Overall Equipment Effectiveness: A Strategic and Practical Improvement Tool

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1 Overall Equipment Effectiveness: A Strategic and Practical Improvement Tool Used strategically, overall equipment effectiveness can be a valuable key in unlocking a manufacturer s production potential By Lotfi Maroizy Steve Wamsley Abstract Overall Equipment Effectiveness (OEE) is a key performance indicator (KPI) used to measure performance in a given process, and is calculated by combining constituent components of availability (uptime), (performance) rate, and quality/yield. OEE is a simple metric that provides a wealth of information that is useful for directing an organization s resources including engineering, continuous improvement, safety, quality, and even outside contractors. While OEE is an extremely valuable tool for operations management, organizations must take care to avoid the pitfalls associated with a singular KPI driving activities on the shop floor. Used strategically, OEE can be a valuable key in unlocking a manufacturer s production potential.

2 Introduction Overall Equipment Effectiveness (OEE) is a metric that has become a go-to standard across numerous industries. With its roots in automotive manufacturing and assembly, this calculated KPI has become the measurement standard for food & beverage (F&B), consumer packaged goods (CPG), processing, life sciences, and other classical discrete manufacturing/assembly industries and sectors. It has taken on many forms and assumed alternate identities, and has appeared in a variety of locations from the shop floor to the corporate war room, and everywhere in between. Planned strategically and implemented tactically, OEE can truly live up to its billing for the operation. It can improve stability and overall equipment performance, unlock capacity, and drive the right behaviors on the shop floor to sustain improved performance. However, it is extremely important to use caution when drawing general conclusions based on OEE metrics. Although very simple in nature, OEE performance varies across (and within) industries/processes and is extremely sensitive to individual factors and/or regulations. Therefore, it should always be treated carefully, addressed on a case-by-case basis, and supported with site-specific data. The chart below shows the distribution of performance in OEE across a number of different discrete manufacturing industries. s Approach to OEE takes a unique view of OEE compared with popular industry perspectives. Our approach to using OEE is simplified and concise, and avoids much of the noise surrounding this metric. Myrtle s OEE Implementation Strategy applies a combination of traditional, time-tested tools and disciplined, reasonable methods to execute an OEE-driven initiative in the organization. It is built on three anchor points: choke modeling, the Myrtle OEE management system, and results planning. Each of these three components is critical to properly and effectively leveraging OEE to impact improved productivity across the organization.

3 OEE Rapid Results Choke Modeling OEE Management System Results Planning Myrtle s OEE Implementation Strategy Myrtle s OEE Implementation Strategy is built on three anchor points: Choke Modeling, the Myrtle OEE Management System, and Results Planning. Anchor Point #1: Choke Modeling Since OEE is a true measure of operation throughput, it is critical to understand the choke point of the operation. Choke points are known by many aliases: Herbie, jug, constraint, bottleneck, line governing operation (LGO), limiting resource, and bad actor. No matter which name we use, a choke point is an obstacle or limitation that prevents or slows progression or movement from one part of the manufacturing process to another. Contrary to popular belief, a choke point is not always limited to the slowest part of the operation. A choke point can be any process in the operation that limits throughput via any means, not just speed. Examples may include things like excess downtime, excess scrap, poor yield, unavailable equipment or unavailable human resources. All of these choke points can be sources of OEE deterioration. Myrtle s OEE Implementation Strategy calls for identification of choke points through analysis and observation. By focusing on one process at a time, rather than the entire factory or operation, it is possible to keep improvement efforts manageable until the organization is more mature and learned, making it easier to consider additional areas. If the transformation is project-based, focusing on one area will allow teams to make a quick, measurable impact and limit the dangers associated with scope creep. Often, companies identify the constraint and then apply the Kaizen strategy whereby cross-functional teams work together proactively to achieve improvements in the manufacturing process. However, this step is often premature. First, it is important to understand the causal factors behind the choke point and to use data to prioritize the choke points according to the volume of losses they are causing. This can be accomplished by pulling data from a loss accounting system. Otherwise, a simple log sheet at the operator station can provide immediate value if managed/updated by the operator. A simple log sheet provides reliable information to plan around and act upon, while providing ancillary benefits of operator ownership and potential solutions (by engaging the persons closest to the choke point). While waiting for some data to accumulate on the log sheet, it is important to interview other employees with knowledge of the process. Employees in maintenance, supply chain or engineering may have additional design, vendor, or other performance data that could be useful for problem solving. Simple problem-solving tools can reveal recurring themes and improvement opportunities, which should be captured in the project/improvement plan. Identifying and understanding choke points is critical to successful use of OEE and provides the basis for driving continuous improvements.

4 The charts below demonstrate simple problem solving that should be applied when identifying the root causes of choke points. Anchor Point #2: OEE Management System (OMS) The second anchor point, the Myrtle OEE Management System (OMS), provides a simple framework for focusing on the choke point at all times, while providing communication to the organization and tracking/measurement of tactical activities. Myrtle s OEE Implementation Strategy starts by focusing on elements that are closest to the shop floor and which are observed and/or acted upon at the shortest intervals. Despite a narrowed focus on improvement in one area or one process, organization leadership must be mindful of the overall effect of process changes in performance across departments, and ensure that the support functions are robust and effective in enabling the production process. Short-interval controls (SICs) at the choke point and hourly/daily/shiftly performance meetings are examples of these. This lower portion of the OMS would also include classical Kaizen or workshop planning and execution. As the team is streamlining (or installing if non-existent) these pieces of the management system, the leaders are doing likewise in the realms of forecasting and planning elements of the OMS. Once matured, this ensures that the team is always aligned with the strategy of the organization. Anchor Point #3: Results Planning The final anchor point, results planning, provides a link and a checkpoint from the initial analysis through the delivery of OEE improvements. Done properly, results planning clearly lays out the road map to project delivery and creates a simple vehicle for all project team members, participants, and others in the client organization to understand what initiatives must be accomplished and in what order or time frame. Results planning also provides this path using multiple sources and boiling them down to the critical project activities, assumptions, and risks that must be understood, overcome, and completed in order to make the maximum impact toward achieving the established goals.

5 The key elements of a robust results plan include: AVS/analysis: interviews, data, observations, studies Risk assessment / Prioritization Quick wins (Choke points / performance focused) Preliminary financials Focused glide paths/blueprint Interviews, data, observations and studies all lend insight into general themes and challenges related to choke points and are validated by those closest to the shop floor. Once validated, these themes should be used to create hypotheses that can be investigated further. A risk assessment balances improvement plans by laying out potential negative effects from outside influences or even those controlled by the client organization internally. It is important that risks are communicated and revisited throughout the project duration, in order to ensure validity and provide a sanity check of guiding assumptions. Focused choke points and performance driven quick wins also populate the results plan. These are results that can be generated quickly and easily, and provide a mechanism to continually engage the shop floor and remedy those nagging issues that individually may not seem like much, but cumulatively add up to significant OEE losses. Preliminary financial data is also a necessary element of the results plan, as it helps drive understanding of where the initial performance baseline exists, as well as the actual mathematical savings that could be expected from a focused OEE improvement project. The final piece of the results plan is a detailed glide path or blueprint. This blueprint outlines the overall initiatives that must be completed and specifies a timeline for these activities. This allows the team to have short-, medium-, and longterm visibility into the deliverables and can also be used to show progress over time. The effectiveness of this element is an absolute direct function of engagement, as it should be developed with the input of the team that will actually be making the changes and doing the work. It is essential that the draft version of the results plan be reviewed and mutually approved by all stakeholders. In addition to providing direction and visibility on how the team will achieve results, the mutual approval step of results planning ensures the alignment of stakeholders: from those on the plant floor to external third parties and executives. Avoiding Potential Pitfalls Caution should always be used when using OEE, as potential pitfalls exist at every turn. Here are some tips for avoiding the most common pitfalls associated with using OEE to improve productivity in the operation. Avoid plant-wide OEE calculations The larger the problem, the more difficult it is to fix. Myrtle s approach calls for using OEE to identify and prioritize the top sources of loss and resolve problems one at a time. By addressing one issue at a time, companies can make gradual but sustainable progress and prevent analysis paralysis associated with plant-wide OEE calculations that yield problems that are too big to tackle quickly and effectively. Calculate OEE at each choke point to truly measure the problem as well as success in overcoming the problem. Ensure good quality data It is imperative that the data used to make decisions is quality data. Skewed, incorrect data can lead to a dangerous situation of addressing the wrong problems. If the loss accounting system is not in good working order, it s better to implement manual processes like the simple log sheet. The data does not have to be sophisticated, but it does need to be correct. Good data points to the biggest sources of loss, so that those can be tackled first for maximum benefit.

6 Involve all stakeholders Engage operators and support staff. Leverage their experience, insight and passion. Whether consultants, executives or operators, often individuals or small groups set out to address OEE and choke points on their own. However, the most qualified to provide insight, ideas and even solutions are the operators who are on the plant floor day in and day out. Engage them in the process for improved adoption and long-term/ quicker success. Keep it simple Use simple glide paths or blueprints to manage and communicate activities and results. Mounds of data and reports are great for analysis, but to get everyone on board and moving in the same direction, present clear, digestible material. Conclusion Used strategically to steer tactical improvement initiatives, OEE can be an incredibly useful tool in gaining improvements in performance and sustaining those gains. With an integrated team-based approach to improving maintenance processes as a way to impact OEE, and driving rapid results at the shop floor level, OEE improvements can be quickly realized and sustained for the long-term. By implementing Myrtle s OEE Implementation Strategy, companies have a significant opportunity to leverage OEE to improve their operations, productivity and overall business results. Success Stories Using Myrtle s OEE Implementation Strategy, companies can achieve long-term sustainable improvements in business operations. The examples below demonstrate the returns in critical KPIs gathered over the course of the projects. Major Beverage manufacturer Achieved a 15 point OEE increase across 4 high-speed bottling lines, representing a 28% improvement, sustained since project conclusion. Historically over budget by $2MM - $3MM, the company finally made budget in Implemented enabling processes: centerline approach, changeover and startup improvements, and intense focus on operator training, along with an integrated team resolution process, enabling a 60% reduction in micro-stops. Following this 12-month project, the company achieved and has sustained each month since project conclusion, BDP well above 90%. Snacks Manufacturer Achieved a 5 point OEE gain (7-8% improvement) sustained across 2 production lines. Implemented standard work methods for changeover/sanitation, reduced delayed startups. Implemented team problem solving approach with maintenance & operations.

7 About Lotfi Maroizy - Lotfi Maroizy is a Director with Group where he helps clients drive sustainable results through behavioral change within their organizations. He has led dozens of projects for leading brands in food & beverage, consumer packaged goods, chemical, mining and life science industries. His capabilities allow him to lead companies in the areas of process design, performance improvement, maintenance & reliability programs, cost reduction initiatives, revenue enhancement, corporate restructuring, M&A and due diligence, and planning and integration to drive significant financial benefits. Lotfi earned his MBA from the University of St. Thomas in Houston, and his Bachelor of Finance from EDHEC School of Management in Casablanca, Morocco. About Steve Wamsley - Steve Wamsley serves as Transformation Manager at Group where he focuses on industrial engineering techniques and Lean Six Sigma tools to eliminate waste, reduce complexity and variation, and facilitate the overall operational improvement of production or business processes. The long list of major clients he has served includes Nestlé, Kellogg s, GM/Ford/Chrysler and Remington Arms. Steve has a Bachelors of Science in Industrial Engineering and a Masters of Science in Manufacturing Management from Kettering University.