Tag Archives: Management Consulting

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 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.

Difficulties of Managers Becoming Coaches– darronrobertsconsulting.com

There have been many comments on my blog articles about the need for operators to become change agents during the Lean Manufacturing Transformation.  All of which I fully support and subscribe to.

People are the company’s most valuable assets, not the shiny new machine or swanky new IT system.  Without the involvement of the people in the area of the change from very early on, the likelihood is that the intended change initiative will fail.  The reasons for this are very obvious, none of us really likes being told what to do, how to do it or when to do it.  After the initial high profile period, many initiatives, revert back to where they were, the people are in their comfort zone and management resign this initiative to another failure, label the people and unchangeable and try to implement another initiative in exactly the same way!

If on the other hand, after you have recognised the need for change and planned a change project, set the project definition and identified the project goals, when it is time to start the change process, communicate the project properly to everyone.  I insist on both written and oral communications, so that people can ask questions, allay their fears and be reassured about their security.  Which are the real underlying fears of any new initiative.  I give a project kick off meeting for senior managers, a separate one for middle managers and then a specific project kick off meeting for each kaizen team.  I get operators into the project as early as possible, facilitate the action meetings for a few times to make sure that all voices have equal say and that all team members have parity, whether they are senior managers or operators in the company.  This is a big factor in the success of all of my projects.

That said, the lower down the organogram the employee the more encouragement they need to make their ideas heard, after all, they are the ones who actually make the product or enter the data into a system!  They are the ones that we want to own the process and these are the ones who we want to actually implement the change.

Herein lies the problem the managers!  The managers want to be everything in the change process.  They want, in fact they might even need, to show their superiors, the consultants and their subordinates their knowledge and management skill.  By doing this they are curtailing the creative effort of others.  It is the responsibility of the management consultant to change the role of the manager in the project from a manager to one of a coaching and supporting leader.  Their superiors already know their capabilities, that is why they have employed them, what they want now is for them to step up to the mark, clichés again and get the best out of the people who work for them.

I have faced this problem in nearly every project I have been involved in.  It is difficult to get a manager to change their role, months in fact, but when they see that they get results that they have not achieved in the past and they are getting accolades for leading the project and not doing the project, then perceptions do change.

The underlying fact is that some people are in positions where they don’t have the training or experience to fully undertake the role they are filling and where the company doesn’t realise there is a problem because they are profitable.  This profitability hides many problems and is accepted until there is a crisis that prompts action.  This observation is backed up by the research that I did for the dissertation of my MBA.  I was researching why British Engineering companies fail to employ modern manufacturing methods, but this can be mapped over to other change projects.