Tag: Weighted OEE

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!

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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 Topics for 2009

We changed our theme!

Today was another day to do a little maintenance. We spent a little time revamping our look and feel. We hope you enjoy the changes and find our site a little easier to navigate.  We updated our Free Downloads page to present another easier and more direct venue to get your files instantly using Box.Net. If you’re already familiar with WordPress, you know how great this widget is. Downloads could never be faster or easier.

We also took some time to update some of our pages. We would suggest, however, that the best detailed content appears in the individual articles that we have posted.

Upcoming Topics for 2009

  1. Tracking OEE Improvements:  We have noticed an increase in the number of requests to discuss tracking OEE improvements.  We have been working on a few different approaches even for our own consulting practice and look forward to sharing some thoughts and ideas here.
  2. How OEE can improve your Cost of Non-Quality.  It’s more than yield.
  3. What OEE can do for your Inventory.  Improvements should be cascading to other areas of your operation – including the warehouse.
  4. Innovation – Defining your future with OEE
  5. OEE and Agile – Going beyond lean with OEE.
  6. Best Practices – OEE in real life, in real time

If you would like to suggest a topic for a future post, ask a question, or make a suggestion, please leave a comment or simply send an e-mail to LeanExecution@gmail.com or vergence.consulting@gmail.com.  We do appreciate your feedback.

Until Next Time – STAY lean!

Vergence Business Associates

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Welcome to LeanExecution!

Welcome! If you are a first time visitor interested in getting started with Overall Equipment Effectiveness (OEE), click here to access our very first post “OEE – Overall Equipment Effectiveness“.

We have presented many articles featuring OEE (Overall Equipment Effectiveness), Lean Thinking, and related topics.  Our latest posts appear immediately following this welcome message.  You can also use the sidebar widgets to select from our top posts or posts by category.

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All downloads mentioned in our articles and feature posts are available from the FREE Downloads page and from the orange “FREE Downloads” box on the sidebar.  You are free to use and modify these files as required for your application.  We trust that our free templates will serve their intended purpose and be of value to your operation.

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Until Next Time – STAY lean!

Vergence Analytics

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!

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 Calculation Errors

Database Errors

We agree that collecting and tracking OEE data is a task best suited for a database, however, all the bells and whistles of an OEE system don’t serve much purpose if the calculations are wrong.  Before you make a significant investment in your OEE data collection, tracking, and monitoring system, make sure the system you plan to purchase is calculating the OEE results correctly.

The ultimate system is one that supports automated data collection technology to minimize data entry costs, reduces the risk of entry errors, and provides reporting or monitoring of OEE in real time.  These solutions may be purchased “off the shelf” or customized to your specific process application.

Excel Spreadsheets

If a database is the best approach, you may ask why we use Excel spreadsheets to present our examples or why we supply templates to allow you to track and monitor OEE.  We have four primary reasons:

  1. Almost everyone is familiar with spreadsheets and most people have access to them on their computer.
  2. We determined that a customized database solution being used was not calculating the weighted OEE factors correctly and the overall OEE index was also wrong.  We found it necessary to develop a spreadsheet that made it easy to validate the database calculations.
  3. Database enhancements were easier to develop and demonstrate using a spreadsheet.  We encountered a production process that was equipped with automated data collection capability and provided an overwhelming amount of performance data in real time.  It was easier to perform database queries and use the power of PIVOT tables to develop the desired solutions.
  4. Spreadsheet templates allow you to start collecting and analyzing data immediately.  It also allows the users to get a “feel” for the data.  Although the graphs and drill downs offered by databases are based on predetermined rules, humans are still required to make sense of the data.

Recommendations

In summary, validate the software and its capabilities prior to purchase.  We have observed installations where the OEE data is used to monitor current production performance and the reports generated by the system are used to support the results – good or bad.

We have also evaluated a number of other free OEE spreadsheet offerings on the web and observed that some of these also fail to correctly calculate OEE where multiple machines or part numbers are concerned.  Take a look at our free spreadsheets offerings (see the sidebar).  Our tutorial provides an in depth explanation of how to calculate OEE for single and multiple machines or parts.

The purpose of measuring OEE is to ensure sustained performance with the objective to continually improve over time.  Don’t fall into the trap of setting up a system that, once installed, will only be used to generate reports to justify the current results.

Take the time to train your team and demonstrate how the results will be used to improve their processes.  Involve all of your employees from the very beginning, including the system selection process, so they understand the intent and can provide feedback for what may be meaningful to them while, in turn, they can support the company’s goals and objectives.

Reference Posts.

We encourage you to visit our previous posts showing how to calculate OEE for multiple parts and machines.

  1. Single Process – Multiple Shifts:  OEE

  2. Multiple Parts / Processes:  OEE

  3. Practical OEE

  4. Weighted Calculations:  OEE

  5. How to Calculate OEE

  6. Overall Equipment Efficiency

If you have any questions, comments, or wish to suggest a topic for a future post, please forward an e-mail to leanexecution@gmail.com

We appreciate your feedback.

Until next time – STAY Lean!

OEE For Dedicated – Single Part – Processes

OEE For Dedicated – Single Part – Processes

Definition: 

Dedicated – Single Part – Process:  A process that produces a single product or slight variations on a theme and does not require significant tooling or equipment changeover events.

A single part process is the easiest application for a OEE pilot project.  The single part process also makes it easier to demonstrate some of the more advanced Lean Thinking tools that can be applied to improve your operation or process.  In our “Variation, Waste, and OEE” post, we introduced the potential impacts of variance to your organization.  We also restated our mission to control, reduce, and eliminate variation in our processes as the primary objective of LEAN.

We need to spend more time understanding what our true production capabilities are.  The single part process makes the process of understanding these principles much easier.  The lessons learned can then be applied to more complex or multipart processes.  In multipart or complex operations, production part sequencing may have a significant impact on hourly rates and overall shift throughput.  How would you know unless you actually had a model that provided the insight?

Process Velocity:  Measuring Throughput

Let’s start this discussion by asking a few simple questions that will help you to get your mind in gear.  Do you measure variation in production output?  Do you measure shift rates?  Do you use the “average” rate per hour to set up your production schedules?  How do you know when normal production rates have been achieved?  Does a high production rate on one shift really signify a process improvement or was it simply a statistically expected event?

Once again an example will best serve our discussion.  Assume the following data represents one week of production over three shifts:

Machine A:  Production Process Performance Report

Cycle Time (Seconds):   57      
Shift Standard (440 minutes) 440      
             
Day Shift Planned Quantity
Production Time Total Test Scrap Accept
Mon 1 440 420 1 2 417
Mon 2 440 390 1 1 388
Mon 3 440 320 1 3 316
Tue 1 440 361 1 1 359
Tue 2 440 392 1 5 386
Tue 3 440 365 1 2 362
Wed 1 440 402 1 7 394
Wed 2 440 317 1 6 310
Wed 3 440 430 1 1 428
Thu 1 440 453 1 5 447
Thu 2 440 419 1 3 415
Thu 3 440 366 1 1 364
Fri 1 440 400 1 2 397
Fri 2 440 411 1 4 406
Fri 3 440 379 1 2 376
Totals 15 6600 5825 15 45 5765

The following table is an extension of the above table and shows the unplanned downtime as well actual, standard, and ideal operating times.

Day Shift Unplanned Operating Time
Down Time Actual Standard Ideal
Mon 1 25 415.0 399.0 396.2
Mon 2 55 385.0 370.5 368.6
Mon 3 122 318.0 304.0 300.2
Tue 1 84 356.0 343.0 341.1
Tue 2 65 375.0 372.4 366.7
Tue 3 82 358.0 346.8 343.9
Wed 1 45 395.0 381.9 374.3
Wed 2 130 310.0 301.2 294.5
Wed 3 30 410.0 408.5 406.6
Thu 1 5 435.0 430.4 424.7
Thu 2 40 400.0 398.1 394.3
Thu 3 90 350.0 347.7 345.8
Fri 1 45 395.0 380.0 377.2
Fri 2 45 395.0 390.5 385.7
Fri 3 60 380.0 360.1 357.2
Totals 15 923 5677 5533.8 5476.8

The table below shows the OEE calculations for each day and shift worked.  Note that this table is also an extension of the above data.

Day Shift Overall Equipment Effectiveness (OEE)
Availability Performance Quality OEE
Mon 1 94.3% 96.1% 99.3% 90.0%
Mon 2 87.5% 96.2% 99.5% 83.8%
Mon 3 72.3% 95.6% 98.8% 68.2%
Tue 1 80.9% 96.3% 99.4% 77.5%
Tue 2 85.2% 99.3% 98.5% 83.3%
Tue 3 81.4% 96.9% 99.2% 78.2%
Wed 1 89.8% 96.7% 98.0% 85.1%
Wed 2 70.5% 97.1% 97.8% 66.9%
Wed 3 93.2% 99.6% 99.5% 92.4%
Thu 1 98.9% 98.9% 98.7% 96.5%
Thu 2 90.9% 99.5% 99.0% 89.6%
Thu 3 79.5% 99.3% 99.5% 78.6%
Fri 1 89.8% 96.2% 99.3% 85.7%
Fri 2 89.8% 98.8% 98.8% 87.7%
Fri 3 86.4% 94.8% 99.2% 81.2%
Totals 15 86.0% 97.5% 99.0% 83.0%

The results from the table above suggest that the process is running just short of world-class OEE (83% versus 90% for dedicated processes.  Note that 85% is considered world-class for multipart variable processes).  As you can see from the daily and shift results, a lot of variation is occurring over the course of the week.  This is the opportunity that we need to pursue further.  A quick scan of the data suggests that Wednesday 2nd shift and Monday 3rd shift are the main contributors to the reduced OEE.  We will investigate the data a little further to really understand what opportunities exist.

A dedicated, continuous process should yield a higher OEE since the process is not subject to continual setup and change over.  Although some model changes or variations to the existing product may exist, they are typically less disruptive.  A OEE of 90% may be an achievable target and is typical for most dedicated operations.

FREE Downloads

We are currently offering our Excel OEE Spreadsheet Templates and example files at no charge.  You can download our files from the ORANGE BOX on the sidebar titled “FREE DOWNLOADS” or click on the FREE Downloads Page.  These files can be used as is and can be easily modified to suit many different manufacturing processes.  There are no hidden files, formulas, or macros and no obligations for the services provided here.

Please forward your questions, comments, or suggestions to LeanExecution@gmail.com.  To request our services for a specific project, please send your inquiries to Vergence.Consulting@gmail.com.

We welcome your feedback and thank you for visiting.

Until Next Time – STAY Lean!

"Click"

OEE for Multiple Parts – Single Machine (Multipart Processes)

How to Calculate OEE for Single Machine and Multiple Parts.

Flexible manufacturing provides the advantage of producing many different parts on the same piece of equipment.  The same is true for processes such as stamping presses, molding machines, or machining operations.

The first question most often asked is, “How do we calculate OEE for a piece of equipment that is capable of manufacturing multiple parts?”  The overall OEE for a stamping press, molding machine, machining process, or other “multipart” process is easily calculated using the same formulas presented in our previous posts “How to Calculate OEE” and “Practical OEE“.

We presented three machines running at various rates and producing unique products.  We demonstrated how to calculate the OEE for each part individually and for all parts collectively.  The machines A, B, and C could very easily be parts A, B, and C running on one machine.  The application of the OEE formulas presented for these three machines is the same for multiple parts running on the same machine.

We have prepared two Excel spreadsheets that demonstrate how to calculate OEE for a single machine that produces multiple parts.  We have also created a separate Excel spreadsheet that will show you how to calculate OEE for Multiple Departments and Multiple Machines running Multiple Parts.

Calculating OEE for any period of time, department, or group of equipment is a simple task.  With the understanding that OEE measures how effectively Net Available Time is used to produce good parts at the ideal rate, the formula for any OEE calculation follows:

OEE (Any Category) = Total SUM of IDEAL Time / Total SUM of NET Available Time

Once this basic premise for OEE calculations is clearly understood, any combination of OEE summaries can be prepared including OEE summaries by Shift, Operator, Manager, Division, Process, and Process Type.

FREE Downloads 

We are currently offering our Excel OEE Spreadsheet Templates and example files at no charge.  You can download our files from the ORANGE BOX on the sidebar titled “FREE DOWNLOADS” or click on the FREE Downloads Page.  These files can be used as is and can be easily modified to suit many different manufacturing processes.  There are no hidden files, formulas, or macros and no obligations for the services provided here.

Multipart OEE – Confronting the Challenges

Most manufacturing environments are challenged with the task of minimizing inventories requiring more frequent change-overs or setups.  By far, the greatest challenge of multipart equipment is managing the change-over process and is usually reflected in the OEE Availability factor.

We recommend including setup or change-over time as part of the unplanned downtime calculation.  Then, by definition, one method to improve Availability is to reduce change-over or setup time.  Reductions in change-over time will also be reflected by improved Availability.  The Availability factor is now a useful metric for tracking improvements.

According to our definition, change-over time or setup time is measured from the end of the current production run (“the last good part made”) to the start of the next production run (“first good part produced”).  We have worked with some manufacturers that decided to do change-overs on the off shift so that they could avoid the down time penalty.  They clearly didn’t get the point – deferring the time when the change-over is performed doesn’t change the time required to perform it.

Several programs such as SMED (single minute exchange of dies) are available and, when coupled with best practices for quick die change (QDC) or quick tool change techniques, can greatly reduce the time lost during your tool change events.

We will consider posting best practices for SMED or QDC and would welcome any reader comments in this area.

We always welcome your feedback and comments.  Feel free to send us your questions or comments to leanexecution@gmail.com

Until Next Time – STAY Lean!

"Click"

How to Reduce Costs with OEE: Cost Control

OEE is a great metric to help identify where you may be incurring losses in your processes or operation.  As one of the goals of implementing a Lean strategy is to reduce costs, it only seems natural that we should be able to determine what processes to focus on that are driving the greatest losses.

From the example developed in our previous posts we determined that the OEE and related factors for our three processes were as follows:

Machine Availability Performance Quality OEE
A 92.97% 88.26% 97.77%  80.22%
B 96.04% 77.23% 94.44% 70.05%
C 95.16% 61.70% 95.20% 55.90%

Based on the OEE results, one would be inclined to take a look at Machine C as it has the lowest OEE.  Is this really the greatest opportunity?  The only way to answer the question is to understand what factors are driving costs and ultimately affecting profitability.

The performance factor for machine C is definitely pulling down the OEE for this process.  What would you think if the machine is 100% automated (no labour) and the cycle time, although it may be less than standard, is still meeting the takt time to meet customer demand?  Is there really a cost?  Of course there is, but the impact to your business may be minimal in terms of cost when compared to the other machines.

It is clear that we need to develop a model to understand what losses and ultimately costs are associated with each of the factors.  In turn, we will be able to better understand the overall OEE.

What costs do we consider?  We recommend keeping the model simple.  There are typically three cost components associated with any given process or product:  Material, Labour, and Overhead.  Burden is another term used for Overhead and we will use these terms interchangeably.

Our goal over the next few posts will be to develop a simple cost model for each process and, in turn, determine which one may be the process of choice for improvement.  For now, we will provide a general discussion of some of the potential cost considerations.

Improving quality typically yields the greatest return on investment because all of the cost elements stated above are impacted by the Quality factor.  Raw material, Labour, and Burden are all expended to produce a part scrap part.

The costs associated with Quality losses are further challenged when considering the number of parts that would have to be produced in order to recover these lost costs.  If you are lucky enough to enjoy a 10% profit margin (clear), then, at a minimum, 10 parts would have to be produced for every part scrapped.  Of course, more parts would have to be produced to recover other infrastructure costs incurred including documentation, record keeping, and scrapping of the actual parts.

Performance losses typically affect labour and overhead.  Labour losses are easy enough to understand.  If a machine is operator dependent, then we will have to pay a person to stand at the machine to run it.  If it is running slowly, more costs are incurred to cover the additional labour time.

In many cases, direct losses related to overhead are sometimes difficult to assess unless a truly activity based costing system is in place.  The reason for the complexity arises because some of the costs are “fixed”.  Because the equipment exists, expenses such as depreciation or property taxes are incurred whether or not the equipment or, for that matter, the plant is running.  The performance of the machine or any of the other factors for that matter won’t change this fact.

Availability then becomes somewhat more obscure when it comes to calculating hard costs.  If the labour can be redeployed to another process when a machine goes down, perhaps some of the labour losses can be avoided.  If not, then waiting for a machine to be repaired or material to be delivered is a real loss that should be addressed.

Intangible costs are also difficult to quantify but we should be aware of their existence.  The costs associated or related to poor OEE may include overtime, expedited freight, and infrastructure costs related to extra handling of material or management of non-conforming material (containment, extra inspection, rework, and scrap).  Although this is a relatively short list, it addresses the most obvious potential losses.  With a little more thought, the list could easily grow longer.

Other key metrics in your facility such as customer delivery or quality performance indicators may also point to problems that can be traced directly to poor OEE performance.  Although difficult to measure, a company’s competitive position is compromised when efficiencies are low and eventually the costs of poor performance make their way into the “burden” costs required to manage the operation.

While OEE is an effective metric for operations, on its own, it does not provide a direct indicator of real financial losses.  As Lean Practitioners we are challenged to provide an analysis that not only improves the metrics of the business but also translate into real financial improvements on the balance sheet and ultimately – the bottom line.  We would suggest that OEE is a time driven metric (asset time management strategy) versus our proposed COEE which is Finance or “Value” driven (cost management strategy).   We are presently developing a model that will allow your OEE data to be sensitized with cost data as demonstrated by the table below.

We have coined the term COEE or Cost of Overall Equipment Effectiveness.  Consider the following OEE results converted to Cost based drivers using standard costs as our baseline.  The sample data and spreadsheet used to calculate this data will be available as a download soon.  The overall spreadsheet is quite large and based on a fully detailed three shift operation.

Cost driven OEE model - Summary
Cost driven OEE model - Summary

Our OEE cost model clearly presents the real costs or “losses” incurred per part.  Our Weighted OEE Cost Model will change the way you view OEE data, enabling you to set priorities and identify real, quantifiable, opportunities for improvement.  The above snapshot represents the goal of our COEE project – a clean, clear, summary of the losses incurred correlated directly to your OEE index.  Another advantage is that the Availability, Performance, and Quality factors are recalculated based on cost and presents a realistic breakdown of losses for each of these factors from a financial perspective.  Our spreadsheet presents an advanced OEE example that will bring real value to your OEE implementation strategy.

NOTE:  The fully developed spreadsheet is available from our FREE Downloads page or from the FREE Downloads box on the sidebar.

A well implemented OEE strategy should become evident on the balance sheet through improved material utilization, reduced labour variance (straight and overtime reductions), reduced scrap costs, reduced rework costs, and other burden account reductions.

Take quick, effective, and efficient action to solve the problems having the greatest financial impact to your business.  Last but not least, don’t confuse activity with action.  Decisions are not actions and talking about a problem or even writing about it could be construed as activity.  Real actions produce real, measurable, results.

Change requires Change.  Profit is to business as oxygen is to humans – you need it to survive. 

We have created a number of Excel spreadsheets that are immediately available for download from our FREE Downloads page or from the Free Downloads widget on the side bar.  These spreadsheets can be modified as required for your application.  There are no hidden files, formulas, or macros and no obligations for the services provided here.

If you have any questions or comments, feel free to send an email to LeanExecution@gmail.com

Until Next Time – STAY Lean!

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