Can OEE be Used to Reduce Operating Cost?

OEE or Overall Equipment Effectiveness measures manufacturing performance against perfection. It is regarded as the global benchmark for managing and improving manufacturing efficiency. Any deviation from perfection drives up operating cost. OEE looks at three different losses and multiplies them across to assess total losses. Those losses are:

Availability – This is a measure of downtime (both planned and unplanned)

Throughput – This measures rate loss against the theoretical maximum run rate

Yield – This measures the amount of efficiency lost due to quality issues

Each of these factors has a cost impact. There are measurable financial and other costs associated with having people at work, the lights on, and machines operating. Anytime these things are happening and you aren’t producing at theoretical maximum levels, you are suffering efficiency and financial losses. Most factories are operating at or below 60% OEE but have no idea. Additionally, most factories do not measure productivity, and many who do, use methods that exclude significant losses such as changeover times, start-ups, throughput loss and many others. Again, anytime you have people on the clock and product yet to be made, anything less than the theoretical max output is a loss…for whatever reason – controllable or uncontrollable. At the end of the day, all aspects of running your business are controllable; the only real question is: are you willing to do what it takes to “fix” something that is perceived as “uncontrollable”. I’ve worked with manufacturers who, for years, wrote off “bad raw material” as uncontrollable but have never talked with the supplier about fixing the problem or investigated sourcing with other suppliers. In almost all cases, uncontrollable is synonymous for “we don’t want to deal with it”.

The Logic

For a factory with a direct operating cost of $10M annually and an OEE of 60%, the total efficiency losses are 40%. Therefore 40% of the direct operating costs are also losses, or $4M in this case. At 100% efficiency, the operating cost would be $6M.

World-class execution is 85% OEE, which equates to a direct operating cost of $8.5M in the example above. For the same factory, there is a $2.5M savings opportunity for improving from 60% to 85% OEE. What would you do with an extra $2.5M dollars per year? Expand production? Pay bonuses? Acquire a new business? Buy a small yacht and sail around the world?

Achieving 85% OEE is challenging but attainable for the vast majority of manufacturers. Click the link below to receive a free report on how much savings opportunity you might have based on your direct operating costs and efficiency performance:

My Total Savings Opportunity

If you don’t know your OEE, we can get you up in going on fOS in less than a month. It will help you track OEE by product, line, shift, team, and even individual. It’s a great tool for highlighting exactly where to focus improvement efforts. For the sake of the tool mentioned in the above link, input 60% as a reference point and see what you get for a savings opportunity if you’re unsure of your current OEE.




Is the Factory Operating System the Death of Lean Manufacturing?

Manuficient - Death

With over 70% of Lean initiatives failing across the United States and the world over, is Lean dying? Is the Factory Operating System (fOS) only helping to kill Lean off? Both Lean and the fOS are designed to serve the same purpose: the systematic elimination of waste. However, there are some very distinct differences between Lean as we have come to understand it and the fOS.

Those differences include:

Lean is tools and theory-focused, which often causes conflict and debate
The fOS is singularly focused on getting better, which everyone agrees is, well… better

Lean is pushed onto the organization from the top down
The fOS is pulled into the organization from the shop-floor up

Lean is levered on fear and crisis
The fOS is levered on desire and success as people are recognized for achieving increasingly greater efficiency

Lean requires a high level of expertise to educate / coach / facilitate the effective use of prescriptive tools
The fOS encourages and rewards ingenuity from all levels in the organization – sort of like crowd-sourcing for improvement methods and ideas

Lean takes years to implement effectively
The fOS is implemented virtually instantly

Lean concentrates on waste and process failures
The fOS concentrates on outstanding performance

Lean improvements can be difficult to quantify and sustain
The fOS visualizes performance levels so that the impact of process changes are easily quantifiable and addressable

…and many more.

Lean manufacturing is one the most prominent Continuous Improvement programs of the past century. Despite the many flaws in the way companies attempt to implement and approach Lean, it’s principle of a never-ending pursuit of perfection is the true value to be extracted from the rubble of failed initiatives. The fOS, especially in combination with the Percent Perfect Methodology®, beautifully extracts this precious element and makes it readily available to all manufacturers in it’s purest form. This positions the fOS as a powerful tool that results in companies becoming more Lean without all the bloodshed involved in implementing an organizational transformation to the scale of a traditional Lean implementation. In other words, the fOS does kill the “old Lean”, and gives life to the “new Lean” that approaches Continuous Improvement more like professional sports than military boot camp. Except in this sport, the field is the factory, the opponent is inefficiency, the season never ends, and there are winners everyday.

The fOS is a system designed to create a culture of performance improvement leveraged around OEE, which is regarded as the global benchmark for managing manufacturing productivity.

Visit http://manuficient.com or click here to learn more about how the fOS might help you save MILLIONS over the next 12 months.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2016]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.



The fOS is the New North Star for Continuous Improvement Programs Around the World

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The fOS, or the Factory Operating System, is a game changer for manufacturers and the Continuous Improvement movement. It is a powerfully disruptive technology and is a wake-up call for many who believe they are running a World-Class operation. The truth is that a vast majority of manufacturers, including those who believe they have “implemented Lean”, are less than 60% as efficient as they could be. Prior to the fOS, anyone could say they were World-Class because there was no truly objective way to measure performance across various factories and industries. Those days are over – and so are the days of using productivity and efficiency as a vanity metric. There are any number of ways to measure productivity; and due to this un-standardization, manufacturers all over the world have chosen different measures. This creates 2 problems: 1) It’s very difficult to measure one factory against another and 2) it’s easy to omit efficiency losses to avoid dealing with difficult issues. As a result, performance and efficiency often gets deprioritized behind more pressing crisis. The fOS solves these problems by measuring manufacturers against perfection, ie, absolute-zero efficiency losses. This provides manufacturing leaders with a compass, or North Star, for where they are in their journey to Operational Perfection. It also lends itself to the actions needed to make significant progress in the journey, especially when coupled with the Percent Perfect Methodology®

What is the fOS? It is a cloud-based Continuous Performance Improvement (CI) system leveraged on the power of OEE, the global benchmark in managing manufacturing productivity. No matter where you are in your CI journey, the fOS will make you better – faster. It is a private system that only allows people within the same company to view, add, edit, or delete performance data unless special permissions are provided. The fOS is loaded with features to cultivate a professional sports-like environment regarding manufacturing performance. This includes:

  • Success Stories – When someone sets a Personal Record, Raises the Bar (outperforms the standard), or achieves a Record Breaking Week, this achievement gets broadcast automatically across your network. Other users can easily give “Hi 5s” and recognize their outstanding results.
  • Efficiency Rankings – Top performers, or those operators, supervisors, and managers, who achieve the highest efficiencies are recognized daily. All others on the chain of command are also ranked based on their performance numbers. For example, if there are 50 people in your ops team, you might be ranked anywhere from 1 to 50 in your network. The question becomes: what can you do to become number 1?
  • Better Everyday Wall – This is sort of like a Linkedin or Facebook wall (or ESPN News feed) except the site automatically and exclusively publishes Success Stories there. Then people can recognize, comment and collaborate on how to drive organization-wide excellence.

The fOS is loaded with features that make capturing data, calculating efficiency, and reporting performance a piece of cake, minimizing the burden of using this super-powerful Continuous Improvement system. Another ground-breaking feature is that it automatically sets and updates production standards based on the maximum demonstrated historical run rate. The standard is adjusted every time someone Raises the Bar. This automates a task that could otherwise take an Industrial Engineer months to complete. Yet another invaluable feature is that it allows users to calculate the savings opportunity on a line, team, shift, or product in one click for the selected date range. Again, automating something that usually takes quite a while to determine. It’s an all-around phenomenal tool with beyond bank-level security to keep your data safe and private. Additionally, very little, if any, confidential data is even required to use the system to begin with.

Every manufacturer on the planet and their suppliers should be using this system. Then start receiving automated reports everyday showing exactly where you are in your journey to Operational Perfection.

Click here to have us setup your user accounts and get it rolling for you today.

Check out the fOS Videos link for more information.

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Systematization: The Teeth in the Gears of Continuous Improvement

Manuficient - People & Gears

Systematization is standardizing a sequence of events through automation or verifiable reaction protocols designed to produce consistent outcomes. It’s also where the rubber hits the road for the Percent Perfect Methodology® (PPM), which is designed to achieve rapid and sustained results in operating efficiency and manufacturing profitability. We see systematization everywhere we look, especially in manufacturing. For example, every factory has a system for tracking and managing when and how much an employee should get paid based on the hours they worked each payment cycle. If an employee wants to take a day off or works an extra shift, there are usually well defined protocols in place to make sure that employee is compensated accordingly. The reason just about every company has gotten this particular process down to such a science is because failing to fairly compensate employees could land them in some serious hot water. In this case, the motivation is fear of a lawsuit or disenfranchising workers; it’s also just outright unprofessional when people aren’t getting paid on time and in full.

Manuficient Methodology1.1 SystematizeSystematize is the fourth and final phase of the PPM. In Phase 1, we defined perfection for your manufacturing operation. Phase 2 assessed where exactly you are in your journey to Operational Perfection (OP). In Phase 3, we prioritized 3 – 5 critical initiatives needed to make substantial progress toward your potential. In Phase 4, Systematize, we look closely at how to fully integrate the 3 – 5 critical initiatives identified in Phase 3 into your operating model, or the way you do business, to close the gap between your current state and OP. This produces rapid results and ensures that improvements are sustained.

There are a several key elements required for an initiative to be systematized:

  1. An event or trigger to indicate that waste has occurred.
  2. A method or technique for making the waste or inefficiency visible and/or highly detectable.
  3. A reaction protocol – This could be an automatic or manual series of steps to be taken to remediate and eliminate the opportunity of re-occurrence of waste.
  4. A method or technique to track, quantify, and report waste events and their impact on operating cost and service levels. There also needs to be a way to evaluate the quality of response from element 3.
  5. A method or technique for allocating the appropriate resources to minimize or eliminate chronic process waste – This is to continuously improve processes where the greatest ongoing opportunities exist.

An overwhelming majority of Continuous Improvement initiatives fail to sustain because the organization gradually (and sometimes instantly) rejects the changes needed to make progress. For example, I’ve seen organizations do kaizen events to reduce changeover times (called SMED events) but fail to systematize the initiative to see and effectively respond when there is a deviation from the new procedure – and thus waste is allowed to creep back into the process. In other words, the organization rejects the initiative. If this backsliding were to happen with the payroll system and people were not being paid on time and in full, the reaction would be swift and possibly quite extreme. For this SMED event to sustain, there should have been techniques installed to ensure that the new process was being executed as specified and detailed reaction protocols to address any deviation from standard. One tool for achieving this would be something like a changeover clock that alarms or sends an alert if the allotted timeframe is exceeded, indicating that waste is occurring. Then the alarm or alert triggers waste elimination protocols. Generally speaking, lights and sounds are great tools for highlighting that waste is occurring. These are called andon systems.

Tools of Systematization

Automated Response tools:

  1. Poka Yoke – If waste could be eliminated automatically then it should. The tool for this is called poka yoke, or error-proofing. This is a technique for preventing or limiting any activity that produces waste. It is also the most effective tool to Systematize improvement. Examples are guides that ensure perfect assembly on the first attempt or an outlet designed to prevent the wrong device from being plugged in.
  2. Autonomation – The close cousin of poka yoke is autonomation, which automatically detects and rejects bad parts or waste in order to minimize the impact to production. An example would include an opening on the production line that removes parts that do not fit through it. In this case, the defective unit would be swept aside as not to interrupt production.Non-automated Response tools
  3. 5S – Finally, 5S which stands for Sort, Set in order, Shine, Standardize, and Sustain can be used as a tool for making waste highly visible. 5S is a technique to organize a workstation to increase efficiency and make so that wasteful activity becomes visualized. For example, if cleaning tools are to be staged near the production line, an area should be designated for those cleaning tools. If the tools are not in use or in their designated space, waste is likely occurring because the line operator will end up needing to wait or walk to another workstation to get the supplies they need.
  4. Performance Reports – The purpose of performance reports is to highlight the amount of and other details about the waste that has occurred. The more real-time and actionable these reports are, the more waste can be eliminated from the process. This is ranked last on the list of Response tools because it’s the least reactive method of eliminating waste. The interval between reports indicates the window that inefficiency is allowed to fester before it can be identified and addressed. For example, up to a week may go by before you become aware of an issue if you’re using a weekly report. The rule of thumb for Performance Report effectiveness is visibility. The objective is to make waste very obvious and public, which has to do with how the report is formatted. It also has to do with how the report is presented. For example, huge boards or screens that highlight opportunities positioned in the main entrance where everyone can easily see are going to be a lot more effective than a report that gets saved on a hard drive and left there. The fOS at http://factoryoperatingsystem.com is a great tool for reporting performance since it automates the data synthesis and disseminates performance reports along with success stories to appropriate personnel within the operations chain of command.

There are many other great tools to systemize improvement but these are the Big 4. For any of these tools to work, they need to be coupled with reaction or escalation protocols. There are two types of escalation protocols:

  1. Immanent Issue Escalation – This is the sequence of steps to be taken when waste occurs that threatens the ability to meet the immediate objectives, such as attaining schedule for the day. An example of an Imminent Escalation protocol might be:
    T=0 mins – Begin 5 Why / Troubleshooting Analysis
    T=5 mins – Notify production lead or mechanic to continue 5 Why / Troubleshooting Analysis
    T=10 mins – Notify production and maintenance supervisor to continue troubleshooting and deploy additional resources if needed; also to coordinate production to minimize waste in other areas
    T=15 mins – Notify Operations Manager to support coordination of other production activities to minimize impact of waste; also to deploy additional methods of analysis or technical resources
    T=20 mins – Notify Plant Manager to engage necessary resources including but not limited to reaching out to other facilities for ideas and supportThis protocol would be executed until the issue is resolved. For example, if the issue is resolved after 10 minutes, the Operations and Plant Manager would never be engaged. However, the issue would still be presented in Performance Reports and followed up on to ensure absolute resolution.
  2. Chronic Issue Escalation – This process is used for issues that impact performance but not to the extent of threatening schedule attainment. For example, a date coder system that kicks out one unit out of hundreds every 20 minutes would probably be a chronic issue. A Chronic Escalation protocol might be structured as follows:
    Day 0 – 1 = Line operators are given an opportunity to resolve the issue through Root Cause Analysis (RCA) or other CI tools.
    Day 2 – 7 = A mechanic or other administrative personnel is assigned to the issue to continue the RCA process and deploy additional resources
    Day 8 – 30 = A Staff member or Manager is assigned the issue to drive it to resolution by deploying tools and resources as needed
    >Day 30 – The Plant Manager takes the necessary measures to completely resolve the issue including but not limited to engaging outside resources

The Plant Manager is the last point of accountability for ensuring that the escalation protocols are being used and are working as expected. He or she should apply downward pressure to resolve issues before they reach the Plant Manager level. Again, this only applies to issues that do not use Automated Response tools; and thus is why the Automated Response tools are superior. At each phase in escalation, a specific person and due date needs to be assigned. There also needs to be a set of rewards / consequences for resolving or allowing issues to escalate. This set of rewards and consequences will vary by organization and company culture. Lastly, before items can be removed from the escalation process, there needs to be a method to ensure that the issue has been resolved effectively.

MIC_Lean - Systematic

In the Systematize phase of the Percent Perfect Methodology®, the 3 – 5 initiatives identified in the Prioritize phase are “systematized” into your operations model. Automated waste identification / prevention and correction tools are deployed to reduce or eliminate inefficiency. Escalation protocols are also implemented to make sure that systemic process failures are effectively managed and eventually eliminated for key initiatives. This also includes training internal resources to see the waste and to develop proficiency in the tools that are best fit to eliminate it. The fOS gives you a good indication of where you are in your journey to Operational Perfection by team, product, production line and other factors. A Plant Manager should also be mindful of how many issues are being escalated to their level because this indicates how competent the management team is. A highly competent team would resolve more issues at lower levels and prevent escalation. Frequent escalations indicate that additional training is needed to increase operational discipline.

A manufacturing efficiency expert such as those at Manuficient can help to systematize improvement initiatives and ensure sustainment of improvement efforts.

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The Compounding Benefits of Prioritizing in Continuous Improvement

Manuficient - Compounding

Albert Einstein once said that the most powerful force in the universe is compounding. Just as in finance, this is true for managing a manufacturing operation. New problems, big and small, arise everyday. When a problem goes unresolved, it behaves like a disease on your productivity. Additionally, new problems are added to old ones, which creates a snowball effect, and thus the compounding dynamic takes effect. At some point in the life cycle of a manufacturing operating, it takes what Grant Cardone calls “massive action” to reverse this momentum and get into a position where compounding is working in your favor. To do this, you must develop a thorough understanding of what specific wastes are driving inefficiency and pick them apart with well orchestrated and massive action. The 85/15 rule (a variation of the 80/20 rule) definitely applies here. In other words, 85% of your inefficiency is probably being driven by 15% of the issues. The key is to systematically identify the 15% of issues and prioritize the fewest number of initiatives needed to eliminate 85% of inefficiency, which will result in substantial profitability increases.

Manuficient Methodology1.1 PrioritizePrioritizing is the act of deliberately ranking needed activities, then allocating time and other resources in the order of greatest to least significance. Prioritize is the 3rd Phase in the Percent Perfect Methodology® (PPM), which identifies the 3 – 5 tools and initiatives needed to capture the greatest gains toward achieving your operating potential. In Phase 1 of the PPM, we looked at how to define perfection for a manufacturing operation. In Phase 2, we reviewed how to Assess where you are in your journey to Operational Perfection (OP). In this phase, we look at how to determine which specific initiatives will have the greatest impact on closing the gap between current state and perfection.

There are hundreds and perhaps thousands of Lean Six Sigma and other Continuous Improvement tools out there to be applied depending on the specific application. In fact, any repeatable activity that makes a process more efficient can be classified as a tool, which makes the list virtually limitless. The challenge is knowing a) which tool(s) should be applied and b) how to most effectively apply the tool(s) selected. Just like a mechanic needs to have the right tools for a given job and know how to use them without completely mucking up the project, so do manufacturing leaders. This takes resourcefulness, knowledge, and skills – which are all a function of having the right quantity and quality of experiences.

You can identify the appropriate tool to apply based on the type of waste that is occurring. The 8 lean wastes are: defects; overproduction; waiting; non-utilized talent & ideas; transporting; inventory; motion; and excessive processing.

There is a 6 Step Process for determining which tools will have the greatest impact on closing the gap to OP for your manufacturing operation:

Step 1: Determine what perfection would be for your manufacturing operation. Use the Factory Operating System (fOS) to achieve this. It’s a free tool and provides the best way to set and establish your theoretical maximum productivity levels.

Step 2: Analyze where you are in your journey to Operational Perfection. The fOS will also help you complete this step. It provides a user-friendly interface to track, aggregate, and report production performance. It also helps to cultivate employee motivation around CI by disseminating success stories such as personal records and breakthrough performances across your manufacturing network.

Step 3: For each of the three significant types of loss (availability, throughput, and yield), further categorize each type into the 8 wastes.

Step 4: Quantify the total losses being driven by each type of the 8 wastes and perform a Pareto Analysis grouped by type of waste and total annualized losses (in dollars or other currency).

Step 5: Select the set of tools or processes that are best fit for eliminating or reducing the types of wastes that are resulting in the greatest losses. The objective here is to identify the fewest number of tools that will cut waste to within 15% of Operational Perfection, which is widely considered to be World-Class execution. For example, motion waste is best address through time and motion studies; and transporting waste is minimized through process layout re-design and a technique called Point of Use Supply (POUS) among others.

Step 6: Develop the specific initiatives needed to best leverage the selected tools for maximum effect. This may mean customizing or combining tools to refine an ideal set for your specific needs.

Once you’ve gotten this far, you’ve won more than half of the battle. Abraham Lincoln once said that “If you give me 6 hours to cut down a tree, I’ll spend the first 4 sharpening my ax.” After Phase 3 of the PPM, the axe is razor sharp and you’re just about ready to deliver a swift blow to your manufacturing operation’s inefficiency. Unfortunately, many companies skip this phase and consequently, this is where they go wrong with their CI program implementations. Instead, they often mistakenly approach it as either a beautification or fire-fighting program. They start with something like 5S because it’s very visual and friendly or they go with problem-solving / kaizen events just so they can pull their CI resources into the weeds of daily operations with them. This isn’t necessarily a bad thing, it’s just not the most effective use of time and resources. They rarely take the time (and it usually doesn’t take much time) to assess exactly where the greatest gains can be achieved, then prioritize effort and resources. As a result of this and other factors, 70% of improvement programs fail in their first couple of years according to a study completed by the McKinsey & Company consulting firm. Furthermore, having the prioritized list of initiatives on hand helps to recruit / promote the ideal talent for manufacturing leadership roles. For example, if your greatest opportunity for improvement is to reduce changeover times, the optimal talent for a director or plant manager role would have a tremendous track record for implementing the SMED tool (Single-Minute Exchange of a Die) for minimizing changeover times. You can see how having a rock solid CI playbook changes your entire approach to how you play the game. Can you imagine how many major decisions are made everyday without taking any of these factors into account?

MIC_World Class Mfg

I can assure you that the powerful dynamics of compounding are either working for or against you. If you’re not taking deliberate action to leverage this phenomena to your advantage, then it’s most likely working against you. The key to changing the trajectory of your manufacturing operation’s performance is to prioritize the small set of CI initiatives that will produce the greatest impact on closing the gap to Operational Perfection. Defining perfection provides the North Star for manufacturing leaders to navigate the complex maze of day to day manufacturing operations. Assessing the current state helps you to gauge exactly where you are in your journey. The fOS tool at http://factoryoperatingsystem.com is the best tool available to define and assess where you are against operational perfection on an ongoing basis. Finally, prioritizing provides a clear and executable roadmap to World-Class execution. From here, you have laid the groundwork to capture rapid gains in productivity and profitability.

A manufacturing efficiency expert such as those at Manuficient can help you to prioritize your CI initiatives and gain immediate results in performance.

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Assessing Your True Opportunity for Improvement – And Closing the Gap

Manuficient - Skills Gap

An inherent requirement of Continuous Improvement is to set a goal that cannot be feasibly achieved – then pursue it with reckless abandon. Okay maybe not completely reckless but it’s important to at least take it seriously. The phrase “shoot for the moon and even if you miss, you’ll land among the stars” by Norman Vincent Paele applies here in full effect. Approaching your Lean initiative with this attitude sets the stage for creating a culture of perpetual improvement. In the last post, we covered how to define perfection for a manufacturing operation. This provides the North Star that we shoot for when we decide that we’re going to do Continuous Improvement. Perfection, in this regard, is essentially to operate in a state of zero efficiency losses. This post dives into how to measure losses and determine exactly what type of waste is occurring in your manufacturing process.

Manuficient Methodology1.1 AssessThe second phase in the Percent Perfect Methodology® (PPM) is to Assess your efficiency losses against perfection and categorize them accordingly. The reason this is done is to categorize your losses in terms of availability, throughput, and yield, as is how Overall Equipment Effectiveness (OEE) is typically determined. This is also done to gain a deep understanding of which and how much of the 8 Lean Wastes are occurring. The PPM is a methodology designed to determine and systematize the few critical operational disciplines needed make dramatic progress toward perfection.

Understanding your efficiency losses by category is critical for a few good reasons:

  1. Areas for greatest efficiency losses highlight gaps in competency in the workforce and management that will need to be strengthened
  2. Opportunities to make dramatic improvements in equipment and plant layout become apparent as well as the cost savings opportunity associated
  3. Quantifying efficiency losses by category enables the ability to prioritize which management disciplines to incorporate into your operating model, which is spelled out in more detail in the third and fourth phase of the PPM

The challenge to this approach is that sometimes learning how efficient you’re not can be a bit difficult to swallow. Especially if you have a culture of using vanity metrics, or metrics that are designed to make the team look good as opposed to exposing real opportunities for improvement. I was approached by one supervisor as we were executing this part of the engagement who, in a state of desperation, asked that we not show their OEE number. Instead, let’s use a number that doesn’t count losses like start-ups, changeovers, waiting on product, shutdowns and others because he believed he didn’t have any direct control over those factors. As I listened to him speak, it became clear that he wanted to show efficiencies at or above 100% so he and his team could feel good about their performance everyday. It seems that he was under the misconception that this would help make his team “more” engaged. Perhaps he was right that they would be more engaged, but what exactly was he trying to engage them in? It certainly wasn’t Lean or Continuous Improvement. My comment to this Supervisor was to “look at Lean like a journey that starts now. The last Supervisor left off at 53% to perfection; your mission is to take this team and this plant to 83%. That’s what you should engage your team to do”; and thus the buy-in process began for him. FYI…this Supervisor went on to lead his team to 78% after a few short months (and his team continued to improve after he was promoted).

Having a consistent and reliable way to measure performance on an ongoing basis has the same effect of pro athletes having the statisticians on ESPN to track and report their performance numbers. By establishing a fair and objective way to measure progress, you level the playing field so that people can clearly see if they are getting better or not; and by how much. This also enables you to conduct a side-by-side comparision to see who’s getting better, who’s consistently doing well, and who needs help. You can also easily determine the true impact of process changes by assessing progress against your new definition of perfection. This is the part that makes manufacturing more like a sport than day-to-day drudgery. In comes the sport of: Continuous Improvement, where the winners are those getting better and executing at a high level. This includes setting personal records, breaking production records, raising the bar (outperforming the standard), and much more. From there, you can establish your own system of rewards and recognition including but not limited to: most consistent, most improved, top performers, broken records, and so on. You could even do your own version of the Heisman or MVP awards. How fun would that be?

MIC_Continuous Improvement Culture

Finally, this step helps to uncover opportunities to benchmark the things that are going well and share them across the board to help underperforming teams, products, and production lines to achieve breakthroughs in performance. For instance, this analysis will reveal why underperformers are incurring greater costs than top performers, then help to close the gap.

Fortunately, by using the Factory Operating System (fOS), Phase 2 (Assess) of the Percent Perfect Methodology® is completed automatically. As production runs are entered into the system, the calculation to categorize losses by downtime, rate loss, and yield loss is done automatically. It takes less than a minute to enter a production run and the system which allows you to group results by line, shift, team, individual, product, and several other options. This helps you to quickly see where efficiency losses are occurring and areas where process waste is being held to a minimal. It also shares success stories such as personal records, record breaking week, raising the bar (outperforming the standard), and others with people across your manufacturing network to drive a culture around getting better everyday. Additionally, the fOS is free for anyone in your organization to jump on and start using to measure themselves against and strive toward perfection.

Once you’ve identified your North Star, which can also be viewed as Operational Perfection (OP) and provides the “compass” for your Continuous Improvement initiative, it’s important to determine exactly where you are in the journey. The goal is to reach 100%, which is theoretically impossible but will keep you and your team striving to get better everyday. In fact, World-Class execution is widely considered to be 85% OEE. This means keeping total process waste to within 15% including start-ups, changeovers, shutdowns, unplanned downtime, rate losses, and yield losses. Remember to celebrate progress at every step of the way. As milestones are reached and records are broken, a culture will emerge that abandoning the status quo and getting better is the way to go; and there will be no doubt in anyone’s mind about what Continuous Improvement is all about.

A manufacturing efficiency expert such as those at Manuficient can help implement a low-burden system of measuring efficiency such as the fOS to initiate your journey to Operational Excellence.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2016]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.


How to Define Perfection for Manufacturing Performance

Manuficient - 100%

Perfection for a manufacturing operation is the absence of inefficiency, or process waste. It is seamless execution. It is spending every minute of every day in a state of operational bliss where everything and everyone is in the zone of impenetrable harmony. Product quality is flawless; machines run like an impeccable script; manufacturing teams perform like a masterfully orchestrated symphony; and the supply chain delivers like clockwork.  The first step in the Percent Perfect Methodology® (PPM) is to paint a clear picture of a manufacturer’s operating parameters in a state of absolute zero losses such as profitability, operating costs, lead time, capacity, material costs, and others. The PPM is a methodology designed to determine and systematize the few critical operational disciplines needed make dramatic progress toward perfection. There is a powerful psychological and motivating effect to beginning the PPM methodology with defining perfection. This approach quickly shows the difference between ‘how good you could be’ and ‘how good you currently are’. This creates an intense motivation to get better because defending the status quo becomes completely unacceptable by anyone’s standards, especially for an organization with great opportunity for improvement. It also provides some insight to how much more efficient your competitors might be by presenting your performance on a spectrum of 0 – 100% using OEE, which is the global benchmark for managing manufacturing efficiency.

Manuficient Methodology1.1 Define

Operational Perfection (OP) is achieved when the following types of process waste are completely eliminated:


In this state, your operating costs are reduced to the minimum needed for creating the necessary value while retaining the capability to meet the changing demands of daily operations. This has a profound effect on profitability and just about every other key measure of execution. Here are a few of the capabilities needed to achieve OP:

  • Exclusively value-added activity (no downtime, changeover time, or start-up time; maximum run rates only; and no quality / yield losses)
  • Zero raw, finished, or work in progress (WIP) inventory
  • Perfectly balanced capacity between workstations (no waiting time in or between stations)
  • Lead time equal to the duration of sequential value-added steps (no transporting, motion, or other losses)

Additionally, the customer receives their 6 Rights – 100% of the time. This means the right product, at the right time, at the right place, in the right quantity, in the right quality, and at the right price.

Continuous Improvement, in its purest essence, means closing the gap between your current state of execution and OP. It’s a fantasy to think this can happen overnight. In fact, getting within 15% of perfection is considered World-Class execution, which can take years and most will never even come close. The point here is to define the true north for factory performance; and set the objective of your Continuous Improvement initiative, which is to eventually achieve OP, or to reach the North Star. Whether you are doing Lean, Six Sigma, Re-engineering, ISO 9000, Agile Operations, TPM, TQM, or any other Continuous Improvement program, it’s important to know and understand your OP just like a navigator and the North Star. It’s also important to know that perfection is theoretically unachievable. Hence, Continuous Improvement is just that…improvement that continues into perpetuity. In other words, everyday, your manufacturing operation should be inching (or sprinting – why not?) toward perfection, or OP.

Manuficient - Perfection

So here are a few steps to define perfection for your manufacturing organization:

Step 1: Determine your maximum theoretical run rates. These are the greatest rates that your production equipment or teams can achieve before reaching the point of diminishing returns, which is when increasing speeds result in declining quality or system damage.

Step 2: Determine the total runtime needed to execute your product mix at theoretical maximum run rates. All startup, changeover, shutdown, unplanned downtime, rate losses, and yield losses should be excluded.

This gets you to your optimal runtime for a given product mix and provides the basis for defining perfection for your manufacturing system. It also positions you to determine operating parameters in a state of zero-losses including:

  • Profitability (Total Revenue – Total Cost in a state of zero losses)
  • Operating Cost (Operating Costs required in state of zero losses)
  • Throughput Capacity (Max Time Available x Weighted Avg Theoretical Run Rate)
  • Order Lead Time (Processing time for the sequence of value-added activities)
  • Working Capital (Total product in-process [value-added stages only])
  • Labor Requirements (Labor required in state of zero losses)
  • Energy Requirements (Energy required in state of zero losses)
  • Material Requirements (Minimal material required to produce demanded goods)
  • Others

Determining Theoretical Maximum Run Rates

Theoretical Maximum Run Rates can be determined in a few different ways. Its imporatant to determine your theoretical max at the bottleneck process step. Wikipedia defines the bottleneck as “a phenomenon where the performance or capacity of an entire system is limited by a single or small number of components or resources.” For all practical purposes, it’s the step in the process that constrains the throughput of the manufacturing system. If the bottleneck is a mechanical process, you need to calculate the machine’s cycle times from step 0 to step 0. It’s important to capture the full cycle. Then you can estimate how many units can be produced in a given timeframe such as seconds, minutes, hours, or even longer. If it’s a labor process, time and motion studies will need to be completed to determine the throughput rate per person and subsequently, the entire process step if multiple workstations are involved. A rule of thumb to include for time and motion studies is a fatigue factor which varies based on the intensity and duration of work being done. The other key factor is to assess throughput based on a speed that 50% of all well-trained people can achieve on a sustained basis. It is advised that an experienced Industrial Engineer be employed or contracted to help establish these rates as professional judgement needs to be applied. You get this wrong and you will be dealing with more employee grievances than you are with prospective customers if you catch my drift.

The alternative to establishing maximum run rates is by using empirically demonstrated rates. This process involves determining the rate from every production run and considering the max rate achieved as the benchmark (or standard) against which all subsequent runs are measured. The advantage to using this method is that it doesn’t require an Industrial Engineer to determine the Theoretical Max Rates. The other benefit to this method is that “standard” rates are based on demonstrated performance, which removes all debate about rather or not the rate is attainable. This is the method applied by the Factory Operating System (fOS) so that Theoretical Max Rates can be defined organically. As run data is captured in the fOS, the system keeps track of the maximum rate achieved for each product and production line.  With this method, the fOS learns the ‘definition of perfection’ for your manufacturing system using a form of artificial intelligence. As production records are broken, the standard is updated accordingly and best-practices are shared across the network.

Continuous Improvement should be baked into the way any manufacturer does business. In any truly competitive landscape, the best performers win – eventually. Therefore, it’s imperative to strive to get better everyday in order to increase competitiveness and stay healthy as a business. As Toyota has cleverly made into it’s slogan, we should all be “in pursuit of perfection”. The Percent Perfect Methodology® defines perfection for all manufacturers in the same way; putting all manufacturers on the same playing field regardless of industry, product, location, or other attributes so that everyone has an equal shot at World-Class execution. The fOS helps manufacturers to determine perfection for their specific operating parameters and then measure actual execution against OP on an ongoing basis.

The fOS automatically performs the first phase of the Percent Perfect Methodology®. It helps you to define and maintain a current definition of perfection for your manufacturing operation. The optimal approach for implementing the fOS would be to assess where you have WIP buffers in your manufacturing process. Then use the fOS to track efficiencies in between WIP buffers. You’ll quickly realize that WIP builds up because process throughputs are imbalanced. The fOS will help you see where efficiency losses are occurring so that stations can be balanced and WIP can be eliminated; creating more of a continuous flow operation over time.

A manufacturing efficiency expert such as those at Manuficient can help you to Define Perfection for your operation and initiate your journey to OP.

fOS Lead Capture2PPM Lead Capture2

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.