Lean Manufacturing

Overview of the System of OEE Metrics

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OEE Templates
What is OEE
In the most general sense, OEE (Overall Equipment Effectiveness) can be described as a universally accepted set of metrics that bring clear focus to the key success drivers for manufacturing enterprises. The OEE strategy is considered “best practice” and dovetails well with the Lean Manufacturing philosophy. In fact, the OEE set of metrics can provide the key indicators of progress on the Lean journey.
OEE should not be viewed as a fad or flavor of the month; the measurement technique has been in practice for many years, albeit with a narrower purpose. Historically, OEE was used as a toplevel summary view of capacity and it’s utilization. In recent years it has reappeared but with amore valuable multi-level view of the business, placing emphasis on the underlying issues that limit performance. The resurgence of OEE is doubtless related to its ability to plainly portray the opportunities for improvement that exist for all manufacturers.
Functionally, these metrics provide the basis by which excellent manufacturers may
systematically direct their business towards attainment of critical objectives…
• Ever-Improving Operating Margins
• Optimized Competitive Position
• Maximized Utilization of Capital
More specifically, OEE can be best illustrated by a brief discussion of the six metrics that comprise the system. The hierarchy consists of two top-level measures and four underlying measures.
The Two Top-Level Metrics
Overall Equipment Effectiveness (or OEE) and Total Effective Equipment Performance (or TEEP) are two closely related measurements that report the overall utilization of facilities, time and material for manufacturing operations. These top view metrics directly indicate the gap between actual and ideal performance.
• Overall Equipment Effectiveness (or OEE) quantifies how well a manufacturing unit
performs relative to its designed capacity, during the periods when it is scheduled to run.
• Total Effective Equipment Performance (or TEEP) measures OEE effectiveness
against calendar hours, i.e.: 24 hours per day, 365 days per year.
The Four Underlying Metrics
In addition to the above measures, there are four underlying metrics that provide understanding as to why and where the OEE and TEEP performance gaps exist. A comprehensive OEE measurement system, such as OEE Management by Capstone Metrics, allows this data to be the primary driver for improvement at all levels of the enterprise.
The measurements are described below:
• Loading: The portion of the TEEP Metric that represents the percentage of total calendar
time that is actually scheduled for operation.
• Availability: The portion of the OEE Metric represents the percentage of scheduled time that the operation is available to operate. Often referred to as Uptime.
• Performance: The portion of the OEE Metric represents the speed at which the Work
Center runs as a percentage of its designed speed.
• Quality: The portion of the OEE Metric represents the Good Units produced as a
percentage of the Total Units Started. Commonly referred to as First Pass Yield.

Visualizing OEE/TEEP by use of a Cascade Chart
To more clearly understand the metrics and their roles, a Cascade Chart is useful. An example of comprehensive OEE/TEEP presentation is shown below in a sample report from Capstone
Metrics OEE Management Software.

The left three bars indicate what is presented to the production team in terms of scheduled time and/or booked business volume. This combination is also referred to as Loading.
The three bars on the right side display how effectively that scheduled capacity is utilized. This is the OEE performance. Note that the blue OEE Goal Line depicts plant OEE targets based on the actual Loading.
In total, the six bars signify the progressive erosion of ideal capacity and the categories of loss that are responsible. The remaining utilized capacity, after losses, is reflected by the TEEP metric.
It can now be seen that TEEP = Loading x OEE.
Study of the Cascade Chart reveals that each category of loss in the Capacity Stream can now be identified. Ownership of each loss will naturally flow to specific functional areas.

Calculations for OEE and TEEP

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OEE Templates
What follows is a detailed presentation of each of the six OEE / TEEP Metrics and examples of how to perform calculations. The calculations are not particularly complicated, but care must be taken as to standards that are used as the basis. Additionally, these calculations are valid at the work center or part number level but become more complicated if rolling up to aggregate levels.
OEE (Overall Equipment Effectiveness) OEE breaks the performance of a manufacturing unit into three separate but measurable components: Availability, Performance, and Quality. Each component points to an aspect of the process that can be targeted for improvement. OEE may be applied to any individual Work Center, or rolled up to Department or Plant levels. This tool also allows for drilling down for very specific analysis, such as a particular Part Number, Shift, or any of several other parameters.
It is unlikely that any manufacturing process can run at 100% OEE. Many manufacturers benchmark their industry to set a challenging target, 85% is not uncommon.
Calculation: OEE = Availability x Performance x Quality
Example:
A given Work Center experiences:
Availability of 86.7%.
The Work Center Performance is 93.0%.
Work Center Quality is 95.0%.
OEE = 86.7% Availability x 93.0% Performance x 95.0% Quality = 76.6%
TEEP (Total Effective Equipment Performance) Where OEE measures effectiveness based on scheduled hours, TEEP measures effectiveness against calendar hours, i.e.: 24 hours per day, 365 days per year. TEEP, therefore, reports the 'bottom line' utilization of assets.
Calculation: TEEP = Loading x OEE
Example:
A given Work Center experiences
OEE of 76.67%.
Work Center Loading is 71.4%
TEEP = 71.4% Loading x 76.7% OEE = 54.8%
Stated another way, TEEP adds a fourth metric 'Loading'.
TEEP = Loading x Availability x Performance x Quality
Loading The Loading portion of the TEEP Metric represents the percentage of time that an operation is scheduled to operate compared to the total Calendar Time that is available. The Loading Metric is a pure measurement of Schedule Effectiveness and is designed to exclude the effects how well that operation may perform.
Calculation: Loading = Scheduled Time / Calendar Time
Example:
A given Work Center is scheduled to run 5 Days per Week, 24 Hours per Day.
For a given week, the Total Calendar Time is 7 Days at 24 Hours.
Loading = (5 days x 24 hours) / (7 days x 24 hours) = 71.4%
Availability
The Availability portion of the OEE Metric represents the percentage of scheduled time that the operation is available to operate. The Availability Metric is a pure measurement of Uptime that is designed to exclude the effects of Quality, Performance, and Scheduled Downtime Events.
Calculation: Availability = Available Time / Scheduled Time
Example:
A given Work Center is scheduled to run for an 8 hour (480 minute) shift.
The normal shift includes a scheduled 30 minute break when the Work Center is expected to be down.
The Work Center experiences 60 minutes of unscheduled downtime.
Scheduled Time = 480 min - 30 min break = 450 Min
Available Time = 450 min Scheduled - 60 min Unscheduled Downtime = 390 Min
Availability = 390 Avail Min / 450 Scheduled Min = 86.7%
Performance
The Performance portion of the OEE Metric represents the speed at which the Work Center runs as a percentage of its designed speed. The Performance Metric is a pure measurement of speed that is designed to exclude the effects of Quality and Availability.
Calculation: Performance = Actual Rate / Standard Rate
Example:
A given Work Center is scheduled to run for an 8 hour (480 minute) shift with a 30
minute scheduled break.
Available Time = 450 Min Sched - 60 Min Unsched Downtime = 390 Minutes
The Standard Rate for the part being produced is 40 Units/Hour.
The Work Center produces 242 Total Units during the shift. Note: The basis is Total
Units, not Good Units. The Performance metric does not penalize for Quality.
Actual Rate = 242 Units / (390 Avail min / 60 min/hr) = 37.2 Units/Hour
Performance = 37.2 Units/Hour / 40 Units/Hour = 93.0%
Quality
The Quality portion of the OEE Metric represents the Good Units produced as a percentage of the Total Units Started. The Quality Metric is a pure measurement of Process Yield that is designed
to exclude the effects of Availability and Performance.
Calculation: Quality = Good Units / Units Started
Example:
A given Work Center produces 230 Good Units during a shift.
242 Units were started in order to produce the 230 Good Units.
Quality = 230 Good Units / 242 Units Started = 95.0%

What is OEE?

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- OEE or Overall Equipment Effectiveness is a system of measures that provide continuous visibility to manufacturing productivity and waste.
- OEE provides a clear focus on utilization of facilities and equipment.
- OEE is accepted worldwide as the standard for quantifying manufacturing success.

Overview of the family of OEE Metrics
OEE, Overall Equipment Effectiveness, is a top-level metric, which is comprised of 3 underlying elements - Availability, Performance, and Quality. These three legs of the OEE metric are summarized as follows:

Availability reflects equipment and process uptime
Performance reports speed of production compared to design standards
Quality indicates the process yield
OEE = Availability X Performance X Quality

TEEP, or Total Effective Equipment Performance adds the Loading metric. TEEP, therefore, reports the 'bottom line' utilization of assets.

Loading the amount of calendar time that assets are actually scheduled to run
TEEP = Loading X Availability X Performance X Quality
Or… TEEP = Loading X OEE

The result is an information set that provides excellent ability to drill down and identify each issue that is impacting cost or restricting throughput. OEE has become recognized as the standard measure for Lean Manufacturing environments. Successful manufacturers tend to focus on driving their OEE to 85% - 95%, based on their particular processes.

Why measure your OEE?
1. Favorable changes in OEE directly lead to gains in profitability. The linkage between OEE results and financial performance is a function of:
a. Reduced Variable Manufacturing Cost (Direct Cost) resulting from…
I. Increased Uptime (Availability)
II. Higher Speed (Performance)
III. Minimized material waste (Quality)
b. Better Asset Utilization, leading to…
I. Lower Overhead Cost (Fixed Cost)
II. Additional Sales Capacity - at no cost
c. Reduced Inventory as the Manufacturing Processes become more reliable
d. Rational basis for more effective capital management and spending
2. OEE should be viewed as a 'Continuous Improvement Engine' that provides a robust framework for the Lean Manufacturing journey:
I. Triggers and monitors Six Sigma projects and Kaizen events
II. Provides basis for Total Productive Maintenance (TPM)
3. As far as global competition is concerned, OEE improvement strategies can offset labor cost disadvantages to provide a more level playing field.
4. OEE is the universal yardstick allowing benchmarking of manufacturing effectiveness.

What is SMED?

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SMED, stands for Single-Minute Exchange of Die, is a theory and techniques for performing setup operations in under ten minutes, i.e., in a number of minutes expressed in a single digit. The SMED method was revolutionized by Mr. Shingo since 1950 in Japan. The concepts and techniques became available to other countries started around 1974 in West Germany and Switzerland and in 1976 in Europe and United States. However, not util 1980s, the SMED technique getting acceptace to companies outside Japan.

Effects of Setup Reduction
Setup reduction may bring the following impacts to the shop floor:

Lot-size can be reduced.
Help to reduce inventory.
Reduce the cost of setup labor.
Increase the capacity on bottleneck equipment.
Help to eliminate the setup scrap.
Reduce the potentail Quality problems and obsolescence.

Alternatives for Setup Reduction
SMED is not the only approach for reducing setup time. Some other alternatives are:

Production Planning - reduce the number of setups.
Group Technology / cell foramtion - reduce the number of setups
Design Standardization - reduce the number of setups.
Use Standard Module - reduce the number of setups.
Work Simplification.
Mechanization or automation - an expensive option.

Procedures for Setup Reduction
SMED can be conducted according to the following steps:

1.Form the setup reduction team.
2.Conduct training and education.
3.Study the setup process (e.g., use video tape).
4.Classify setup operations into waste, internal setups (IED), and external setups (OED).
-Waste - Operation which do not add values to the setup.
-Internal Setups - Operations that can only be performed while the machine is shut down.
-External Setups - Operations that can be performed without shutting down the machine.
5.Eliminate the waste.
6.Convert as many internal setups as possilbe to external setups.
-Use standard insert module.
7.Improve internal setups (include adjustment).
-Use specially designed cart to organize tools.
-Use quick-release fasteners instead of bolts and nuts.
-Use stoppers to quickly position the jigs.
-Use rolling bolsters instead of cranes.
-Use overhang mechanisms to handle heavy jigs.
-Use locating pins and holes (socket) to eliminate the adjustment.
-Use standardized die height.
8.Improve external setups.
-Apply visual control principles.
-Use checklist to avoid omission.
-Use specially designed cart to help organize tools.
-Organize workplace (5S) to reduce search.
9.Develop the standard operating procedure (SOP).
10.valuate the performance of setup reduction.
11.Prepare for the next setup reduction project.

Toolkits for Setup Reduction
Many toolkits can be applied to help setup reductions. For instance:
-Visual Control.
-5S Checklist.
-Specially designed setup cart.
-Workplace organization (5S).
-Railed cart.
-Standardized baseplate and socket.
-Attachment plate.
-Overhang tools.
-Quick fasteners -- clamping cam, crank, clamping (lock) lever.
-Standardized die height.
-Locating pins.
-Stopper.

Lean-Manufacturing Objectives

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Quality
Increasing the quality level of the working process means reducing the number of errors, repairs and rejects. The result is less demand for company resources and therefore lower total operating costs.

Cost
The production process begins with human resources, installations and raw materials and ends with finished products. Productivity increases when the same amount of initial resources generate more finished products at the end of the process, or, conversely, when less initial resources are required to produce the same volume of finished products.

Deadlines : Reducing throughtime
Throughtime is the time that elapses between the company receiving its raw materials and receiving payment for the products produced using those raw materials. Reducing this interval means being able to produce more products in the same time, better rotation of resources and the ability to react faster and more flexibly to satisfy customer needs.

Cost : Shortening the production line
A production line that is too long means more personnel, more work in progress, longer task execution times and higher logistics costs. Not only does space optimization reduce all these costs, but it also allows you to produce more in the same space.The result is the opportunity to make substantial savings on investment : fewer buildings, less floor area, lower general costs.

Cost : Reducing inventory
Inventories eat up space, add considerably to logistics costs and consume significant amounts of financial assets ; assets that could be better employed elsewhere.Used in conjunction with small containers and supply trains, supermarkets located as closely as possible to the line and line-side flow racks give companies back the value destroyed by old stock management systems with their containers, pallets and forklift handling.

Cost : Reducing space
Most companies use far too much space and more personnel than they need to :Lean Manufacturing using the LeanTek system does away with unproductive conveyors, reduces production line length, incorporates previously separate workstations into the main line, reduces stocks and cuts logistics costs.All these improvements help reduce the need for space and offer the option of earmarking the regained space for future expansion.

Reduce Waste

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1 - Muda caused by inappropriate processing

Using small front-picked containers reduces the length of the line, saving on general expenditure, reducing flow costs and saving time.

2 - Muda caused by defects

Defects cost the company money and time. They require the installation of a non-productive remedial system. Disposing of rejects is even more costly. Eliminating defects means not producing them in the first place !This means creating a suitably ergonomic environment in which components and tools are all in their correct place and within immediate reach of production operations. This reduces the likelihood of impact, dropped equipment and bad workmanship.

3 - Muda caused by unnecessary movement

Unnecessary movement and movement at the workstation create no added value. Quite the opposite in fact: it makes the work harder and takes up space. LeanTek’s modular architecture allows workstations to be configured so that components are as close as possible to the operator’s hand.This contributes to reducing the negative added value generated by unnecessary movement. Operator productivity improves and there are fewer constraints on work as operators focus on productive tasks.

4 - Muda caused by unnecessary stock

Stocks of finished products, semi-finished products and raw materials create no added value. Quite the opposite in fact : excessive stocks increase costs as a result of the investment required to handle them.The Muda that results from unnecessary stock is linked to that caused by overproduction. Using a LeanTek system in association with smaller, more frequent deliveries allows companies to reduce stocks.This is achieved by installing dynamic supermarket-style storage as close as possible to the line : the stock handler can then take products directly from the flow racks to supply the production line. LeanTek allows stock to be sized to the strict minimum required and allows it to evolve simply and quickly.

5 - Muda caused by waiting

This Muda is generated when the operator no longer has the components required to carry out his/her task : their hands are idle. This works through the installation of a new logistics system based on continuous flow and regular supplies. Operators can then concentrate on added value operations, whilst logistics supplies components in small trains.

6 - Muda caused by transport

Moving products from one place to another creates no value. Quite the opposite in fact: transport eats up space and capital.The Lean Manufacturing method requires that logistic circuits are as short as possible in the plant, between the loading bay and the supermarket and between the supermarket and the line-side.This works through implementing a newlogistics system based on flexible trains capable of distributing all the components required for production to several teams in a single journey.

7 - Muda caused by overproduction

The introduction of a kanban system combats waste from overproduction. LeanTek’s contribution is the creation of customizable JIT supermarkets as close to the line as possible.

Kaizen System

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One of the fist steps taken by the Lean Company is to introduce multidisciplinary teams (including operators) on the factory floor to help reduce waste. The Kaizen approach consists of making continual user-driven improvements as part of the fight against muda.

Lean Manufacturing identifies 7 areas of waste or ' muda '.

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The Lean Manufacturing house can only grow if its foundations are built first. Without using a highly flexible and modular system that allows muda to be eliminated and Kaizen attitudes to be introduced into the plant, it is impossible to proceed to the later steps of Lean Manufacturing, which are work standardization, sequencing (Heijunka) JIT and JIDOKA.

The 7 lean manufacturing identified wastes

Changing the production system

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There are three problems inherent in any production system:• Waste (Muda),• Instability,• Variability (Mura).
These problems reduce system efficiency by exerting a negative effect on quality, costs and delivery times. The end result is a lower return on investment.

(1)Waste (2)Continuous improvment (3)Sequencing(4) Stop et notify anomalies

Benefits

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You would cut delivery times significantly, at the same time as reducing your stocks.You would halve the volume of rejects. You would to achieve almost 100% reliable delivery times.You would improve machine availability by 60% with no additional investment. What would all this mean for your customers, employees and shareholders ?
The result of applying the Lean Manufacturing method is a Lean Company; an organization that combines great production flexibility and an unrivalled ability to respond to rapid change. Lean Manufacturing allows Lean Companies to respond competitively to customer personalization needs, no matter how complex the products concerned.

History

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At the end of 1890, Frederick W Taylor became the first to study work management scientifically and distribute the results. His work led to the formalization of time and motion studies and the setting of common standards. Frank Gilbreth then added the concept of breaking work down into elementary time blocks.It was around this time that the first notions of eliminating waste and studying movement began to emerge. In 1910, Henry Ford invented the assembly line for his standardized Ford Model T. Alfred P.Sloan improved on Ford’s system when he introduced the concept of assembly line diversity at GM.
After the Second World War, Taiichi Ohno and Shingeo Shingo created the Just In Time ”, “Waste Reduction” and “ Pull System ” concepts for Toyota, which, together with other flow management techniques, resulted in the Toyota Production System (TPS).The TPS has been evolved and improved ever since. In 1990, James Womack summarized these concepts to create Lean Manufacturing at a time when Japanese expertise was spreading to the West and the success achieved by companies applying these principles and techniques became undeniable.