Contingency Planning For Lean Operations (II)

Contingency Planning For Lean Operations – Part II

Putting together a contingency plan can be quite challenging when you consider all the things that could go wrong at any given point in time.  Contingency plans should not only be restricted to ”things gone wrong” and are not limited to operations or process specific events.  All aspects of an operation are prone to risk.  As such, contingency planning must be an enterprise wide activity.

Failing to understand and assess the risks that may impact your operation is a recipe for future failure.  If you fail to plan then plan to fail.  The same is true for contingency plans.  Effective risk management and contingency planning are critical to minimize or eliminate the effects of failure.

Natural disasters (like we’ve never seen before) continue to plague us without prediction.  Yet, we are able to respond immediately and effectively.  If you get hurt or injured, someone is there to help you simply by dialing 911.  Emergency units are ever present and available to respond.

Unfortunately the same is not necessarily true for business.  The recent turn in the economy caused financial markets to tumble and decimated corporations on every scale.  Millions of people are affected by the fallout.  The government “loans” were not crafted after the event.  Did contingency plans exist to even consider this level of change in the economy?

Although history may be the best predictor of future events, it is not exclusive or exhaustive to predicting unforeseen future events.  Even if history did provide a glimpse of potential future failures, we may simply choose to ignore the probability of recurrence – this isn’t the first time the financial markets have crashed, yet we can’t seem to determine or understand what key indicators existed that could have prevented this current situation.

Certainly new variables are introduced as technologies continue to evolve and become more integral in our operations.

In Part I of this series we suggested that contingency plans should be prepared to address potential labour challenges and more specifically availability.  Certainly, the recent concerns regarding the H1N1 virus have heightened attention with respect to labour shortages.

• Inclement Weather – Immediate effects of Snow Storm, Hurricane, Heavy Rain, Tornado.
  • Other considerations include:
    • Duration
    • Seasons
    • Cumulative Severity
    • Delayed Effects (flooding)
    • Property Damage.
• Accident / Injury:  Personal versus Workplace
  • Long Term
  • Short term
  • Considerations to reduce or minimize impact to operations:
    • Early Return To Work
    • Modified Duty
    • Restricted Duty
    • Reduced Hours
• Illness (Personal / Family / Extended Family)
  • Short Term
    • (Flu, Cold)
    • Emergency
  • Long Term
    • Surgical Care
    • Chronic Care
• Sudden Premature Death
• Parental Leave (Maternity Leave)
• Bereavement – Immediate Family, Out of Country
• Retirement / Attrition
• Training
  • Onsite vs Offsite
  • Duration
• Meetings – Department
  • Company Wide
  • On Site
  • Customer Site
• Quality Disruption
  • Containment Activity
    • Sorting
    • Rework
• Travel
• Vacation Allowance / Timing
  • Customer Driven
  • Company Mandated
  • Personal Choice
  • Season
  • Duration
    • New Hires – Zero Weeks
    • Senior Employees – Per “X” Years of Service
• Holidays
• Absenteeism (Culpable)
• Layoff and Recall
  • Short Term
  • Long Term
• Supply Chain Disruptions – Raw Material or Part Supply
• Planned Shutdown / Start Up Events – Holidays
• Leave of Absence – Short Term / Long Term
• Facilities
  • Loss of Utilities:  Water, Electricity
  • Fire, Suspended Services
  • Parking Availability
  • Locker Space
• Equipment – Breakdown / Malfunction (Major)
• Tooling – Breakdown  / Malfunction (Major)
• Skill Levels Required – Non-Skilled, Semi-Skilled, and Skilled Labour
•  Union – Strike
• Customer Decreases
  • Shutdown (Reduced Volume)
  • Slow Down (Reduced Volume)
  • Reduced Work Week (4 vs. 5 days)
  • Shutdown (Planned)
• Customer Increases:
  • Volume
  • Extended Work Days (Daily Overtime)
  • Extended Work Week (Saturday)

There are likely more areas of concern that may impact your labour pool, however, this does serve as a starting point.  Do all of the above elements require a contingency plan?  Not necessarily.  We still contend that it is good practice to document all potential concerns.  It is easier to add a note to document the reason for exclusion from the contingency plan by stating:

• The following elements were discussed during the preparation of this plan, however, specific contingency plans were not considered necessary at the time of review:
  • Training – Scheduled Activity
  • Culpable Absenteeism – Progressive Discipline Program
  • Add Elements to the List as applicable

This latter task may seem somewhat trivial, but consider who else may be reading the report.  Defining the scope of the contingency plan and adding a list of exclusions supported with reason(s) clarifies any ommissions from the core plan, will minimize the time required for review, and eliminates any assumptions regarding unintended ommisions.

Our next post will address the elements to be considered when developing a contingency plan.

Until Next Time – STAY Lean!

Contingency Planning For Lean Operations – Part I

Contingency Planning For Lean Operations – Part I

Lean operations are driven by effective planning and efficient execution of core activities to ensure optimal performance is achieved and sustained.  The very nature of lean requires extreme attention to detail through all phases of planning and execution.  Upstream operations simply cannot tolerate any disruptions in product supply or process flow without the risk of incurring significant downtime costs or other related losses.

Effective risk management methods, contingency plans, and loss prevention strategy are critical components of successful operations management in a lean operation.  Risk management and preventing disruptions is the subject of contingency planning and requires the participation of all team members.

Successful contingency planning assures the establishment of an effective communication strategy and identification of core activities and actions required.  Contingency plans may require alternative methods, processes, systems, sources, or services and must be verified, validated, and tested prior to implementation.

Understanding and assessing the potential risks to your operation is the basis for contingency planning with the objective to minimize or eliminate potential losses.

Inventory represents the most basic form of contingency planning.  Safety stock or buffer inventories are typically used to minimize the effects of equipment downtime or disruptions in the supply chain. 

The levels of inventory to maintain are dependent on a number factors including Lead Time, Value, Carrying Cost, Transit Time (Distance), Shelf Life, Minimum Order Quantities, Payment Terms, and Obsolescence.

Why is this relevant?

Material and Labour represent two key resources that may be influenced by external factors that are beyond the control of any company policy or practice.  Internally controlled or managed resources such facilities, equipment, and tooling are less susceptible to unknown elements.  For the purposes of this discussion, we will examine Labour in a little more detail.

The H1N1 virus, originally known as the Swine Flu, is the latest potential health pandemic since the outbreak of SARS only a few years ago.  The government has been struggling to organize mass immunization clinics and to engage the media to aid in the cause.  In the meantime, the potential impact of the H1N1 virus on your operation remains to be an unknown. 

Experts have commented to the media that the lessons from the SARS outbreak have still not been learned.  One would expect that past practices would have already been adopted into new best practices from our experiences with other similar events in our history.

Government agencies at all levels (Federal, Provincial, and local) have mismanaged the activities required to procure and distribute the vaccine, and failed to provide an effective communication and immunization strategy to ensure the risk to public health was minimized and the at the very least understood.

The lack of coordination and accountability for the success or failure of the communication strategy, procurement and distribution of the vaccine, and other related activities are strong indicators that the planning process did not consider the infrastructure requirements and relationships needed between levels of government.

The lack of an effective communication strategy introduced confusion and speculation in the media and the general public.  Mass education only seemed to become more aggressive as incidents of severe H1N1 complications and related deaths were reported in the media.

If this really was a pandemic event, many operations today would (and may still) be adversely affected due to direct or indirect (supply chain) labour shortages.  Do you have contingency plans in place to address this concern?

It could be argued that “if we are affected to this extent, then our customers will be as well.”  This is not necessarily true unless your customers and / or suppliers are located in the same immediate area or region of your business.

People travel all the time, whether they are commuting to work from out-of-town or traveling to or arriving from a foreign country on business.  The source of exposure is beyond your immediate control. 

What other elements can directly impact labour?  We will explore some of these in our next post.  In the meantime, keep your hands washed and remember to cough into your sleeve.

Until Next Time – STAY Lean!

Unexpected and Appreciated – Uncommon Courtesy:  This morning, a person cut into the drive through lane ahead of us – not realizing the gap in the line was there for thru traffic.  Recognizing the error in drive through etiquette and to make amends, we were pleasantly surprised by the ”free” coffee at the pick up window.  Thank you ladies!

Going DEEP with OEE

Does anyone actually look at their daily equipment availability? Instead of using TEEP that is typically based on calendarized availability, looking at the Daily Equipment Effectiveness Performance of your operation may provide some interesting insights.

Working overtime due to material or equipment availability occurs many times.  Unfortunately, we find that sometimes these very same machines are idle during the week.

A detailed explanation for calculating DEEP can be found in one of our earlier posts, “OEE, Downtime, and TEEP.”  Understanding machine utilization patterns may provide greater insight into the actual versus planned operating pattern of your process.

Just something to invoke some thoughts for your operation and to perhaps identify another opportunity to improve performance.

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Until Next Time – STAY Lean!

OEE For Manufacturing

We are often asked what companies (or types of companies) are using OEE as part of their daily operations.  While our focus has been primarily in the automotive industry, we are highly encouraged by the level of integration deployed in the Semiconductor Industry.  We have found an excellent article that describes how OEE among other metrics is being used to sustain and improve performance in the semiconductor industry.

Somehow it is not surprising to learn the semiconductor industry has established a high level of OEE integration in their operations.  Perhaps this is the reason why electronics continue to improve at such a rapid pace in both technology and price.

To get a better understanding of how the semiconductor industry has integrated OEE and other related metrics into their operational strategy, click here.

The article clearly presents a concise hierarchy of metrics (including OEE) typically used in operations and includes their interactions and dependencies.  The semiconductor industry serves as a great benchmark for OEE integration and how it is used as powerful tool to improve operations.

While we have reviewed some articles that describe OEE as an over rated metric, we believe that the proof of wisdom is in the result.  The semiconductor industry is exemplary in this regard.  It is clear that electronics industry “gets it”.

As we have mentioned in many of our previous posts, OEE should not be an isolated metric.  While it can be assessed and reviewed independently, it is important to understand the effect on the system and organization as a whole.

We appreciate your feedback.  Please feel free to leave us a comment or send us an e-mail with your suggestions to leanexecution@gmail.com

Until Next Time – STAY lean!

OEE for Batch Processes

We recently received an e-mail regarding OEE calculations for batch processes and more specifically the effect on down stream equipment that is directly dependent (perhaps integrated) on the batch process.  While the inquiry was specifically related to the printing industry, batch processing is found throughout manufacturing. Our more recent experiences pertain to heat treating operations where parts are loaded into a stationary fixed load oven as opposed to a continuous belt process.

Batch processing will inherently cause directly integrated downstream equipment (such as cooling, quenching, or coating processes) to be idle. It many cases it doesn’t make sense to measure the OEE of each co-dependent piece of equipment that is part of the same line or process. Unless there is a strong case otherwise, it may be better to de-integrate subsequent downstream processes.

Batch processing presents a myriad of challenges for line balancing, batch sizes, and capacity management in general.  We presented two articles in April 2009 that addressed the topic of  where OEE should be measured.  Click here for Part I or Click  here for Part II.

Please leave your comments regarding this or other topics.  We appreciate your feedback.  Also, remember to get your free OEE spreadsheets.  See our free downloads page or click on the file you want from the “Orange” box file on the sidebar.

Until Next Time – STAY lean!

OEE Topics for 2009

We changed our theme!

Today was another day to do a little maintenance. We spent a little time revamping our look and feel. We hope you enjoy the changes and find our site a little easier to navigate.  We updated our Free Downloads page to present another easier and more direct venue to get your files instantly using Box.Net. If you’re already familiar with WordPress, you know how great this widget is. Downloads could never be faster or easier.

We also took some time to update some of our pages. We would suggest, however, that the best detailed content appears in the individual articles that we have posted.

Upcoming Topics for 2009

1. Tracking OEE Improvements:  We have noticed an increase in the number of requests to discuss tracking OEE improvements.  We have been working on a few different approaches even for our own consulting practice and look forward to sharing some thoughts and ideas here.
2. How OEE can improve your Cost of Non-Quality.  It’s more than yield.
3. What OEE can do for your Inventory.  Improvements should be cascading to other areas of your operation – including the warehouse.
4. Innovation – Defining your future with OEE
5. OEE and Agile - Going beyond lean with OEE.
6. Best Practices – OEE in real life, in real time

If you would like to suggest a topic for a future post, ask a question, or make a suggestion, please leave a comment or simply send an e-mail to LeanExecution@gmail.com or vergence.consulting@gmail.com.  We do appreciate your feedback.

Until Next Time – STAY lean!

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Welcome to LeanExecution!

Welcome!  If you are a first time visitor interested in getting started with OEE, click here to access our first post “OEE – Overall Equipment Effectiveness“.  This is the post that started it all.

We have presented many articles over the past many months featuring OEE (Overall Equipment Effectiveness) and related topics.  Our latest posts appear immediately following this welcome message.  You can also use the sidebar widgets to select from our top posts or to to select key posts by category.

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All downloads mentioned in our articles and feature posts are available from the FREE Downloads page and from the orange “FREE Downloads” box on the sidebar.  You are free to use and modify the files as required for your application.  We trust that our free templates will serve their intended purpose and be of value to your operation.

Questions, Comments, Future Topics

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Until Next Time – STAY lean!

Make or Break with OEE

Reward systems, bonuses, and other forms of compensation have been the topic of many newspaper articles and news broadcasts as of late.  Although attention has turned toward the viability and sustainability of the manufacturing sector, there are many of us who question how the performance of these companies is measured and, even more so, rewarded.

While executive compensation is typically subject to scrutiny in and outside of most organizations, those rewards that are internal to an organization are seldom challenged or checked.  How do we really measure the effectiveness of our leaders and management?

Our industry leaders are truly being tested as today’s economy has further challenged many organizations to make additional substantive cuts to their operating budgets.  These times all but test our own survival strategies as well.

Executives and management at all levels continue to look at where and what to cut – this usually translates into “WHO should be cut”.  It is time for leadership to recognize that current management methodologies and infrastructure must change – the organizational structure must become seamless in its approach.

In the late 1940’s and early 1950’s, Toyota was faced with the same dilemma our current North American auto manufacturers are facing.  They didn’t just try to figure out how to build a better car they also figured out how to build them more efficiently and effectively.  Toyota  didn’t replicate the existing North American systems, they re-invented them.

Consumers want a quality product.  The what, where, when, and how it is built are not really their concern – as long as it’s available when they want it!

Discussions should be focused on the METHOD or the HOW things get done (systems and / or processes) not necessarily WHO does it.  Rationalizing the current business structure and what can be done to improve it is required.  It is difficult to get your team involved in problem solving and strategy meetings when the only thing on their minds is “who is left after the storm blows through”.

The Axe Falls … on operations

Typically, operations becomes the focus of most cost cutting endeavours.  In the automotive industry, plant closures are devastating communities and the ripple effect of these closures puts us on the brink of another wave of closures at the supplier level.  The most recent example supporting this trend is Chrysler’s announcement to close several of it’s major plants in North America.

Unfortunately, eliminating excess capacity is only a short term solution.  The true change events will occur when the infrastructure challenges are addressed and a new “fresh” culture is introduced and embraced by the “new” management.

If we learn anything during these times, we quickly discover the difference between the things that matter most and those that don’t.  Now is the time to find out what is really necessary and matters most to your operations.  A corporate, system level, 5S process is required to really clean up and move forward.

Bankruptcy can make the discovery process very quick and easy.  Liquidators are also very quick to give you the real value of your assets.  Peter F. Drucker suggested that abandonment was a necessary part of the management process.  The timing, however, is much better when it is on your terms and not those of the bank.

OEE – does it work?

Overall Equipment Efficiency, or OEE, is one of those metrics that should survive the test of time.  We have discussed the many positive attributes of using OEE as an effective metric for managing your manufacturing operations.  If the culture in your company is one of candor and open and honest communication, then OEE can definitely be used as a metric to help drive change and improvements.

In the wrong culture (selfish versus company gain), metrics such as OEE can be used and abused quite readily.  We would caution you to think about how improvements to OEE are rewarded.  At a minimum:

Reward the action or the change - not the result.

Rewarding the action allows you to identify what has been changed or improved and will encourage others to duplicate this type of activity.  The OEE result serves to validate the effectiveness of the change or improvement.  This strategy also ensures that people are focused on solutions and tangible actions as opposed to “tweaking the system” to make the numbers look better.  Getting a better stop watch may improve the accuracy of the measurement, unfortunately it won’t save you a dime unless something else changes.

What’s next

Visioneering and Innovation are imperative to our continued future successes.  The electronics industry continues to churn out new ideas and technologies at an amazing rate of change.  Some argue that it’s easier with electronics because …

Is it really?  Or is it that we have learned by the very practices of leaders in the electronics field that change is inevitable, encouraged, embraced, and most importantly expected.

The automotive industry and manufacturers in general need real and true competition.  There is absolutely no room for complaceny.  If the automotive industry was anything but close to embracing this type of culture, cars would be much different today.

Perhaps this is a bit of a rant, however, we seem to be too set in our ways.  Protecting past methods, preserving old cultures, and confusing complexity with genius.  Museums and memorials have their place, just not in today’s manufacturing facilities and management practices.

Until next time – Stay LEAN!

How to Improve OEE – Any Questions?

Ask any Quality or Engineering manager and they will tell you that measurement systems are valuable tools to identify problems and opportunities.  The measurement system itself is not the answer – it is the data source, the EVIDENCE that drives the questions.  It is a part of the discovery and validation process to confirm the opportunity or problem and the effectiveness of the solutions to resolve it.

A well integrated OEE system should provide the data to answer the questions on everyone’s mind, ”What do we need to do to improve?” or “Why aren’t we improving?”  The simple answer is, “We need to fix it.”  Of course the real question may not be, “What do we need to fix?” but, “Why did it break?”

Yes, we will likely have to replace the part(s) that failed to get the line back up and running, but what really caused the failure to occur?  What was the real root cause?  This introductory post to problem solving and root cause analysis will kick start some of the techniques used to solve problems effectively.

The Problem Statement:

The key to effective problem solving starts with identifying the problem to be solved.  This is typically a brief statement describing the problem.  For external concerns, the problem is usually stated in customer terms.

This post presents some simple examples of problems to be solved.  You will quickly discover that defining the problem may not be as simple as it looks.  We will discuss this in more depth in our future posts.

Root Cause Analysis

Identifying the real root cause(s) for the failure is the secret to successful problem solving.  The method you use to arrive at the root cause should allow you to confirm and validate your solution before taking action.  Here is an important point to remember:

Do not confuse symptoms with root causes.  

For example, you are driving down the road and suddenly find yourself struggling to maintain control of your vehicle.  Your expert driving skills allow you to pull over and stop on the side of the road.  You get out of the car and walk around to discover that you have a flat tire.  The flat tire is a symptom – not the root cause.

As luck would have it, a police officer who just happened to be following you in an unmarked car, notices your sudden erratic driving behavior and charges you with recklessness and careless driving.  Since none of the tires on the police car are flat, the officer presumes the condition of your vehicle is the direct result of your poor driving skills and bad habits after many years on the road.  Another point to remember:

Do not jump to conclusions

You, like many people, would argue that your many years of driving provided you with the experience necessary to avert danger.  The officer quickly recognizes that your many years of experience have caused you to lose perspective of the potential hazards of driving.  The officer advises that your driving record shows no record of any tickets or accidents and clearly suggests that you have had very few “experiences” with the law and minimal exposure to poor road conditions.

The officer proceeds to charge you, the operator, because you simply weren’t paying attention to the conditions and potential hazards of the road.  You are given a ticket to serve as a reminder to pay more attention to the road and to be mindful of your driving habits in the future.  Then to add insult to injury, the officer advises you to fix your tire and drive carefully. 

Unforgiving of the circumstances and since quota’s have to be met, the charges stand and you find yourself on your way to court.  As you sit in your vehicle, stunned that you just got a ticket for getting a flat tire, you are conflicted and fuming because the officer blamed you, your poor driving skills, and your bad habits for driving recklessly down the road!  The following tip will help you remember:

Operator Error is not a Root Cause

Many times, management is too quick to attribute the root cause to operator error.

5 WHY Analysis

One of the best methods for identifying the real root cause is the 5-Why approach.  The concept of asking the question “WHY?” five times is quite simple.  In practice though, you will find it may not be that easy.  Why?  Because the wrong answer will lead you through a continuing series of wrong answers that ultimately lead to the wrong conclusion.

There is always more than one answer – Which one is correct?

Referring back to our example of the flat tire, you now need an argument to absolve yourself of any blame for the incident on the highway.  In court, the judge asks, “How you plead to the charges before you?”  You answer, “Not Guilty your honor.”

1. Why?  While I was driving down the road, I got a flat tire.
2. Why?  Because all the air ran out of my tire.
3. Why?  Because there was a hole in it.
4. Why?  Because the tire didn’t have anti-puncture technology.
5. Why?  Because the manufacturer didn’t design it properly.

Were it not for my expert driving skills, this situation could have been much worse.  As it was, using my superior driving skills, I successfully managed to maneuver my vehicle, without incident, to the side of the road, averting what could have been a disastrous crash.  Therefore, I request to be completely absolved of any and all wrongful doing and I am filing a class action suit against the tire manufacturer to cover court costs, lost wages, and damages as well as my emotional stress.

Clearly not satisfied, the judge requests you to take a 10 minute break to rethink your case.  On your return to the courtroom, you are prepared to present the following argument:

1. Why?  While I was driving down the road, I got a flat tire.
2. Why?  Because all the air ran out of my tire.
3. Why?  Because there was a hole in it.
4. Why?  Because there was a nail on the road.
5. Why?  Because the government refuses to keep the highways clean.

Were it not for my expert driving skills, this situation could have been much worse.  As it was, using my superior driving skills, I successfully managed to maneuver my vehicle, without incident, to the side of the road, averting what could have been a disastrous crash.  Therefore, I am filing a class action suit against the government to cover for court costs, lost wages, and damages as well as my emotional stress.  To resolve this matter quickly, I request that all charges be dropped and I in turn will drop my counter-claim.

The purpose of the above example was to demonstrate how the answer to the question – WHY? - can lead to completely different conclusions.  On one hand we’re ready to sue the tire manufacturer and on the other, we’re ready to take on the government.  If there was indeed a nail on the road, how did it get there?

Don’t Assign Blame

Solving problems and getting to the root cause is not about assigning blame to someone or something.  You can’t blame the government or the tire company for the fact that there was a nail on the road.  It is to easy to assign blame and it happens everywhere, everyday.  Perhaps the nail manufacturer should be sued as well for failing to provide adequate protections should the nail become lost or misplaced.

The question that wasn’t asked is, “Why was the nail on the road?”  The answer may be that it likely fell out of a board or from a truck or trailer that may have been carrying construction materials.  Again, being careful with the answer, we don’t want to come to the conclusion that nails should be banned completely.

On the other hand, it may be worthwhile to advise that all companies and contractors must make a reasonable effort and take appropriate precautions and measures to ensure that all loads are secure and free from loose raw materials.  Any nails must be placed in a sealed container and secured to the vehicle for the purpose of transport.  A maximum fine of $2,000.00 may be imposed and made payable to the “Operator Error Trust Fund.”

Leading the Witness:  The solution BIAS

STOP! - if you think you already know the answer – Stop!  We know that the right question doesn’t always lead to the right answer as we attempted to show in our example.  Another major pitfall is thinking we already have the answer and we just need to frame the questions and answers to support that conclusion.  This isn’t problem solving, this is creative story telling.  Don’t lead your team into following what “appears” to be a logical conclusion – be prepared to prove it.

Don’t Assume Anything – Follow the EVIDENCE

At a minimum, follow the evidence.  What is the data telling you?  It’s time to start thinking like a crime scene investigator (CSI) or good lawyer.  Asking questions and continuing to probe for answers is the secret to uncovering the less obvious and, more than likely, real solution.

Many OEE equipment / software integrators provide the ability to record and track downtime events in real time.  This data is extremely valuable for trouble shooting and problem solving; however, they are not necessarily root causes.  The integrators provide the capability to readily identify what part of the process failed or what is broken.  While this may be the cause of the line down condition, it is not the root cause of the problem.

Do not confuse the Point of Failure (Source) with the Root Cause

Don’t fall into this trap:

• Supervisor:  “The OEE system report showed that we lost two hours on the paint line last night.”
• Maintenance:  “Yeah, I saw the report too.  This OEE system tracks everything!”
• Supervisor:  “Why did the line go down?”
• Maintenance:  ”The A-Tank feed pump overheated.  The OEE system told us exactly which pump failed.  It saved us a ton of time.”
• Supervisor:  ”What did you do?”
• Maintenance:  “Oh, we replaced it.  The line is running fine now.”
• Supervisor:  “OK, that’s good.  Thanks.”

End of conversation.

So, WHY did the pump overheat?  Some questions just never get asked, but I’m sure the OEE will be just fine on the next shift.  We recognize that most effective TPM managers are sharper than this.  Our point is that not everyone is looking at the data from the same perspective.

We’ll discuss “How to Improve OEE” in more detail in our next post:  “How to use the 5 Why Approach.”

Until Next Time – STAY lean!

OEE Integration – Part V

Defining overall equipment effectiveness (OEE) criteria as part of the scope of work or purchase order agreement is quickly becoming standard practice throughout the automotive industry and manufacturing in general.

OEE Assessments

OEE criteria should be performed for every new purchase.  Often times, a high speed machine may be incorporated into a mixed technology production environment.  It is also possible that the machine or equipment under review is not the perceived production constraint or bottleneck.  This should not exclude the process from an OEE assessment.

Although LEAN manufacturing encourages single piece flow, it may be more feasible and cost effective for a machine to run independently.  This situation could occur in instances where business has grown within a commodity base and now the capacity of the machine must be shared across multiple product lines.

Engineering and Finance must consider the optimum production model that will yield the most cost effective strategy and subsequent process routing.  This assessment is best supported using Value Stream Analysis and Standardized Work procedures to fully understand the planned costs associated with inventory at all levels or stages of the process (raw, work in progress, and finished goods), labour (direct and indirect), and burden or overhead.

Lastly, it is important to understand the real or full potential of the equipment or process being purchased or developed.  Future business costs and opportunities for future growth are important considerations for any capital investment.  Press shops or metal stamping suppliers recognize open capacity to drive current and future business growth demands.  Idle machines don’t make money.  Open capacity is money lost.

The Purchase Agreement

To eliminate any misconceptions or lack of understanding, OEE expectations must become an integral part of the purchase agreement.  This can be accomplished by creating a Statement of Work, incorporating the requirements into a tooling, machine, or equipment standard, or, at a minimum, as purchase order line item stipulating the OEE criteria to be satisfied as a condition of purchase.

The objective of these tools is to ensure that all parties are aware of the their obligations and responsibilities to deliver a robust process that meets the OEE objectives.  We recall an incident (after the fact) where the scope of work clearly stated that machine setup or change over time was to be calculated as part of the availability factor.  For the most part, the equipment met the required performance and quality criteria, however, the supplier assumed availability only pertained to the downtime experienced while the machine was running.  This, coupled with downtime during the run, resulted in a less than satisfactory availability factor and resulting OEE index.

In this case, the equipment supplier lost a significant percentage of their final payment for failing to meet the OEE criteria defined in the purchase order and statement of work.  Setup is a planned activity directly related to the production of parts and greatly affects the available capacity of the machine or equipment.

We recommend defining the criteria for each individual factor and the overall equipment effectiveness (OEE).  The values you choose for each factor will depend on your operation or the process under review and may include considerations such as low versus high volume or inventory costs, make-to-order versus warehousing / storage.

For buy-off purposes, we expect a new process to provide a minimum of 90% Availability, 95% performance, and 100% Quality.  We will not accept any process that is less than 85% for a dedicated process.  Mixed model production equipment may be subject to different criteria, specifically regarding availability as tool change complexity increases.

Availability includes change over or setups.  Increased model mix and low volume production may reduce availability.  This assessment should be determined in conjunction with detailed change over / setup instructions.

Typically, Quick Die Change or Tool Change strategy is deployed for most, if not all, new programs.  The investment in these techniques increases your agility as a supplier and maximizes your machine up time.  A rapid change-over / setup strategy can significantly reduce the dependence on high volume production to sustain profitability.

Suppliers to the automotive industry have certainly felt the impact of low or significantly reduced volumes over the last quarter of 2008 and certainly the first quarter of 2009.  An effective tool change strategy to maximize up-time and support low volume runs has never been in demand more than now.

The 95% performance factor takes into account operator functions outside of the normal machine process cycle.  A standardized work process will enable you to determine what performance level is achievable.

If Six-Sigma is your objective, then anything less than 100% quality at machine buy-off is a formula for failure. 

In Conclusion

So when should OEE integration start?  At the onset of every new program and the OEE criteria should be incorporated into the purchase agreement.  This will ensure that OEE becomes and remains an integral part of the process.

In the past, many tools were bought-off by simply running 300 pieces or in other cases a minimum of 8 hours.  The only true measure was up time throughput and the quality of the product.  Today, there is more to running an efficient operation than simply having the ability to produce parts.  Safely producing a quality product at rate – effectively – is the mission.

More on this topic to follow.

Until next time – STAY lean!