Tag: OEE metric

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: 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

Cost Weighted OEE and other free OEE Spreadsheet Templates

OEE Spreadsheet Templates – One Click Closer:

As the days of summer are upon us, we thought it would be good idea to make it easier for you to access our free downloads so you can spend more time doing the things you want to do.  We have updated our site and we are pleased to offer you four ways to download our OEE spreadsheet templates:

  1. We added a new page titled “Downloads
  2. We also added a new Link List to the sidebar titled “Download Files”
  3. We made the FREE DOWNLOADS orange Box file a little larger and easier to read.
  4. We will include direct access links in the content of our posts.

Your OEE templates are literally a click away – saving you time and effort.

Cost Weighted OEE – Advanced OEE Template

We have received numerous requests for our “Cost Weighted OEE” template.  Many people are starting to realize that the OEE factors for availability, performance, and quality are not directly correlated.  Of course, we have also discussed our concerns in this regard on several occasions and will state again that OEE is not a stand alone metric.  As a vantage point metric, it can provide a valuable perspective on operations in real time, however, it is only one part of the overall equation.

Rex Gallaher wrote an excellent article titled “OEE Oxymoron; Are all factors truly equal?” that was published by ReliablePlant.com on February 18, 2009.  This article also conveys the premise that the OEE factors are not equal.  Understanding the financial impact of each of the OEE factors will assure that efforts and energy are focused on activities that will provide the greatest return on investment for your company.

To celebrate our site updates, we thought we would give you at least one more reason to see how our download venues work.  A copy of the Cost Weighted OEE Template is now available through all three of our download venues or you can Click HERE to get immediate access to the file.

For a detailed discussion of OEE and how it can (and should not) be used to identify opportunities to eliminate waste and reduce costs, click on one of the links below:

  1. OEE and Cost Control – Published in December, 2008
  2. 6 Things OEE is NOT! – Published in April, 2009
  3. Make or Break with OEE – Published in May, 2009

In light of the current economy, many companies have been forced to look inward to find “new” money.  OEE is one of the few lean metrics available that can help your organization to focus on the greatest opportunities with measurable returns.  We trust the templates and spreadsheet solutions that we offer here will help you in your quest.

For more information, click on the Categories section of the sidebar to search for other articles on our Blog that may be of interest to you.  They can provide significant insight into the many aspects of operations and OEE and may serve as part of your ongoing training efforts.

We appreciate your feedback.  Please feel free to leave a comment or send an e-mail with your suggestions for a future topic, comments, questions, or concerns to leanexecution@gmail.com or versalytics@gmail.com

Until next time – STAY lean!

How OEE can improve your Inventory

Once you have established a robust OEE system, you should also be reaping benefits in other areas of your organization.

We will be offering some insights into the other performance metrics such as inventory over the next few weeks. Improved availability, performance, and quality will all have an impact on your inventory and materials management processes. Inventory turns is one metric that should be improving as your OEE improves. If not, perhaps there is an opportunity to integrate OEE even deeper into your organization.

In a truly lean organization, other vantage point metrics will provide evidence of a well integrated OEE system. Metrics such as delivery, quality (ppm), labour efficiency, lead time, mean time between failures, mean response times, down time, turn over, and financial performance indicators are all directly or indirectly affected by improvements to your operation and OEE.

We will discuss the impact of OEE on these “other” metrics over the next few posts. Remember, we also offer excel templates at no cost to you. Click on the “BOX” files on the sidebar to get your free templates today! Our templates offer more than a simple OEE calculator – they can be used immediately with little or no modifications to suit your processes.

Until next time, STAY lean!

Vergence – Lean Execution Team.

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

Make or Break with OEE

Reward systems, bonuses, and other forms of compensation have been the topic of many newspaper articles and news broadcasts as of late.  Although attention has turned toward the viability and sustainability of the manufacturing sector, there are many of us who question how the performance of these companies is measured and, even more so, rewarded.

While executive compensation is typically subject to scrutiny in and outside of most organizations, those rewards that are internal to an organization are seldom challenged or checked.  How do we really measure the effectiveness of our leaders and management?

Our industry leaders are truly being tested as today’s economy has further challenged many organizations to make additional substantive cuts to their operating budgets.  These times all but test our own survival strategies as well.

Executives and management at all levels continue to look at where and what to cut – this usually translates into “WHO should be cut”.  It is time for leadership to recognize that current management methodologies and infrastructure must change – the organizational structure must become seamless in its approach.

In the late 1940’s and early 1950’s, Toyota was faced with the same dilemma our current North American auto manufacturers are facing.  They didn’t just try to figure out how to build a better car they also figured out how to build them more efficiently and effectively.  Toyota  didn’t replicate the existing North American systems, they re-invented them.

Consumers want a quality product.  The what, where, when, and how it is built are not really their concern – as long as it’s available when they want it!

Discussions should be focused on the METHOD or the HOW things get done (systems and / or processes) not necessarily WHO does it.  Rationalizing the current business structure and what can be done to improve it is required.  It is difficult to get your team involved in problem solving and strategy meetings when the only thing on their minds is “who is left after the storm blows through”.

The Axe Falls … on operations

Typically, operations becomes the focus of most cost cutting endeavours.  In the automotive industry, plant closures are devastating communities and the ripple effect of these closures puts us on the brink of another wave of closures at the supplier level.  The most recent example supporting this trend is Chrysler’s announcement to close several of it’s major plants in North America.

Unfortunately, eliminating excess capacity is only a short term solution.  The true change events will occur when the infrastructure challenges are addressed and a new “fresh” culture is introduced and embraced by the “new” management.

If we learn anything during these times, we quickly discover the difference between the things that matter most and those that don’t.  Now is the time to find out what is really necessary and matters most to your operations.  A corporate, system level, 5S process is required to really clean up and move forward.

Bankruptcy can make the discovery process very quick and easy.  Liquidators are also very quick to give you the real value of your assets.  Peter F. Drucker suggested that abandonment was a necessary part of the management process.  The timing, however, is much better when it is on your terms and not those of the bank.

OEE – does it work?

Overall Equipment Efficiency, or OEE, is one of those metrics that should survive the test of time.  We have discussed the many positive attributes of using OEE as an effective metric for managing your manufacturing operations.  If the culture in your company is one of candor and open and honest communication, then OEE can definitely be used as a metric to help drive change and improvements.

In the wrong culture (selfish versus company gain), metrics such as OEE can be used and abused quite readily.  We would caution you to think about how improvements to OEE are rewarded.  At a minimum:

Reward the action or the change – not the result.

Rewarding the action allows you to identify what has been changed or improved and will encourage others to duplicate this type of activity.  The OEE result serves to validate the effectiveness of the change or improvement.  This strategy also ensures that people are focused on solutions and tangible actions as opposed to “tweaking the system” to make the numbers look better.  Getting a better stop watch may improve the accuracy of the measurement, unfortunately it won’t save you a dime unless something else changes.

What’s next

Visioneering and Innovation are imperative to our continued future successes.  The electronics industry continues to churn out new ideas and technologies at an amazing rate of change.  Some argue that it’s easier with electronics because …

Is it really?  Or is it that we have learned by the very practices of leaders in the electronics field that change is inevitable, encouraged, embraced, and most importantly expected.

The automotive industry and manufacturers in general need real and true competition.  There is absolutely no room for complaceny.  If the automotive industry was anything but close to embracing this type of culture, cars would be much different today.

Perhaps this is a bit of a rant, however, we seem to be too set in our ways.  Protecting past methods, preserving old cultures, and confusing complexity with genius.  Museums and memorials have their place, just not in today’s manufacturing facilities and management practices.

Until next time – Stay LEAN!

OEE – A Vantage Point Metric

The automotive industry has recently been plagued by doom and gloom as the economy continues to erode any chances for a rebound.  Chrysler has already met with the reality of an uncertain future and has subsequently filed for bankruptcy.  Unfortunately, as Chrysler plants shut down and cease operations for the next 30 – 60 days, suppliers will also feel the impact as well.  This will affect other OEM’s such as GM, Honda, and Toyota, as the remaining suppliers will not have the sales to keep their doors open to support these demands.

These times demand extremely effective use of resources to minimize waste and reduce losses in all facets of the business.  For this reason, it is a good time to revisit the metrics you use to manage your organization and to make sure that they are providing the right information, at the right time to manage your business effectively.  This post was also presented on our companion blog.

We use the term Vantage Point Metrics to identify those metrics that are core to the day to  day management of your business.  The objective is to distinguish these metrics from the “noise” that is easily created by other less significant metrics.  (While it is important to measure everything that is important to your business, not all measurements are equally important at all times or at the same time.)

Determining Vantage Point Metrics is simply a matter of identifying those metrics that are critical to the profitability of your operation.  A few simple examples include Safety, Overall Equipment Effectiveness (OEE), Labour Efficiencies, Profit, Absenteeism, Cost of Non-Quality, Delivery Performance, Performance to Schedule, and Inventory Turns.

Climate Control

Keep the number of vantage point metrics to a minimum.  Note that we are NOT suggesting that you stop measuring.  There is a difference.  Too many metrics can create noise and loss of focus.  What we are suggesting is that metrics that are critial to the day to day operation must be reported more frequently than others.  What is important to who.  Can the metric be measured in real time?  Can the people reviewing the data make changes in real time?  If the data being collected cannot be used to make decisions to correct a current trend then why is it being measured?

Although we can’t control the weather, we certainly spend a signficant amount of time, money, and resources to get up to the minute data and short term forecasts.  Only the few key metrics are reported with an explanation of the various environmental influences that may affect the forecast in the short term.

In a similar way, Vantage Point Metrics are those few that have a direct relationship or impact on the current business climate.  Changes in the weather may cause us to alter both personal and business plans.  Agriculture, NASA, and Aerospace companies rely on the weather as a dynamic component of their business.  Vantage Point metrics should assimilate the same sensitivity to climate change in your business.

Measuring for measurement’s sake is waste.  Measure critical to success factors that can be used to alter or change the course of business as required.  Real time data collection in conjuction with short response-control loops is the key to using these metrics successfully.

Consider managing your personal cash flow in real time versus performing a month end summary.  Anyone who has purchased fuel for their vehicle this past year is keenly aware of the fluctuations in pricing and the cost of filling the tank.  As the variation in price increases, we in turn become more sensitive to our purchasing habits.

What is the Vantage Point Metric that would allow you to manage your fuel purchases?  Is it the price per gallon or litre at the gas station?  Could it also be worthwhile to monitor the price of a barrel of oil?  Our logic suggests that a direct correlation between price at the pump and the cost of barrel of oil should exist although our experience strongly suggests otherwise.  Repair costs, refinery costs, weather, and the value of the dollar, all seem to have an impact on the price at the pump.

Fortunately, gas pumps display the price in real time as the tank is being filled.  Knowing our current cash position allows us to fill our tanks to such an amount that we don’t exceed our ability to pay for it.  This is measuring and managing in real time.  The Vantage Point metric in this case is CASH.  It is possible to manage cash flow in real time to determine what and how much can be purchased.  If cash is the Vantage Point metric, it becomes clear that many business transactions can be controlled and understood from this one simple metric.

Consider what Vantage Point Metrics can do for your business.  Focus on the few metrics that provide the greatest level of control and management of your business.  Keep it simple and keep it real.  Keep measuring and be prepared to drill down when you have to.

Overall Equipment Effectiveness or OEE provides a single metric that combines Availability, Performance, and Quality into one unique index.  It is very possible to drill down into the details of the metric as required.

Inventory turns is another Vantage Point metric that tells a story much greater than just how well material is moving through your organization.

Training

Turning ordinary metrics into Vantage Point metrics requires training all employees, associates, or business partners.  They need to clearly understand what the metric is measuring and the various aspects or elements of the business climate that can affect positive change.

When the weather is reported on the news, the forecast is typically accompanied by an explanation of the reasons for the current weather conditions and future forecast.  They don’t just post a weather map on the screen and leave it for the viewer to determine the emerging weather patterns.  Similarly, Vantage Point Metrics require supporting details and explanations to educate the team on the meaning of the data and how to respond to the current conditions and what the effects will be if we don’t.

Metrics can be extremely valuable if selected and used wisely.  Easy data is not necessarily meaningful data.  Collecting and analyzing the data is the beginning not the end of the process.  Measuring absenteeism for example is not a difficult task.  Understanding why certain behavior patterns exist and affecting change to produce positive results is the journey to be pursued.

The Six Sigma DMAIC model (Define, Measure, Analyze, Improve, and Control) suggests that we already know that a problem exists.  This model does not support Vantage Point Metrics in that a defined outcome or goal has been established.  The data is analyzed to determine and define the root cause for the current trend.  Improvements are then formulated into an action plan, implemented, and monitored accordingly.  The metric continues to serve as continual feedback as actions are taken.

You can either wait for the problem to define itself or implement Vantage Point Metrics that will prevent the problem from occurring all together.

Most people have had the opportunity to drive a car or truck and know that we need to obey the rules of the road.  A speeding ticket is a problem that is readily defined.  It is a problem not only because it could cost you some money but repeated occurrences could also result in the loss of your licence to drive.  To avoid this dilemma from happening you can monitor your Vantage Point Metric (the speedometer) and respond to the current conditions – all in real time – and avoid the ticket.

When or if we do receive a speeding ticket, it is the result of a conscious decision to speed, not mere fate or bad luck.  As such, the issue, like many, becomes that of not adhering to policy or standard operating procedure.

Focus on the vital few Vantage Point Metrics to achieve stability in your organization.  As problems are resolved and opportunities to improve are pursued, new metrics will begin to surface that will bring even more positive results to the bottom line.

Until Next Time – STAY lean!

We appreciate your feedback and your comments.  We do not sell, share, or distribute your information with any third party sources.  We here for you!

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 Integration: What Software should I use?

OEE Integration Part VII – What Software Should I Use?

Many readers have noted that we have avoided recommending a specific OEE software solution.  The reasons for this are as varied as the number of companies looking to implement OEE in their facilities.  Our experience suggests that every manufacturing facility has differing or varying needs.

A recent Google search produced as many as 136,000 results for the term “OEE Software”.  So it would appear that there are literally thousands of potential solutions available to support your OEE implementation ranging from off the shelf to highly integrated software technologies.

Our goal is to share our OEE experiences and help you to understand the various elements of OEE.  By sharing our insight, experience, and knowledge, we serve to provide you with the information you need to make a well informed decision before purchasing or implementing a system for your organization or company.

OEE Solution Options

There is no “one size fits all” solution.  It is important to assess your current OEE performance and determine what solution is best for your situation.  At a minimum we would recommend a solution that provides both OEE data in real time using operator friendly shop floor display technology and a database platform to collect and store the data for later analysis and possibly to support your production reporting processes (ERP).

Note that we did not state the type of display technology – this could range from a simple hand chart on a white board to a plasma display driven by a real time computer system.  Our recommendation does not stress the need for high technology; it simply suggests you need something.

By way of analogy, in an emergency room, a doctor will assess every patient.  While some patients require a simple test or a stitch or two, others may end up in an Intensive Care Unit with all types of monitoring equipment connected to their bodies to monitor and manage their current condition.  Different situations require different degrees of invasive technology or intervention

Could it be that you may find OEE is something you don’t have to do at all?  We’ll discuss this in more detail later.

Until next time – STAY Lean!

Vergence Analytics

OEE Integration – Part IV

OEE and APQP – New Equipment / Program / Process Launch

In parts I – III we discussed the role of leadership to define policies and procedures.  We also discussed developing the infrastructure of your team through training and development.  However, this still doesn’t put OEE at the forefront of your company.  If the goal of your company is to achieve world class performance, it is easier to make sure the process can achieve this level from the start.

In this respect, although most OEE implementations focus on current processes and equipment, we recommend a parallel integration of new initiatives, such as OEE, into the Advanced Product, Process, and Quality Planning stages of a new program launch.  This will be referred to as APQP activity for the discussion that follows.

OEE is rapidly becoming one of the key criteria to be met for new equipment purchases or process launch activities.  This also presents an opportunity for the leadership of the company to take an active role in defining the process performance expectations and, more specifically, OEE for any process procurement / purchasing activities.

Advance Process and Quality Planning (APQP)

The objective of APQP activities is to ensure the engineering and quality aspects of the product meet the customer’s requirements for its intended purpose or function and that the manufacturing process is capable of making a quality product at rate.

New program launches present a fresh platform to clearly define the process performance objectives specifically with regard to OEE.  This also presents an ideal opportunity to explore and develop the technologies that will or can be used to provide OEE data in real time – by design.

The OEE data collection, monitoring, and reporting technology also forces the formulation of a clear policy and definition for OEE.  The system can be used as part of the equipment validation process and, in turn, also used to verify the performance expectations of the process itself.

Another advantage of pursuing OEE objectives at the onset of your APQP activity is that the equipment and tooling suppliers can be included in the development process.  This will provide adequate time to define the scope of the project and OEE criteria, including how OEE will be measured and training your suppliers accordingly.

The introduction of statistical process control (SPC) into the automotive industry many years ago caught many tooling suppliers by surprise when statistical evidence of process capability for the parts produced by the tool was required before they would be paid.  This led to many additional hours of “rework” to improve the tools.  Suddenly, feasibility assessments, product design reviews, and gage or fixture designs gained more significance and were brought into the forefront of many discussions before the next set of tools were ever designed or built.

The same has occurred with the introduction of OEE.  While OEE has been around for a number of years, it too is growing in popularity as a true manufacturing metric.  For this reason, it is imperative that the equipment or tooling supplier understands what comprises the definition of OEE.  A machine running multiple parts must support multiple changeovers or setups, varying machine rates (cycle times), and quality criteria.  It is important to define who is responsible for the various aspects that may affect or impact each factor of OEE.

We will discuss this in more detail in our next post.

Until Next Time – STAY lean!