Today, many manufacturers are concerning themselves with continuous improvement projects to enhance the efficiency of production and packaging processes, and ultimately improve their bottom line.
One topic we often hear in our conversations is Overall Equipment Effectiveness – or OEE. This is a reflection of machine availability, performance and quality. For a manufacturer, an increase in OEE means more products are being produced using fewer resources.
For their second mission, we asked Anna, Garrett and Eric to learn more about why companies are focusing on continuous improvement and OEE – and why these types of projects are so important to manufacturing facilities.
Let’s see what they found out:
Anna: OEE Defined
For our second mission, we were asked to explain the importance of continuous improvement within a company and their processes and what steps are taken to implement such improvements. One of the most commonly heard phrases in the manufacturing industry is overall equipment effectiveness or for short, OEE. A condensed definition of OEE is the percentage of time a piece of equipment is being productive. For example, if a machine has an OEE score of 75%, it means the piece of equipment was only being productive nine hours of a 12-hour shift and was down the remaining three hours.
From a more technical standpoint, OEE is a calculation of:
(Good Pieces x Ideal Cycle Time)/(Planned Production Time)
Good pieces are products that are produced with no defects as per company quality control and quality assurance standards; ideal cycle time is the theoretical fastest possible time to produce one product; and planned production time is the total time the machine is scheduled for production. (Source: LeanProduction.com)
Why does this matter? It matters because the higher the OEE score, the more products the company is getting out to market at a lower cost per product. OEE also accounts for all losses, including downtime, speed losses, and quality losses. It is important to realize it is very difficult to obtain a 100% OEE score in a manufacturing setting with so many critical components to the processes plus human error. A more reasonable OEE score goal is 85%, which is considered world class in business; however, more typical scores are 60%, which indicates room for improvement, and 40%, which is not uncommon for a company that is just starting to monitor performance.
Since we now have a basic understanding of what OEE is and how it is calculated, we can discuss the pros and cons to OEE in relation to packaging and product development. A high OEE score is great for a company that only runs one product on the line and produces it in mass volumes – for example, a line that only runs 8 oz snack bars – because they will not have to change the line since they will only be running the single product. A lower OEE allows for more flexibility in the line and allows for different products to be run without having to buy a second or third line for those products. When you have a line that has more capability to be adjusted for different products, you allow your company to grow the portfolio without the expense of buying a brand new line. It depends on what the company wants todo and how they want to grow: have one line that can run multiple products with a lower OEE rating or multiple specialized lines that have high OEE ratings? It also depends on the demand of said products because companies will need to offset the cost of the new lines.
There are several factors that play into having a successful company and there is a lot of work, time, and collaboration that must happen in order for companies to meet their annual goals. (Source: R. C. Hansen) When there are multiple moving parts to a company, it can be hard to meet on the same level and obtain the set goals since some business units may be impacted differently than others when a company is trying to improve their processes and improve their bottom line.
Garrett: The Importance of OEE as Explained by Scott Gahr
For this mission on continuous improvement and overall equipment effectiveness (OEE), I looked for a specific example in a manufacturing setting. So, I contacted Mr. Scott Gahr, who is an expert in packaging automation specific to end of line packaging machinery. He is the Packaging Equipment Manager at Midland Packaging.
I conducted a short interview in order to better understand what his company does. Mr. Gahr explained how he saves Midland customers money by recommending specific types of packaging machinery that can help create a more efficient and lean manufacturing environment. He has over 20 years of industry experience when it comes to packaging as well as a B.S. degree in organizational communications from the University of Wisconsin-Milwaukee.
Midland Packaging specializes in assessing companies’ TCO (total cost of ownership) and OEE. These two variables play a key role in project justification. Helping their customer’s optimize efficiency and increase throughput during the overall packaging process is Midland’s primary goal. This is what people call making your “manufacturing lean.” They assess the total expenditure required for the equipment, including long-term operating costs of the machinery and personnel costs associated with the operation of the equipment, and compare it to the level of throughput that is going to be achieved after these changes.
Many companies are focusing on automating their end of line packaging methods in order to improve OEE. The utilization of automatic carton erectors, case packers, case sealers, and integrated palletizing/stretch wrapping is helping companies become more efficient. These types of automation will decrease a company’s downtime, increase throughput, and enhance quality and consistency in the packaging process, which, in the end, can save companies substantial amounts of money.
Eric: OEE – An Indication of Production Performance
One metric in manufacturing is OEE, or overall equipment effectiveness, which provides one indication of production performance. The methodology behind OEE can be applied to a large-scale setting such as a factory, to a specific production line, or even to a single machine.
The purpose of OEE is to provide an easy way to track performance, monitor efficiency, and identify improvement opportunities. “By monitoring and measuring the behavior of machines on a regular basis, problems are identified early, and the effectiveness of the machines is accounted for. Furthermore, by monitoring machines and their behavior, the results of the effort toward improvement are evaluated and adjusted as needed,” suggests Mr. D.H. Stamatis in his publication “Measuring OEE: A Traditional Simple Approach.”
From a packaging standpoint, OEE can be utilized to explore improvements, changes, and solutions. As an example, while using an OEE approach, packaging personnel can verify that packaging machinery is operating correctly and in the way in which it was designed. Packaging operations can also implement OEE to find opportunities to reduce the amount of packaging scrap, increase production speeds, or to optimize package design.
When calculating OEE, there are three components to consider: availability, performance, and quality.
- Availability relates to the machine’s production time (uptime) compared to its maximum operating time.
- Performance is the relationship between the speed or output at which a machine operates compared to its design or potential maximums.
- Quality can be measured by product loss in the form of scrap, defects, rejects, etc.
The result of multiplying Availability, Performance, and Quality is the OEE value.
Several benefits can be gained by having continuous oversight of a machine via OEE monitoring. One common benefit is an assessment of the current versus historical operational success of the production unit over time. Information gained in this assessment can often offer insight into continuous improvement solutions. As the OEE metric fluctuates, focusing on its three components can give an indication of what is lowering overall effectiveness and what needs to be in focus in order to return to the desired OEE.
Overall, OEE has broad application in manufacturing settings. Finding areas for improvements, clarifying that the operation is running as expected, and researching how and where improvements can be made are all benefits of using the OEE methodology.
Hansen, R. C. (2005). Overall Equipment Effectiveness: A Powerful Production/Maintenance Tool for Increased Profits. New York, NY: Industrial Press.
OEE. (n.d.). Retrieved February 18, 2016, from https://www.leanproduction.com/oee.html
Stamatis, D. H. “Measuring OEE: A Traditional Simple Approach.” The OEE Primer: Understanding Overall Equipment Effectiveness, Reliability, and Maintainability. Boca Raton: CRC, 2010. 47. Print.