formula simply doesn’t work.

The quality factor for OEE is only concerned with the time earned through the production of quality parts.  Watch for our post over the next few days and we’ll clear up the seemingly overlooked “how to” of calculating the quality factor.

Until Next Time – STAY lean!

We appreciate your feedback.  Please feel free to leave a comment or send an e-mail with suggestions or questions to leanexecution@gmail.com

We respect your privacy – What you share with us, stays with us.

OEE Integration: Can you fix it?

As we are all aware, inspecting or measuring parts does not change the quality of the product.   Likewise, measuring and reporting OEE alone does not solve problems or improve performance.  While it is fair to say that increased focus and measurement of any process usually results in some degree of improvement, these are typically attributed to changes in human behavior due to observation and not necessarily real process improvements.

Using OEE to identify opportunities in your operation is the equivalent of turning the light on in a dark room.  Although the room hasn’t changed, we certainly have a better understanding of what it looks like.  As such, OEE is a vantage point metric that can be used to illuminate our understanding of the process and identify opportunities to drive improvements.

It is essential for your team to develop and utilize effective problem solving skills to successfully identify systemic and process root causes for failure and to develop and execute permanent corrective actions to resolve them.  Our experience suggests that the lack of solid and proven problem solving skills coupled with poor execution is the leading cause of failure for new initiatives such as OEE.

We introduced an approach to improving OEE in our “Improve OEE:  A Hands On Approach“, post (03-Jan-09).  Although we identified some of the tools that could be used to solve of the problems, we didn’t spend much time going into the details.  Over the next few posts, we’ll discuss some of the ideas in a little more detail.

The real problem for most companies is identifying what the real underlying root cause of the current “failure” mode is.  Without a good understanding of the root cause, the solutions developed and implemented will not be effective, only serving to temporarily cure the immediate superficial symptoms.

Using effective problem solving skills to analyze the OEE data and to develop and execute permanent corrective actions will assure sustainable and ever improving performance.

Until Next Time – STAY lean!

OEE Where do we Measure – Part II

We have stated that policies and procedures will have an impact on your OEE implementation strategy.  One reader commented on Part I of this post stating that “OEE should be measured at the ‘design’ bottleneck process / piece of equipment that sets the pace of the line.”  While this is certainly an effective approach, the question is whether or not company policy or procedure supports the measurement of OEE in this manner.  Nothing is as simple as it looks.  Take this to the boardroom and see what kind of response you get.  We’re flexible.

As such, this becomes yet another consideration for what is being measured, how the data going to be used, and what is the significance of the results.  While we didn’t elude to a multi-series post, the comment was indeed timely.  The risk of not understanding the data could result in other inefficiencies that are built into the process that could mask either upstream or downstream disruptions.

Inventory – Hiding Opportunities

Whenever we think of the “bottleneck”, we instantly turn to the Theory of Constraints.  The objective is to ensure that the bottleneck operation is performing as required – no disruptions.  In many cases, process engineers will anticipate the bottleneck and incorporate buffers or safety stock into the process to minimize the effect of any potential process disruptions.

On one hand, the inventory, whether in the form of off-line storage or internalized, by using a buffer (or part queue), will in essence minimize or eliminate the effects of external disruptions.  On the other hand, there is a premium to be paid to carry the excess inventory as well.

While buffers or part queue’s can serve as a visual indicator of how well the process is performing, assuming the method used to calculate the queue quantities is correct, our previous post was eluding to the fact that many manufacturers incorporate contingency strategies into the process after the fact such as inventory that was not part of the original process design or reworking product on line.

Incorporating a rework station as part of the manufacturing process because the tooling or equipment is not capable of producing a quality part at rate may eventually be absorbed as part of the “normal” or standard operating procedure.  As such, it is important to manage standardized operating procedures in conjunction with Value Stream Maps to avoid degradation from the base line process.

OEE can serve as an isolated diagnostic tool and as a metric to monitor and manage your overall operation.  Company policy should consider how OEE is to be applied.  While most companies manage OEE for all processes, they are typically managed individually.  Many companies also calculate weighted department, plant, and customer driven OEE indices.

Regardless of the OEE index reported, it is important to understand the complexities introduced by product mix and volumes when considering the use of a weighted OEE index.  The variability of the individual OEE factors compounds the understanding of the net OEE index even more.

We have provided FREE Files for you to download and use at your convenience.  A detailed discussion is also provided in our OEE tutorial.  See the “FREE Files” BOX on the sidebar.

We look forward to your comments.  If you prefer, please send an e-mail to leanexecution@gmail.com

We look forward to hearing from you.

Until next time, STAY – lean!

OEE Integration – Where do We Measure OEE? – Part I

OEE Integration Part IX – Where do we measure OEE?

Our recent posts have included numerous examples to calculate OEE correctly. We also discussed integration of OEE as an effective metric for managing your processes and ultimately how to analyze and use the data to improve your profitability.  We spent little time discussing where this measurement should occur.  OEE can be measured for both manual and automated lines as well as any stand alone operation.

The OEE factors (Performance, Availability, and Quality) are process output results.  The expectation, of course, is to manage the inputs to the process to assure the optimal result is achieved.  Availability, Performance, and Quality can be measured in real-time during production. However, the results should be subject to a due diligence review when production is complete.

At a minimum, it makes sense to measure OEE at the end (output) of the line or process but this is not always ideal.  The complexity of OEE measurement occurs when single or multiple sub-cells are constrained by an upstream or downstream operation or bottleneck operation.  The flow, rate, or pace of a process is always  restricted or limited by a  sequence / process constraint or bottleneck operation.  Just as a chain is only as strong as its weakest link, so too is the line speed limited by the bottleneck operation.

We contend that the “Control-Response” loop for any process must enable immediate and effective corrective action based on the measured data and observations.  Measuring OEE in real-time at the bottleneck process makes it an ideal “Trigger Point” metric or “Control-Response” metric for managing the overall process even in “isolation” at the bottleneck operation.  Any variations at the bottleneck correlate directly to upstream and downstream process performance.

A disruption to production flow may occur due to a stock-out condition or when a customer or supplier operation is down.  While these situations affect or impact the OEE Availability factor, external factors are beyond the scope of the immediate process.

Real-time OEE requires that these events and others, such as product disposition, are reported in real-time as well.  External events are more difficult to capture in real-time and by automated systems in particular.  Operator interfaces must accommodate reporting of these events as they occur.

Reporting PITFALL – After-the-Fact events

If a quality defect is discovered several days after reporting production and all parts are placed on hold for sorting or rework, the QUALITY Factor for that run should be changed to ZERO.  In turn, the net OEE for that run will also be ZERO.  If the system is not changed, the integrity of the data is lost.  This also exemplifies that real-time data can be deceiving if proper controls are not in place.

“Where do we measure?” is followed by “When do we measure?” The short list of examples provided here are likely events that are far and few between.  If this is a daily occurrence, consider adopting the banking policy of, “adjustments to your account will be reflected on the following business day”.  Your process / system is in need of a rapid fix.

OEE is one of the few vital signs or key performance metrics for your manufacturing operation.  As such, measure where you will reap the greatest benefit and focus your attention on the process or operation accordingly.  OEE is as much a diagnostic tool as it is a monitoring tool.

Until Next Time – STAY lean!

Vergence Analytics
Versalytics

OEE Integration – Where do we Start?

Where do we Start?

We mentioned in our previous post that OEE may be an initiative that your company chooses not to do. We doubt that too many corporations would support that view entirely, however, it may certainly influence how extensive the implementation / integration strategy is.

So, where do we start?  Start with an assessment of some of your key processes to determine which one(s) may be good candidates for a deeper OEE review and analysis.  The purpose of the initial assessment is simple – just as healthy patients don’t need to see the doctor on a daily basis, perhaps a high performance process doesn’t necessarily need an overly complex OEE system.

Our most recent experience was working with a fully integrated and customized in-house solution.  The data available at any instant in time was incredible and the number of reports available was even more extensive.

The short story is, the greatest opportunities for improvement extended to the elimination of stock outs during production and the development of a more effective maintenance program.  We recommended and implemented a modified visual inventory management system and a more rigorous maintenance program that could be performed on the non-production shift.

The improvements to the net OEE were noticeable immediately and continue to show positive trends.  Maintenance work could now be performed more thoroughly and problems could be resolved with permanent corrective actions as opposed to patches and short term repairs that were implemented during the production shift.

So getting started now is as simple as collecting baseline production data using whatever reporting system you already have.  Hopefully you are able to access data by hour, or at least by shift.  We recommend downloading one or all of our spreadsheets available in our free downloads BOX on the side bar.

If you have access to your downtime sheets or a data base that can provide this information, now would also be a good time to start reviewing what data is available to you.  You should be ready to perform an initial assessment as fast as the data can be entered and reviewed.

Your initial data assessment will provide at least a small glimpse of the current process and it’s potential.  We have discussed OEE calculations in depth in our previous posts.  Please review our post categories if you need a refresher.

Until Next Time – STAY lean!