UTILIZING OEE
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www.parsec-corp.com
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UNCOVERING HIDDEN CAPACITY
Uncover ing OEE2
INTRODUCTION
As the global marketplace changes, it has become increasingly
clear that stakeholders put a large value on an organization’s
ability to maximize productivity and utilization to its fullest
potential. With consumers demanding lower and lower
prices, a reduction in operating costs and cost of goods sold
has never been more needed to stay competitive. One way
to measure a plant’s performance and productivity is with
Overall Equipment Effectiveness or OEE (but you already
knew that). Now let ’s talk about OEE and how to fully utilize
this KPI to your benefit.
Many manufacturing companies have been measuring the
efficiency of their lines and work cells in such a way as to
“mask” many of the causes of lost efficiency. Over a period of
years, management focuses on the numbers being reported
and is no longer thinking about what is included or excluded
from the measurement.
One of the reasons OEE is such a valuable measure is that
it allows you to look at all sources of lost time and lost
production. OEE can deliver accurate, and actionable
intelligence ready to be consumed by the decision makers
for significant productivity improvement. That’s why OEE has
emerged as the leading approach for accurately measuring
true plant productivity.
Before we delve into OEE, and how to best calculate it, let ’s
briefly discuss the various time categories and what they are.
First, Total Available Time, the time that the plant is open and
theoretically could be producing goods.
Second, Planned Production Time, the Total Available Time
minus the planned shutdown time. Planned shutdown time
could include meal breaks, holiday shutdown, and scheduled
maintenance.
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.
Third is Operating Time. This is the difference between
Planned Production Time and the time lost to downtime.
Downtime events include equipment breakdowns,
unscheduled maintenance, setup time and changeover. This
is included in calculating your OEE.
Fourth, is Net Operating Time, this is the difference between
Operating Time and time lost to a reduction in speed. 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 calculating your OEE.
And lastly, Productive Time. This is the difference between
the Net Operating Time and the time lost to quality issues.
Quality loss includes rejected and reworked products. This
is included in calculating your OEE. Figure 1 illustrates this
concept.
Figure 1
Uncover ing OEE 3
HOW IS OEE CALCULATED
CORRECTLY?
By definition, OEE is the product of Availability, Performance,
and Quality percentages:
OEE = Availability * Performance * Quality
• Availability is a measure of downtime losses
• Performance is a measure of speed losses
• Quality is a measure of defect losses
Each one of these OEE components represents losses that
result in a reduction of operating 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.
By definition then, productive time is a fraction of total
available time. By using and understanding the losses, we
can take the actions necessary to increase productive time
as much as possible. Here you find the most common losses
related to the various OEE categories.
Availability (downtime losses)
Availability is typically reduced by planned and unplanned
events such as:
• Changeovers
• Sanitation/Cleaning
• Preventive maintenance
• Meetings
• Training
• Startup/Shutdown
• No components
• Facility problem (no power, air, refrigeration, etc.)
• Capital projects
Performance (speed losses)
Performance is typically reduced by:
• Running a production system at a speed lower than the
theoretical run rate for that SKU on that line/machine/
work cell.
• Short, stop failures such as jams, overloads, gaps in
components on the line, or other faults that can be
cleared without maintenance intervention. Many lines
have 1,000 or more short stops per week which results in
a massive reduction of output.
Planned shutdown time or time when production is not
needed is normally excluded from your OEE calculation.
Quality (defect losses)
Quality is typically reduced by:
• Any product that is rejected or must be reworked.
REAL-WORLD EXAMPLE
Now that we have discussed the categories for OEE losses let ’s
take a look at how OEE is calculated with a real-world example.
• Total Time: Total time the process is scheduled to work,
5 days with 24 hours each, for a total of 7200 minutes.
• Downtime: Machine stopped for whatever reason: 1,440
minutes.
• Cycle Time: 1.5 minutes/unit
• Good Units: In 5 days, 2880 pieces
• Defective Units: In 5 days, 240 defective pieces
OEE = A x P x Q
OEE = 80% x 81.5% x 92.31% = 60%
OEE = 60%
There are however, several shortcuts to calculating OEE. The
most simple and easiest ways to calculate can be found below.
Uncover ing OEE4
Let’s take a look at a slightly more complex real world example
of a canned food plant.
• Average Line Efficiency is 88% using the traditional way
of measuring efficiency where availability and short stops
failures are not counted.
• OEE calculation time period is 3 days or 4,320 minutes
• Time not scheduled = 1,230 minutes. Plant operates two
shifts per day, over 3 days the line should be unused for
24 hours (1,440 mins) but looking at the time cards, with
overtime, the actual time not scheduled is 20.5 hours.
• Planned production time, 3,090 minutes (4,320 - 1,230).
• Theoretical rate of SKU #1 is 500 cans/min. Note cycle time
is 1/500, or .002
• First pass yield, 1,027,500 cans. This number comes from
the production report, it is not calculated.
• Calculated OEE is 66.5%.
Let’s extend the example of canned food plant. With an initial
OEE of 66.5% prior to implementing an automated OEE and
downtime system.
• By reducing setup times (small investment in tooling,
establishing best practices, and training) the availability
improves from 80% to 85%.
• By identifying and resolving the 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, quality improves from 99.0% to 99.2%.
Compound these small improvement numbers and OEE jumps
from 66.5% to 72.5%. This six point improvement of OEE is a 9%
improvement in the overall value. This means that the canned
food plant can now produce 9% more product with the same
assets in the same time, or if the demand is fixed, produce the
same quantity with a 9% reduction in operating costs.
Benefits Summary
• Produce an additional 43,200 cans daily with the same
assets and costs ($32,400/day), resulting in a yearly
addition of $11.3 million.
• Work 95 fewer shifts per year (when running 24/7/350).
THE BOTTOM LINE
Uncover ing OEE 5
About Parsec
Parsec is the developer of TrakSYS™, a proven operations
management software application and solution platform
designed to significantly improve manufacturing processes.
Parsec is committed to providing best-in-class products and
solutions to our worldwide community of clients to assist them in
optimizing their manufacturing operations. There are thousands
of TrakSYS™ licenses in use, in over 100 countries around the globe
in a wide variety of Industries. TrakSYS™ helps manufacturers to
maximize asset utilization and efficiency, increase capacity with
no new capital equipment, reduce production costs, decrease
lead time, and improve profitability.
For more information about Parsec and TrakSYS™ please visit the
corporate website at www.parsec-corp.com.
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.
UNCOVERING HIDDEN CAPACITY UTILIZING OEE
With consumers demanding lower and lower prices, a reduction in operating costs and cost of goods sold has never been more needed to stay competitive. One way to measure a plant’s performance and productivity is with Overall Equipment Effectiveness or OEE (but you already knew that). Now let’s talk about OEE and how to fully utilize this KPI to your benefit.
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