OEE: The perils of pervasive poor performance

Overall Equipment Effectiveness (OEE): The perils of pervasive poor performance. Developing an impactful and enduring manufacturing operations recovery strategy

INTRODUCTION

Organizations have always managed manufacturing systems with a “one-size-fits-all” mentality.  Recent research has demonstrated that the organization that recognizes different characteristics in their manufacturing processes, and uses these characteristics to focus an optimized improvement methodology, will find a competitive advantage over those that are still caught in the “one-size-fits-all” trap.

This article will introduce two concepts.  The first is segmentation as a methodology for grouping processes with similar characteristics together.  The second concept is that Overall Equipment Effectiveness (OEE) as a key defining metric for manufacturing segmentation.

SEGMENTATION

Segmentation is a tool that has found extensive success in the retail industry sector.  It has only been in the last few years where this tool has found success in manufacturing.  Major industry leaders like Microsoft have significantly increased performance by reducing inventories, stock-outs, and obsolescence, while improving cycle time and on-time customer deliveries.  A detailed write-up on the application of Segmentation can be found in the book “Supply Chain Optimization through Segmentation and Analytics” by Gerhard Plenert.

OEE

OEE (Overall Equipment Effectiveness) is a measurement tool that is successfully being used to define performance on the manufacturing floor.  It can be used for the manufacturing facility as a whole, but is more effective when used to evaluate specific machine performance if we are searching for improvement opportunities.  Specifically, OEE measures the percentage of time a machine is creating value.  Applying lean thinking, any time a machine is not producing quality, salable product, is a “waste” and only when the product is being produced is value being created.

Therefore, an OEE measure eliminates “six big wastes” out of its calculations, which are the non-value-adding activities like:

• Machine Breakdown time
• Machine Tear-down, Clean, and Set-up time
• Run stop-starts for jams or cleaning
• Speed reductions where we are not running the equipment at its full capacity
• Start-up and ramp-up time loss and product rejects
• Run time product rejects (and the time wasted producing those rejects)

If you go to the internet you can find numerous calculations for OEE.  Unfortunately many of these web sites offer calculations that simply do not work, so you have to be careful where you get your information.

The most basic calculation is simply

OEE = A/(B*C)

A divided by (B times C) or OEE = A/(B*C) as a percent where:

A = Total Quality, Saleable, Shippable units produced over a period of time like a shift or 24 hours
B = Total amount of hours per shift (or day)
C = Total number of units that should be produced during that time period at full production rates per hour

The textbook way to look at this calculation is OEE = Machine Availability (as a percent) times Machine efficiency (as a percent) times Quality units produced (as a percent).  For a more in-depth example of OEE calculations, take a look at the following web site, which offers excellent calculation examples leanexecution.wordpress.com/2008/12/03/how-to-calculate-oee/ .

OEE has become a standard measure of productive performance because it easily measures over-all efficiency of the production process, either at the organization level or down at the machine / equipment level.

SEGMENTATION AND OEE

OEE is a metric that tells you how a specific machine is performing.  With this metric we can determine a current level of performance.  Performance levels can be categorized into the following segments:

Using this performance level table as our tool for equipment segmentation we now need to look at the tool set that is available to improve performance in each of these segments.Then we can identify which tools are to be used for each of the OEE segments.

OEE IMPROVEMENT TOOLS

Recovery tools and improvement tools used for OEE can be pulled from a variety of sources. Key amongst these are the tools found in the Toyota Production System (TPS) often referred to as Lean and Six Sigma. Additionally there are tools outside of TPS, like Center-lining which add value when used appropriately. A complete list of tools and how to use them can be found in the book “Strategic Continuous Process Improvement: Which Quality Tools to Use, and When to Use Them” by Gerhard Plenert. Some selective and specific tools that can be used here for OEE improvements include:

SEGMENTED OEE IMPROVEMENTS

The reason for segmenting your OEE performance is so that an equipment specific plan can be developed for improvements. If a piece of equipment is in the Danger Zone then the plan needs to be a Recovery Plan, which would be very different from a piece of equipment that is currently running a 70 % OEE and trying to move to 80 %, where we would be focusing on identifying fine-tuning improvement opportunities.

“Danger Zone” OEE – How to design, develop, deploy and sustain a successful recovery strategy

A successful recovery strategy for equipment which falls into the Danger Zone often fails because the structural basics are missing. Usually these performance failures point to inadequacies in the equipment, material changes, introduction of new products, unexpected and unresolved defect rates, workforce changes resulting in a decrease in proficiency, changes and/or new methods of manufacturing, or changes in the flow of manufacturing.

A look at some of the basic and fundamental root causes includes, 

Machine reliability, age, flow and maintenance issues

• Man, training, competencies 
• Change in Materials
• Methods of manufacturing
• Environment
• Quality and Product Defects, rework levels

Basic structural issues in the manufacturing process include:

• A lack of stand work, which includes inadequate “Standard Operating Procedures” (SOP), incomplete or missing Work Instructions (WI), and inaccurate Standard Worksheets.  We find that every technician is doing the same process differently.
• Firefighting mentality on the production floor which draws attention away from identifying and fixing the key failure points.  The majority of the technicians’ time is spent “keeping things running.”
• Change management structure is missing which should be focused on identifying, understanding and validating the root causes for failures before you diagnose. Study the causes and gather independent data to validate the causes.

Because the basics are lacking in these low OEE environments, it makes little sense to apply tools that would more appropriately be used if we are fine-tuning an OEE of 70 % and trying to move it to 80 %. The tools that would be appropriate for “Danger Zone” OEEs include:

“Typical Range” OEE (60 + %) – How to design, develop, deploy and sustain a successful improvement strategy

A successful improvement strategy for equipment which falls into the Typical Range occurs when the structural basics are in place and the organization is focused on fine-tuning their existing process. Some of the root causes preventing a higher level of performance may include:

• Production Planning and Scheduling conflicts
• Material availability issues – the materials are not available for the production process when they are needed
• Spare parts or replacement parts availability
• Labor management / scheduling
• Lack of updated Standards and Center-lines
• Inadequate change-over and cleaning processes which are not optimized

The types of tools that would appropriately be used if we are fine-tuning an OEE of 60+ % and trying to move it to a higher % includes (this does not eliminate the use of the basic tools which are always available if a fundamental structural problem is identified):

“Poor Performance” Rangege

Successful improvement strategies in this range generally look towards the tools in the Danger Zone, but there may also be a need for some of the tools in the Typical Range.  An experienced change management agent becomes a critical resource in selecting the appropriate tools and managing this improvement process effectively.

WHY OEE IMPROVEMENT PROJECTS FAIL

OEE improvement projects that struggle have one fundamental point of failure, which is that they are all slotted into a “one-size-fits-all” model.  Typically the Tier-1 Management Consulting Firms work with a pre-defined standard methodology and they try to apply that same methodology to all OEE improvement projects, regardless of the current OEE level of performance.  They typically like to flaunt buzzwords as if these were the optimal solutions to all the world’s problems.  Therefore, our experience stresses that OEE improvement failures should pay attention to and avoid the following:

• Avoid Tier-1/Big Name Management Consulting Firms
  

  The first mistake most companies make is to call in the Tier-1/Big Name Management Consulting firms who have limited flexibility in their approach.

• Stay away from “Carpet Bombing” OEE recovery strategies

  Tier-1 firms use a “carpet bomb” model where they pull all levers, making the available data match their cause.  They also tend to deploy trial and error, searching for something that will work rather than having a structured and managed solution. Once a lever appears to work, they say it was “by design.”
  

• Steer clear of the “Blitzkrieg” OEE improvement deployment method

  Using Blitzkrieg deployment method, like most Tier-1 firms sell as the best solution, might yield fast results, however lots of motion and noise won’t make the recovery last and often it is the focused attention to a process that generates the temporary improvement rather than the improvement methodology.

• Failures of the “one-size fits all” model

  • Not focusing on the true causes, focusing on the wrong things
  • Changes made add complexity to daily responsibilities, employees want improvements to be simple in order to sustain the improvements
  • Laser focus on one tool, like Center-lining will cause you to miss the big picture
  • Employees need to understand why a change is being made, contribute to the change, own and internalize the OEE improvements
    

• Don’t pay $100,000/week for a Big Name Management Consulting Firm
  

  Tier-1 Firms can charge as much as $100,000 per week for a 5-person triage team to diagnose
  and develop an OEE improvement strategy

  • Because of the “Big Name,” everyone just assumes their strategy is sound and flawless.
    No one will be fired for hiring them and they will stick around, at no
    cost, until the recovery is sustained.
    
  • Here is a secret the Tier-1 Firms don’t want you to know
    • It’s not the Consulting Firm’s fault the strategy didn’t work.  Rather the blame is placed on the employees or on culture issues.
    • They claim that employees make mistakes and regularly deviate from a strategy and plan, or won’t sustain the strategy. Hence, it’s fairly certain that employees won’t follow the strategy exactly.

SUMMARY

Competitive advantage is found in recognizing that there are differences in what improvement methodologies need to be applied depending on the OEE level of the organization.  In order to match the appropriate improvement tool using OEE as a measure of performance effectiveness, OEE segmentation needs to be applied.  Only then can a desirable OEE improvement plan be structured and executed.