OEE - The Critical KPI to Drive Manufacturing Productivity
- 1. 1 TM Overall Equipment Effectiveness TM The Critical KPI to Drive Manufacturing Productivity
- 2. 2 TM A net reduction in cost of operations directly and positively affects the bottom line. Companies can boost revenue without sacrificing profitability by factoring in long-term debt-to-capital ratio. Since finance puts a premium on a company’s ability to maximize productivity and use existing assets, you have to continually measure, analyze, and adjust your processes. This is accomplished by a rigorous practice of productivity gains, cost cutting with increased efficiencies, and maximizing returns on fixed assets. Though complex, this productivity improvement affects labor, equipment, consumables, procedures, quality, and capital investment. As part of the plan to improve, the following goals are common for most manufacturers: • Increase capacity / decrease time to produce • Increase return on assets • Reduce operating costs • Better manage capital • Increase total shareholder returns How do you accomplish these goals? An Introduction to OEE A powerful method to improve manufacturing productivity Overall Equipment Effectiveness (OEE) has emerged as a powerful method of evaluating the productivity of production systems. This ebook will be a guide to OEE – so you can lead your Operational Excellence team.
- 3. 3 TM Definition of OEE OEE is an effective methodology to help improve the productivity of manufacturing processes. Since the early 1990s, OEE has emerged as a leading approach for accurately measuring true plant productivity. Initially, OEE was regularly associated with Total Productive Maintenance (TPM) programs. It is now being looked at as a powerful means of evaluating the Key Performance Indicators (KPIs). By definition, OEE is the product of Availability, Performance, and Quality category percentages: Where: Availability = Downtime Losses Performance = Speed Losses Quality = Defect Losses OEE = Availability * Performance * Quality Total Productive Maintenance (TPM) is a maintenance system covering life of all equipment: planning, manufacturing, and maintenance. Improving performance via elimination of the 6 major types of waste. OEE is the formula for defining equipment effectiveness in a TPM program. 3
- 4. 4 TM OEE is made up of three categories: Each one of these OEE components represents losses that result in a reduction of Production Time. We begin with Total Available Time and subtract time losses due to Availability (Downtime), Performance (Speed), and Quality (Reject/Rework). Very quickly, one can see the effects of these losses on production time. Productive Time becomes a fraction of Total Available Time. By using and understanding the losses, you can take the actions necessary to increase Productive Time as much as possible. Figure 1 illustrates the time losses due to various OEE categories. Understanding OEE Terminology Figure 1 – Time Losses *Planned Shutdown Time, or time when the productive capacity is not needed, is not normally Total Available Time Planned Production Time Planned Shutdown* Operating Time Availability Loss Net Operating Time Performance Losses Productive Time Quality Losses }OEE Availability The ratio of the Operating Time to the Planned Production Time Performance The rate at which equipment converts available time into product. Calculation excludes availability and quality losses. Quality Percentage of parts which meet specifications. OEE recognizes quality as only one aspect of equipment utilization. included in the OEE calculation.
- 5. 5 TM Total Available Time: This is the time the plant is open and could be used for production (excluding holidays). Planned Production Time: This is the Total Available Time minus the Planned Shutdown Time. Planned Shutdown could include meal breaks, or scheduled maintenance; changeover is often categorized as loss of Planned Production Time. Operating Time: This is the difference between Planned Production Time and the time lost to downtime. Downtime events include equipment breakdown, unscheduled maintenance, setup time and changeover. This is included in the OEE calculations. Net Operating Time: This is the difference between the Operating Time and time lost to Speed reduction. Speed reduction events include operating equipment at below rated speed (increased cycle time), frequent short-lived stoppages not requiring maintenance, and certain operator errors. This is included in the OEE calculations. Productive Time: This is the difference between the Net Operating Time and the time lost to Quality issues. Quality losses include rejected and reworked products. This is included in the OEE calculations. Figure 1 describes how each OEE Category is calculated. 5
- 6. 6 TM OEE Calculations Downtime Losses Availability: The ratio of Operating Time to Planned Production Time (Operating Time is Planned Production Time Less Downtime Loss). Availability of 100% means the process has been running with no stops. Availability = Operating Time / Planned Production Time Speed Losses Quality Losses Quality: The ratio of Good Parts to Total Parts. Quality of 100% means there have been no reject or rework parts. Quality = Good Parts / Parts Produced Performance: The ratio of Theoretical/Ideal Speed to Actual Speed. Performance of 100% means the process has been consistently running at its theoretical maximum speed. Performance = Parts Produced / (Ideal Speed * Operating Time)
- 7. 7 TM Defining OEE Events Within each OEE Category, there are several events that must be identified, correctly measured, and analyzed. There are situations (or events) that may require further thought to decide to which category they belong. For example, short-lived stops and operator errors could be recorded as either Availability (Downtime) or Performance (Speed) losses. The correct categorization will be made based on the specific manufacturing process and plant. It is important to be consistent and uniform in categorizing events in order to get reliable results. As stated above, there are many events that affect OEE. By implementing an OEE practice, you can reduce these commonly occurring loss events to increase the overall plant productivity. Figure 2 provides a list of the Common Loss Events, and the attributed categories. Common Events OEE Category Comment Equipment Breakdowns Availability Loss Depending on the specifics of the production environment, certain variety of breakdowns not requiring maintenance could be categorized as Performance/Speed Losses Process Setup and Adjustments Availability Loss Includes certain operator errors and product changeovers Short Stops and Idling Performance Loss Short stops are typically those which do not require maintenance. Generally, problems with consumables could be categorized as Performance/Speed Losses Reduced Speed Performance Loss Factors such as equipment age or production anomalies that keep the operation from running at the maximum theoretical speed would be included in this category Startup Rejects Quality Loss Production loss (rejected) during initial stages (transition) of startup prior to reaching steady state (regularly producing good products) Production Rejects Quality Loss Products lost (rejected due to defect) during the normal production stages Figure 2
- 8. 8 TM The purpose of implementing an OEE program is to improve productivity. It is important to know what you are aiming to achieve. What is considered to be world-class OEE? Are the components of OEE important by themselves? These are very significant questions. By general consensus, world-class OEE is 85% or higher. By contrast, most manufacturing plants have an OEE in the range of 30 – 60%. It is not unusual for these plants to experience daily fluctuations of about 10% - there is room for improvement. What is Considered World-Class OEE? Availability 90% Performance 95%x x Quality 99.9% Overall OEE 85%= Components of World-Class OEE
- 9. 9 TM Achieving world-class OEE is quite challenging and requires the need to consistently follow a rigorous program. This means regular measurement, analysis, and taking action based on the findings. An important point to keep in mind is that you must look at all four numbers (OEE, Availability, Performance, and Quality) together and individually. Though it may sound contradictory since OEE is a measure of productivity, it is possible to have a reasonable OEE without having an acceptable individual component score. With each component of OEE being counted equally (A*P*Q), each needs to be diligently inspected. Don’t forgo quality (more rejects or rework) to increase output or performance. If the balance in achieving a higher OEE is off, the outcome may be unacceptable. Scrutinize each component of OEE: Quick tip • Availability • Performance • Quality • Overall OEE A PQ P AQ Q AP
- 10. 10 TM Benchmark OEE In a recent survey conducted by LNS Research, nearly 200 companies across multiple disciplines reported their OEE numbers. From these findings, it seems world-class OEE is being met in a number of factories – especially in Life Sciences and Discrete – but just how far is this from reality? From these ranges, the numbers seem to be significantly inflated compared to the reality of most manufacturers. The OEE of these industries tend to be more shocking in practice. With the proper methodology, technical ability, and infrastructure in place, you can achieve world-class manufacturing numbers. You cannot misrepresent the numbers if you plan to act on them. Get accurate, automated, real time insight into your shop floor with TrakSYS™. Let’s look at a real life example. Highest Reported OEE Median OEE Lowest Reported OEE Average OEE Range 100 10 20 30 40 50 60 70 80 90 Batch Manufacturing 94 75 58 Discrete Manufacturing 99 85 50 Food & Beverage / CPG 95 78 55 Life Sciences 98 85 45 Process Manufacturing 94 80 72
- 11. 11 TM It is good to know what OEE and its components are but in order to have a good understanding of the concept, it is helpful to look at a real example. Consider a beverage plant with the following production schedule for the bottling area: A Real Example Figure 4 - Production Data for Calculation of OEE and its Components Item Data Days of Operation Planned 5 Number of Shifts 15 (3 per day, 8 hrs. each) Total Planned Shutdown 2,400 minutes (160 minutes/shift) Downtime 1,250 minutes (for all shifts) Theoretical (Ideal) Rate 600 bpm (bottles per minute) Total Bottles Produced 1,656,502 Rejected Bottles 1,207
- 12. 12 TM The Breakdown Planned Production Time Total Available Time – Total Planned Shutdown Operating Time Planned Production - Downtime Good Bottles Total Bottles - Rejected Bottles 7,200 - 2,400 = 4,800 minutes 4,800 - 1,250 = 3,550 minutes 1,656,502 - 1,207 = 1,655,295 Availability Operating Time / Planned Production Time Quality Good Bottles / Total Bottles Produced Performance Bottles Produced / (Ideal Rate * Operating Time) 3,550 / 4,800 = 0.73 (or 73%) 1,655,295 / 1,656,502 = 0.99 (or 99%) 1,656,502 / ( 600 bpm * 3,550 ) = 0.7777 (or 77%) Real-Time Plant Data Calculated Metrics OEE Availability * Performance * Quality 0.73 * 0.77 * 0.99 = 0.57 (or 57%) KPI
- 13. 13 TM 13 Considering that OEE can also be defined as: OEE = Productive Time / Planned Production Time Then: Productive Time = OEE * Planned Production Time = 0.5748 * 4,800 minutes = 2,759.04 minutes Also, consider if downtimes and short-lived stoppages were reduced by 10% or 125 minutes, the same factory would be able to produce 58,327 more bottle during the same five-day period (assuming the same effective performance). With the wholesale price of each bottle at $0.85, during each five-day period, the bottling area can produce $49,578 more sellable product. If the bottling area is operating 260 days during the year, the extra production will be worth $2,578,056 without extra shifts or overtime.
- 14. 14 TM Global competition dictates the need to optimize assets, labor, and processes, making Overall Equipment Effectiveness (OEE) an essential KPI. Though important for continuous improvement, many companies still struggle with collecting accurate OEE data and characterizing the root cause(s) behind variations in productivity. A manual process to collect OEE data, e.g. clipboards and whiteboards, is often inaccurate, delayed, and/or involves extra paperwork and operator dependencies. The next improvement step is to implement software capable of directly monitoring the control systems running the plant assets. Web-based reports, automated alerts via email or text message, and web journals create a highly engaged and responsive team for significant improvement. These results will tie directly to specific plant initiatives, whether expanding capacity of the existing assets, reducing changeover times, reducing overtime, reducing rework and scrap, or improving customer service levels. Conclusion To learn more, visit pages.parsec-corp.com/productivity.html or contact us [email protected]
- 15. 15 TM About Parsec Parsec Automation Corp. (Parsec) is the developer of TrakSYS™, the leading real-time operations & performance management software. Manufacturing companies worldwide rely on Parsec for flexible and configurable tools to execute manufacturing operations across the value chain more effectively. Without production disruption, TrakSYS™ helps manufacturers to significantly improve asset utilization and efficiency, increase capacity with no new capital equipment, reduce production costs, decrease lead time, and improve profitability. With measurable ROI, TrakSYS™ fuels Lean, Six Sigma, TPM, and Operational Excellence efforts. For more information about Parsec, please visit the corporate Web site at www.parsec-corp.com. © 2015