Are you measuring your manufacturing productivity right?

Manufacturing Productivity OEE
By Ranjith kumar DSM May 14, 2019

Measurement is the first step to get your manufacturing productivity moving towards the target. “If you can’t measure it, you can’t improve it”, is one of the most important business quotes. The production reality in today’s increasingly competitive world demands efficiency and quality with continuous and improved processes. The quest for improving productivity in the current global competitive environment has led to a need for rigorously defined performance measurement systems for manufacturing processes. Regardless of the criteria of the measurement used, to be competitive you have to put up more points on the board.

History of Manufacturing Productivity calculation

Earlier manufacturing productivity is the ratio of a measure of total outputs to a measure of inputs used in the production of goods and services. There are number of ways to measure productivity. A few to highlight were:

  • Multi Factor productivity (MFP), which measures the growth in value added output (real gross output less intermediate inputs) per unit of labour and capital input used; and
  • Labor productivity (LP), which measures the growth in value added output per unit of labor used.

The calculation of MFP using the traditional accounting methods requires independent measures of inputs and outputs. LP can be measured for both the market and non-market sectors of the economy. This is because labour input can be measured in real volume terms as hours worked.

The problem in Old metrics

The accuracy of the raw data and in the methodologies applied generate measurement errors. Two problems in measuring inputs are difficulties in measuring the volume of capital services, and lags between investment and when it is actually utilized in production. The cost of the manufacturing equipment is added to the capital stock while it should be added to the production process. It is important to unpack measures of productivity to understand the proximate and factors affecting productivity growth.  In layman terms, if an equipment is partially utlilized or not utilized today, then the equipment is completely ignored from the productivity calculation. This makes the calculation wrong showing the calculated productivity higher than the actual ones.

What is OEE?

The Total Productive Maintenance (TPM) launched by Nakajima (1988) in the 1980s, provided a quantitive metric called Overall Equipment Effectiveness (OEE) for measuring productivity of individual equipment in a factory. Manufacturing Productivity is a measure of how well the asset works compared to its full potential. Calculate the overall performance of your industrial productivity system and easily classify the different production losses. OEE reports the overall utilization of facilities, time and material for manufacturing operations. This metric directly indicates the gap between the actual and ideal performance of your industrial operation. It is an essential reference point for analysing production process efficiency and productivity. It identifies and measures losses of important aspects of manufacturing namely availability, performance and quality rate. This ultimately helps the business work on the improvement of equipment effectiveness and thereby its manufacturing productivity.

Measuring OEE

OEE measures three elements of metrics:

  • Availability represents the percentage of scheduled time that the operation is available to operate (actual running time vs running time).
  • Performance represents the speed at which the machines run as a percentage of its designed speed (actual speed vs standard speed).  Goods actually produced to the planned numbers is the performance
  • Quality represents the good units produced as a percentage of the total units started (good production vs total production).

OEE can be measured as a function of Availability, performance and quality.

OEE = (Availability)*(Performance)*(Quality)

To be able to better determine what is contributing to the greatest loss of manufacturing productivity, these categories (Availability, Performance and Quality) have been subdivided further into ‘Six Big Losses’.

Planned Down time and Breakdown losses are concerned with availability

Minor stoppages and Speed loss are concerned with performance

Production rejects and Start-up rejects are concerned with Quality.

This helps businesses identify the exact issue and work on it.

Why should you adopt OEE today?

It is insane to hire someone, pay them well and not assign any task to them. The same should not happen anymore with Equipments. Equipments have a large initial cost. In today’s global economy manufacturing industries cannot risk becoming inefficient and non-competitive. OEE allows you to discover the real production capacity of your systems, production lines and machinery. It facilitates the detection of critical weakness and imperfections in your production system by providing the informations needed to eliminate them and improve overall efficiency. This will give your production industries the opportunity to increase value, improve productivity and increase profits while reducing investment recovery time and sustaining competitiveness. Increasing production efficiency will enable you to improve the productivity of existing machines by reducing downtimes. As a consequence this will reduce machine running cost to satisfy production plans without need to rely on overtime work and defer delivery dead lines. Quality can be improved by analysing production data and the number of rejects in order to identify flaws and remove the causes. The reduction in rejects will help you increase your product quality and quality reputation in the market.

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