Lean Tools – Overall Equipment Effectiveness OEE –darronrobertsconsulting

In these troubled times for business, there is a need to reduce the costs associated with running the business.  If we take a Middle Eastern regional example, 60% of the manufacturing cost is raw materials, 30% is overheads and 10% is direct wages.  If the cost of the overheads or fixed cost is $10,000 per month and you produce 1000 units, then the fixed cost per unit is $10.  If you produced 4000 units per month, the fixed cost would still be $10,000 per month, but the fixed cost per unit would have reduced to $2.50.  You would have the increase in variable costs associated with increase in production and you would also have the increase in sales revenue and profit!  The increase profit on fixed cost alone is $30,000 in one month!

So how do we measure efficiency?  The best method is to use Overall Equipment Effectiveness or Efficiency as some term it, OEE.  This is a powerful driver for change, it is not the only one, but it is a very powerful one.  As we have seen it is linked to profit.  It should be linked to capital expenditure.  If the OEE value is not in the 70% range, why buy expensive new capacity over working, at a cost, but a lower cost than CE to improve the current value stream and make it efficient.  In my opinion it should form part of the job description and more controversially it should be a driver for the remuneration package.

OEE is one of the basic key performance indicators, KPI, that every business should monitor as increasing it and sustaining in requires the whole operation to perform as a team, not as individual functions or managers.  Maintenance, Production and Quality functions all have their role to play in this measure.

OEE looks at how you use the planned operation time in terms of availability, productivity and quality of the value stream.  This can be expressed as:

OEE = Availability x Productivity x Quality.

Let us quickly define these terms.  A company plans to work for 24 hours per day, to run four different products. For each of the products there is a tool change, each change over from good part to good part takes 144 minutes.  The operation was designed to run at a Takt time of 500 units per hour, the current rate is 320 units per hour.  From what is produced there are on average 26 quality rejections per hour.

Availability is the time that the process is actually operating, there are two big losses involved in reducing the availability time, recorded breakdown time and set up and adjustment time.

The available time is the (planned time – down time)/ planned time x 100.

In our case ((24 x 60) – (4 x 144))/ (24 x 60) x 100 = 60%

Giving 864 operating minutes out of 1440, or 14.4 hours out of 24. This is Operating Time.

Visual Example of OEEProductivity is the rate of operation or speed of the operation.  The two big losses in this category are unrecorded small downtimes of less than 5 minutes, called idling losses and increasing cycle times or operating slower than the required rate.

The productivity is number produced / number planned x 100

In our case 320 / 500 x 100 = 64%

Out of the 14.4 hours of Operating Time we effectively used only 64% of it, giving us 9.2 out of 24 hours of Net Operating Time.

Quality is defined as the “good” product produced during the Net Operating Time.  In our case some of the valuable time was taken up producing out of spec product! There are the final two big losses here in process scrap and start up scrap.

Quality is (Number produced – number of bad quality) / number produced x 100

In our case (320 – 26)/320 x 100 = 92%

Of the 9.2 hours of Net Operating Time there is only 8.5 hours of Valuable Operating Time from the planned 24 hours!

OEE = Availability x Productivity x Quality

OEE = 60% x 64% x 92% = 35%

This means that 35% of your time is adding value, 65% of your time is non-added value, 8.5 hours of added value 15.5 hours of non-added value!

The world class bench mark for OEE is 85%.  This is not sweating the process, but inputs enough pressure to keep employees alert.  There are times included for change overs, maintenance, training and customer order flexing.

The World Class benchmark OEE = Availability x Productivity x Quality = 90% x 95% x 99% = 85%

So now you have calculated your OEE, what do you do?  Use the six big losses to pinpoint where the problems in the value stream are.  For manual operations the problems are normally organisation and training; for automated processes they are normally change overs and maintenance.  Use the Lean Tools, VSM,5S, 7 Wastes, Visual Control / Visual Management, Standardised Work, SMED – Quick Changeovers and TPM – Total Preventative Maintenance to reduce the wastes and improve the business.  This will increase the quality and delivery levels given to you customers while reducing your internal costs.

This like most of my posts is a brief  introduction / overview of a part of Lean Manufacturing.  For more information, leave me a comment or email me.


Lean Tools Value Stream Maps – darronrobertsconsulting

Value Streams are all the actions, (value added and non-value added), currently required to bring a product or a service through the operation flows from the input, raw material, into the arms of the customer, finished goods or services.

Transfer these actions to a sheet of paper and you have a value stream map, a graphical representation of the operation. This is used to visualise the operation and get everyone in the company talking the same operations language.

In these days of technology, don’t be tempted to waste your time learning a software package to get a nice, neat and perfect electronic version.  Walk the value stream from the customer contact to the supplier contact.  When you understand the number of process steps you can start drawing the map on an A3 size sheet of paper with a pencil and ruler.  This is a living document and should be updated as necessary and displayed in a relevant place.

Walk through process of the value stream and collect as much data as you can from the process.  Do not rely on hearsay, or past reports, capture the process as it is today.  Data that you want to capture are cycle times, change over times, up times, defect rates, number of operators and anything pertinent to the process.  Current Value Stream MapYou also need to capture what happens between processes, how much work in process is there, how much waiting time and anything that is needed to get an understanding of what happens in the value stream.  Connect the process steps with connectors, push arrows, pull connectors or supermarkets.

The last part of the material flow is to draw in the delivery to the customer and the delivery of raw material to the company.  Use a pictogram of the delivery method, a truck, train or plane etc. How often you get deliveries and how often you deliver.

Now that the material flows have been mapped you can start on the information flows.  The material flows are anticlockwise from the top right of the map; the information flows are.  Draw in the communication from the customer to the company, the company to the supplier and the company to the process for planning.  Include how often the customers schedule is communicated; how often you communicate with your suppliers and how often you communicate with the processes, i.e. daily schedule.

The last step in drawing the map is to complete a timeline at the bottom.  Add up the time for all of the process steps and waiting time between the processes to find the total time taken to travel through value stream, this is the flow time.  Then add up all of the added value times, that is, process steps where you are changing the form, function or fit of the operation or service.

Congratulations, you have drawn a current value stream map, for one of your value streams.  Like all maps it is used to guide you on a journey.  Compare the total time or flow time with the value added time or touch time.  If the times are different and mostly they are vastly different, this is the starting point for the improvement journey.  Similarly compare the total number of process steps, with value adding steps.  Only the value adding steps or times are paid for by the customer, the company pays for the rest, reducing profits!

Develop an improvement plan to reduce waste through the value stream.  Use the lean tools 5S, 7 wastes, visual management / visual control and standardised work. Form kaizen teams to address the identified problems and create flow in the value stream.

This is a brief of how to create and use current value stream maps.  If you need more information, leave a comment or send me a message and we can discuss you needs.

Lean Manufacturing Tools – Visual Control – darronrobertsconsulting

All the Lean Manufacturing tools are powerful drivers of waste reduction and improved efficiency.  The third building block of Lean manufacturing is the Visual Management / Visual Control tool.  These are two similar tools.  Visual Management deals with historic data, team photographs, productivity, efficiency, quality that was produced last week, last month or last year.  It is a reference for improvement.

Visual control is what I want to concentrate on in this article.  Visual control is the ability to enable everyone in the workplace to see in clear, simple and visual form:

  •  Indicators of the current situation
  •  Identification of normal conditions
  •  Identification of abnormal conditions
  •  Identification of the correct countermeasure to resolve abnormal condition

There is no digging into computers to retrieve reports, no waiting until the following day for managers to discover that there was a problem in operations.  The process indicates its current state via displays, read outs, clocks, andon boards and good old fashioned operator completed plan vs. actual reports.

This tool allows problems to be shown in real time that then permits the correct people to be informed to go to the operation and solve the problem.

The tool is simple to understand and can be simple to employ.  However, it is little understood and little used.  Operators are, initially afraid to use it because they are being “scrutinised” and they think that there is a problem with their performance.  Supervisors, who are not people managers, are reluctant to manage the process because it makes operators do more work, that as described, they do not want to do.  If there is a culture of “fads” then it will go away anyway!

The power of this tool when it stops becoming a tool and becomes the normal way to work makes the company agile.  Operators become aware that it is not a stick to be beaten with, but a tool to ask for help with their process, that also includes their performance.  Supervisors know that it is helping them achieve their targets if the operators are performing at the required rate.  Managers are there to solve the problems that the supervisors cannot on their own.  If the operation is running Just in Time (J.I.T.) anyway, there is no luxury of Work In Progress (W.I.P.) to hide the problem, they have to be solved quickly, even if that is in the middle of the night shift.

So this tool helps in attaining schedules, keeping up efficiencies (O.E.E.), problem solving and flow through the company.  So why is it used so little?  Is it the fact that we love technology and prefer reading reports on computers at our leisure or like I have described in an earlier article that managers and supervisors are in positions that they are not qualified to do or is it the fact that managers have not heard of the tool or do not understand the power of Visual Control?

Think about the benefits of using Visual Management / Visual Control in your company.