USING OEE AS PART OF A LEAN MANUFACTURING PROGRAM TO IMPROVE FACTORY FLOOR PRODUCTIVITY AND PROFITABILITY

Parsec Automation Corp 3000 East birch street, ste. 104 brea, ca 92821 Phone 714.996.5302 facsimile 714.996.1845 [email protected] www.parsec-corp.com

All product names and/or logos are copyrights and trademarks of their respective owners. None of theseowners has authorized, sponsored, endorsed, or approved this publication. The opinions expressed are those of the author. The author and publisher have made the best efforts to produce a highquality, informative and helpful book, but they make no representation or warranties of any kind with regard to the completeness or accuracy of the contents of the book. They accept no liability of any kind for any losses or damages caused or alleged to be caused, directly or indirectly, from using information contained in this book. Screenshots in this book are directly from publicly accessible file archives. They are used as "fair use" under 17 U.S.C. Section 107 for news reportage purposes only, to illustrate various points that are made in the book. Text and images available over the Internet may be subject to copyright and other intellectual rights owned by third parties. 3 Fatal Mistakes Senior Pharmaceutical Executives Commonly Make When They Attempt To Reduce Downtime and Improve Manufacturing Productivity In the Face Of Severe Capital Constraints... ...Reduced Staffing... ...and a Weak, Post-War Economy... ...And How You Can Avoid Them By: Scott Klages is © 2005 by Parsec Automation Corp. All rights reserved worldwide. First edition: May 2003. No part of this publication may be stored in a retrieval system, transmitted, or reproduced in any way, including but not limited to digital copying and printing without the prior agreement and written permission of the publisher. Parsec Automation Corp. 3000 East Birch Street, Ste. 104 Brea, CA 92821 Ph +1 714-996-5302 http://www.parsec-corp.com/

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Table of Contents Overview ........................................................................................ 4 Automated Calculation of OEE ........................................................ 7 Back of the Envelope Calculation of OEE......................................... 8 Leveraging Small OEE Improvements to Generate Huge Business Opportunities........................................................................ 10 The Bottom Line ........................................................................... 11 About the Author .......................................................................... 12

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Overview Many companies are focusing on LEAN manufacturing to achieve worldclass productivity and increased profitability in the face of intense global competition. Although LEAN initiatives get plenty of attention, most manufacturers have yet to fully commit to implementing such programs due to absence of valid metrics for accurately measuring and driving productivity without disrupting manufacturing operations. There is a solution! OEE (overall equipment effectiveness) has emerged as the methodology of choice for manufacturers to uniformly and consistently measure the key factors that directly affect productivity and efficiency. OEE makes it possible to turn the gray area of productivity into a scientifically determinable methodology that may easily be adopted by most manufacturers. Many manufacturing companies have been measuring the efficiency of their lines and work cells in such a way as to “mask” many causes efficiency loss. Over the years, management focus has shifted to reporting high efficiency numbers, instead of considering how the numbers are arrived at. One of the reasons OEE is such a valuable methodology is that it allows you to look at various sources of lost time and lost production to identify the areas where significant improvement can be achieved. OEE is one of the leading approaches for accurately measuring the true plant productivity. Successful Continuous Improvement programs are based on accurate, consistent and real-time information on factors that affect operational effciency, and a real commitment to the implementation of corrective actions. Studies show that best-in-class manufacturers with metricsbased Lean programs significantly reduce the manufacturing cycle time by as much as 50% resulting in lower overall cost and higher profitablity. These are benefits that must not be overlooked.

FIGURE 1 – Example of a successful continuous improvemet cycle.

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So, what is OEE? By definition, OEE is the product of Availability, Performance, and Quality percentages: OEE = Availability * Performance * Quality Each one of these OEE components represents factors that result in loss of Operating Time. We begin with Total Available Time and subtract planned shutdown time to determine the Planned Operation Time. The Total Productive Time is arrived at by accounting for the Production Time wasted due to Availability (downtime), Perfromance (speed) and Quality (Reject/Rework) losses . It is easy to see how Productive Time could become a fraction of Total Available Time. By understanding the nature and causes for wasted time, decisive corrective action plans to increase Productive Time may be devised. FIGURE 2 illustrates the time losses due to various OEE Categories.

FIGURE 2 – Time definitions related to OEE Please note that the Planned Shutdown Time, or time when the productive capacity is not needed, is not normally included in the OEE calculation.

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TABLE 1 provides examples of typical efficiency losses. OEE Component

Is a measure of…

Example of Typical Losses

Availability

Downtime Losses

Availability is typically reduced by nonproduction tasks, such as: Changeovers Sanitation / Cleaning Lunch/Breaks Preventative Maintenance Meetings Training Startup/Shutdown No components Facility Problem (no power, air, refrigeration, etc.)

Performance

Speed Losses

Performance is reduced by: Running a production system at a speed lower than the Theoretical Run Rate for that SKU on that Line / Machine /Work Cell. By short stop failures such as jams, overloads, running out of components, or other faults that can be cleared without maintenance intervention. Many lines have 1000 or more short stops per week which results in a massive reduction in output.

Quality

Defect Losses

Quality is reduced by any part that is rejected or must be reworked

TABLE 1: Examples of Typical OEE Losses

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Automated Calculation of OEE With modern software tools, the information available from the automation and IT infrastructure (e.g., PLCs, HMIs. Databases, ERP, etc.) can be leveraged to produce sophisticated real-time reports that allow manufacturers to effectively understand the sources of lost productivity, and to motivate the plant team to continually optimize OEE. Figures 3 and 4 below provide examples of reports that can be generated by these systems.

FIGURE 3 – Example of Availability Loss Report

FIGURE 4 – Example of Real-time OEE Report 7

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Back of the Envelope Calculation of OEE Given that many manufacturing companies believe they are running at an Efficiency of 85 to 90% (which is true considering the way they currently measure efficiency), it is very helpful to get an idea of the true potential for improvement by performing a rough Back of the Envelope Calculation of the current OEE. The back of the envelope calculation will lack the detail (breakdown of Availability, Performance, and Quality and the detailed reasons behind all the stoppages) but it will provide a good idea of where your production lines really stand at the moment. This back of the envelope calculation is astoundingly easy to perform. The thought process is described below, and Table 2 is provided as an example: Line: Select a Line, Work Cell, or Machine to perform this calculation on. Select one that you will have accurate production numbers for. OEE Calculation Time Period: Select a period of time that is long enough to account for any major periodic Availability related downtimes that will occur. For instance, if your line runs continuously for 2 days and then must be stopped for a CIP (cleanin-place sanitation) for 4 hours every 3rd day, then run your calculation over the 3 day period. Time Not Scheduled: During the OEE Calculation Time Period, you need to determine how many minutes the line was not scheduled to be used for any productive purpose (changeover, sanitation, PM, etc. are productive purposes). This is the time that you had no production requirements. For instance, if your plant only works 2 shifts, then 3rd shift time would be looked at as “Not Scheduled.” On the other hand, if 3rd shift was used for Preventative Maintenance, then this would be viewed as scheduled time. Theoretical Rate: You will need to know the real Theoretical Rate of the Line based on the equipment specifications for each SKU run on the line during the OEE Calculation Time Period being measured. This is the rate the equipment was to provide when purchased, not the rate that operators may currently be running the equipment at. This can be in any units (cases/hr, units/min, feet/min, lbs/hr, etc.). Good Product Produced: For each SKU, you will need to know the quantity of Good Product Produced in units equivalent to your Theoretical Rate units (i.e. be consistent with your units, cases, individual units, pallets, etc.). If all the SKU’s run during the OEE Calculation Time Period have the same Theoretical Rate, then you have all the information you need to complete the calculation! See the Table below for an example.

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OEE Item Line or System Name

Example Value Packaging Line 3

Current Average Reported Line Efficiency

88%

OEE Calculation Time Period

4,320 minutes

Time Not Scheduled

1,230 minutes

Planned Production Time

3,090 minutes

Theoretical Rate for SKU #1

500 cans per minute

Good Product Produced during Planned Production Time (1st pass yield)

994,980 cans

Calculate the OEE

64.4% OEE

Explanation Canning Line

This is using the “traditional” way of measuring the efficiency where availability and short stop failures are not counted against efficiency 3 days Plant operates 2 shifts per day, so over 3 days, the line should be unused a total of 24 hours (1,440 minutes), but looking at time cards, with overtime, the actual time not scheduled is 20.5 hours. Planned Production Time = OEE Calculation Time Period – Time Not Scheduled = (4,320 – 1,230) This is the run rate for the 12oz can of Chicken Broth, where this product was run for the entire 3 days. This number comes from production reports, it is not calculated. If the production reports are in cases, then you must convert to cans (match the units of the Theoretical Rate). (994,980 cans) * 100% / (500 cans/min * 3,090 minutes)

TABLE 2 – Example of “Back of the Envelope” or Manual OEE Calculation

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In a slightly more complex case, let’s assume that 2 different products (SKUs) were run during the three days, each with a different theoretical rate. In this case, we need to know the Planned Production Time, the Theoretical Rate, and the Good Product Produced for each SKU. Then the OEE for multiple products is calculated by first computing the individual OEE for each SKU and then combining the mix by weighting the individual OEE by the proportion of actual production time for each product. For example, assume SKU A is produced for 2 days and SKU B is produced for 1 day: OEE SKU A = (Good cans of SKU A) / (Theoretical Rate SKU A * 2880 minutes) OEE SKU B = (Good cans of SKU B) / (Theoretical Rate SKU B * 1440 minutes) Combined OEE (3 days) = OEE SKU A * (2880 min. / 4320 min.) + OEE SKU B * (1440 min. / 4320 min.)

Leveraging Small OEE Improvements to Generate Huge Business Opportunities Let’s extend the example of our Canned Food Plant. Let’s say that the plant had an initial OEE of 66.5% prior to implementing an automated OEE and Downtime measurement system and an improvement initiative. By reducing setup times (small investments in tooling, establishing best practices, and training) the Availability improves from 80% to 85%. By identifying and resolving the most (5) most serious causes of short stops, the Performance improves from 84% to 86%. By identifying the number one cause of rejects and resolving it, the quality improves from 99.0 to 99.2%. Compounded, these small improvements have the net effect of improving the OEE from 66.5% to 72.5%!

EXAMPLE 1 –OEE Improvement Example 10

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This 6 point improvement of OEE is a 8.3% improvement over the original value, and therefore the line can produce 8.3% more product in the same production time, or if more capacity is not needed, then the production schedule can be cut back by 8.3%. In a plant that is operating 24x7x350 days, this allows the reduction of 87 shifts per year, or 2nd and 3rd shift on nearly every Sunday.

The Bottom Line Many companies routinely hit capacity constraints, and immediately consider adding overtime for existing workers, hiring workers for a new shift, or buying a new line. Relatively few companies have made the more modest investment that is required to optimize the performance of their existing lines. This investment pays huge dividends by reducing process variability, reducing changeover times, improving operator performance, reducing overtime expenditures, unleashing hidden capacity, and allowing deferral of major capital investments. These are measurable benefits that will substantially improve the bottom line of your production operation.

For more information, please visit www.parsec-corp.com or contact us at [email protected].

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About the Author Scott Klages is a senior manufacturing consultant at Parsec Automation Corporation, a leading provider of systems that help manufacturing executives boost profits by using their assets more productively. He began his adventures in manufacturing over 31 years ago as a struggling “jack of all trades” in a small but energetic family-owned machine design and fabrication company based in Pittsburgh, Pennsylvania. Since that time Scott has thrived on the front lines of manufacturing success. He has a 20 year track record of accomplishment with increasing levels of responsibility in a variety of manufacturing and technology firms. He has presented numerous technical papers at industry conferences in addition to being published in manufacturing trade magazines Scott has served as Chairman of the Electronics Industry Technology Roadmap, the CAD/CAM working group, the IPC CAD/CAM users roundtable, the IPC-D-350 Data Format Certification Task Group, and the ITRI CAD/CAM/DFM sub-group. He is a current Member of ISA (Instrument Society of America) and IFT (Institute of Food Technologists). He recently co-authored a paper for the : ISA (Instrument Society of America) entitled "Optimizing Asset Utilization and Real-time Efficiency Monitoring Using Webbased Downtime Tracking...Utilizing new WebBased Production Monitoring Tools and Real-time Information to Gain Competitive Advantage through superior Asset Utilization." Scott graduated from Stevens Institute of Technology in 1982, earning a Bachelor of Engineering With High Honors and a Graduate Degree In Engineering Management. Scott makes his home with his wife and 3 daughters in Southern California. When he is not helping executives squeeze more profits from their manufacturing lines, he enjoys the equally challenging task of refereeing his daughters’ soccer events.

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