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 Impruver 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.

 

 

The 8 Lean Wastes and Their Potentially Disastrous Effects – Motion

Manuficient - Motion [Katrina]

Motion – any movement that takes time and / or effort that does not directly add value. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Motion to understand what causes it, how to see it, and how to eliminate it.

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Case Study:

In 2005, Hurricane Katrina broke the levees in New Orleans’ lower 9th ward, resulting in catastrophic flooding. Despite the desperate and obvious need for relief, local, state, and federal emergency response agencies failed to supply sufficient aide with any level of urgency. Officials deliberated, stalled, and wasted critical time deciding when, how, and rather or not to respond. An estimated 1,836 lives and $108 Billion were lost due to the flooding. It’s difficult to quantify exactly how much of this loss can be attributed to the poor emergency response; but we can all agree that the amount of time and effort wasted prior to providing aide was a complete disaster in itself.

Corrective Action:

During the event, aide, although debatably insufficient, began to arrive for some affected by the flood. Many people have fled the northern gulf coast to cities like Houston, Nashville, and others around the US – never to return home. Programs to help Katrina victims to resettle elsewhere sprang up around the United States. After Katrina, FEMA was granted authority and tools to respond to crisis more urgently, including the Post-Katrina Emergency Response Act (PKERA). This new system was tested a few years later during Hurricane Sandy and the results were markedly improved.

Interesting Fact:

All major studies concluded that the US Army Core of Engineers (USACE) were primarily responsible for the failing levees. However, they were granted immunity under the Flood Control Act of 1928. The USACE cited budgetary constraints for installing the insufficient levee system. This is one case where saving perhaps a few million dollars ending up costing thousands of lives and hundreds of billions of dollars in the end.

For more details on this case study, check out the Wikipedia article at the following link:

https://en.wikipedia.org/wiki/Hurricane_Katrina

Motion waste occurs in abundance in just about any manufacturing or supply chain operation. Anything from reaching across a table to grab the next unit to shuffling pallets in the warehouse to get everything to fit can be considered motion waste. It is nearly impossible to eliminate all motion waste but it can definitely be reduced greatly. Reducing motion waste reduces process cycle times resulting in an increase in throughput. The best way to measure motion waste is the perform a detailed breakdown of the work needed to execute a process called a Time & Motion Study. In this case, the more granular, the better. For example, a time & motion study output might look like this:

Manuficient - Motion Waste Chart

 

Observe how over 30% of the time spent processing this unit was wasted motion. This type of waste can be reduced by identifying the waste from time & motion studies on critical process steps and optimizing workstation design to increase efficiency. This method allows you to optimize for efficiency within a process step at a very technical and granular level; but can yield tremendous cost and lead time savings if you can increase throughput at the bottleneck step by 30%.

Impruver also helps you see motion waste. Motion waste reduces throughput, increases operating costs, and lengthens lead times. Impruver helps to motivate employees to reduce motion waste by highlighting achievements such as Raising the Bar (outperforming the previous standard). When motion waste is reduced, it can lead to the previously established standard being exceeded, at which time best-practices and operator recognition is distributed across your manufacturing network. This helps others to make progress toward creating breakthroughs in performance as well.

 

 

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.

The 8 Lean Wastes and Their Potentially Disastrous Effects – Transporting

A worker operates a forklift to transport floor boards at a wood flooring factory in Huzhou
A worker operates a forklift to transport floor boards at a wood flooring factory in Huzhou, Zhejiang province July 13, 2012. REUTERS/Sean Yong

Transporting – the act of moving people, materials, or information from one place to another. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Transporting to understand what causes it, how to see it, and how to eliminate it.

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Study:

Based on data from the National EMS Information System (NEMSIS), the US national average time for an ambulance to arrive after an emergency call has been placed is 9.4 minutes. Just to level-set, the gold standard for ambulance arrival time is 8 minutes within 90% of the time. The data suggests that, on average, ambulances arrive 1.4 minutes late for an emergency call.

Additionally, the time to transport a patient back to the hospital to receive full treatment averaged 12.2 minutes in the dataset. This means that the time between the emergency call and the patient arriving at the hospital averaged almost 22 minutes in total.

Manuficient - Ambulance Arrival Time Data
Copyright 2016 Manuficient Consulting

 

Interesting Fact:

The chances of surviving cardiac arrest diminishes greatly after 5 or 6 minutes of waiting time. How many deaths or serious complications could be prevented if we could design an emergency medical system with an overall response time of less than 5 minutes?

For more information on this data, visit the NEMSIS at:

http://www.nedarc.org/

 

Transporting waste is abundant in just about any manufacturing or supply chain system. Since, for all practical purposes, multiple objects cannot occupy the same space at a time, transporting is an inevitable condition in the way we live, work, and play. One of the challenges to reducing transporting waste is that most methods of measuring productivity fail to highlight its existence. It’s important to measure delivery lead time from step to step within the factory and throughout the supply chain to help identify transporting waste; this also needs to be monitored on a continuous basis. Once you know to look for this type of waste, losses can fairly easily be measured and reduced in manufacturing or supply chain processes. For example, tools such as 5S, line layout, work cell design, and point-of-use supply (POUS) are all great approaches to minimize the waste of transporting within a factory.

Impruver also helps you see waste from transporting in the form of lost efficiency. In Impruver, this type of waste could either show up as downtime or rate losses. For example, if operators are having to travel across the factory to retrieve parts needed to perform a changeover, this entire time is captured under the planned downtime category. In this case, you might rearrange where items are being stored or staged in order to minimize transport time, changeovers, and efficiency losses due to planned downtime.

 

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.

The 8 Lean Wastes and Their Potentially Disastrous Effects – Non-utilized Talent & Ideas

Final Launch of Challenger
The Space Shuttle Challenger lifts off Pad 39B at Kennedy Space Center, Florida, at 11:38 a.m., EST, January 28, 1986. The entire crew of seven was lost in the explosion 73 seconds into the launch. (AP Photo/NASA)

Non-utilized Talent & Ideas – all talent, ideas, and capabilities that are not effectively applied to facilitate execution. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Non-utilized Talent & Ideas to better understand what causes it, how to see it, and how to eliminate it. Goleansixsigma.com defines Non-utilized Talent & Ideas as “the concept that employees are not being utilized to their full capability or, conversely that they are engaged in tasks that would be more efficiently done by someone else. Non-Utilized Talent is one of the 8 Wastes which is also known as the waste of intellectual capital.”

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Case Study:

On a particularly cool day in Cape Canaveral, FL in 1986, the Space Shuttle Challenger was scheduled to launch. A few days before the launch, the team of the engineers who were working on the mission had advised the program’s management team that launching at 30 degrees would be very risky. The data that they had collected on the wax-based O-ring performance showed that significant integrity was lost under lower temperatures. The management team decided to launch anyway despite the warning of their engineers and the result was catastrophic. 73 seconds into the space shuttle’s flight, the O-rings failed and it exploded in mid-air. The price tag on this disastrous decision was 7 lives (one of which was supposed to be the first teacher in space) and about $1.5B including the flight mission, search and recovery, and the investigation.

NPR recently did a great story on Bob Ebeling, the engineer who came forward (risking his career) and tried to warn NASA of the danger associated with this launch. You can find the podcast at the link below:

NPR Story on Bob Ebeling

Corrective Action:

In response to this tragic incident, NASA re-designed the O-ring joints and implement an astronaut bail-out system in later space shuttle models. Evidence reveals that some of the passengers may have survived the explosion, until the shuttle crashed with the ocean after descent. Thus, lives may have been spared by allowing the astronauts to “bail out” prior to coming in contact with the earth.

Interesting Fact:

After the Challenger explosion, there were several changes put in place to prevent this type of issue from reoccurring. Unfortunately, many of these changes did not sustain in operation. In 2003, the Space Shuttle Columbia also exploded soon after launch, ending the lives of 7 more astronauts. The Columbia explosion occurred for reasons that would have been prevented by the changes that were put in place after the Challenger mission. This highlights the importance of operational discipline and ensuring that improvements are sustained.

For more details on this case study, check out the Wikipedia article at the following link:

https://en.wikipedia.org/wiki/Space_Shuttle_Challenger_disaster

Non-utilized Talent & Ideas is possibly the most abundant type of waste. It is the only one of the 8 wastes that is not directly a process waste but one of managment or intellectual capital. It is often caused by destructive internal politics and a general lack of respect for people. This type of waste is greatly reduced by practicing a true meritocracy; promoting highly competent people and systematically vetting improvement ideas, regardless of their source. I’ve created and used several great Idea Management and Execution Systems, all of which include regular idea review schedules, rigorous idea vetting, excellent feedback and communication loops, and incentives for submitting or executing improvement projects.

Impruver also helps you see waste from non-utilized talent & ideas in the form of lost efficiency. In Impruver, this type of waste could either show up as downtime, rate, or yield losses. The great thing about Impruver is that it promotes a culture of getting better everyday by highlighting personal bests, record breaking weeks, raising the bar (outperforming the standard) and other great achievements. This motivates your team to most effectively apply their talent and ideas to drive manufacturing execution.

 

 

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.

The 8 Lean Wastes and Their Potentially Disastrous Effects – Waiting

Manuficient - Waiting [Herseys]

Waiting – time spent idle or unproductive until parts, materials, information or other inputs are made available. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Waiting to understand what causes it, how to see it, and how to eliminate it. Leanmanufacturingtools.org defines waiting as “the act of doing nothing or working slowly whilst waiting for a previous step in the process.”

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Case Study:

Leading into the Halloween of 1999, Hershey Foods lost over $150M in revenue due to a preventable mishap in supply chain execution. The company tried to “go live” on multiple supply chain management systems at the same time. In addition, they failed to follow the prescribed implementation plan provided by the software’s developers. The result was that even though the product had been produced, they were unable to “see” the project in the newly implemented management systems and subsequently, could not process orders. Their customers and consumers were left waiting for product that did not arrive, which cost Hersey’s $150M and their customers’ businesses also took a hit. Profits dropped 19% for Q3 of that year and continued to drop for Q4 due to lost credibility and damaged customer relationships.

Corrective Action:

Hershey’s then implemented an Electronic Data Interchange (EDI) system that allowed them much greater visibility over their supply chain, inventory, and critical customer data.

Interesting Fact:

The software’s developer estimated 48 months to correctly implement the supply chain management system but Hershey’s rushed the implementation for fear of how Y2K would affect the computer systems. As we’re all aware of now, Y2K had no effect on computer system operability; thus this fearful and rash decision was completely unfounded.

For more details on this case study, check out the CIO article at the following link:

http://www.cio.com/article/2440386/supply-chain-management/supply-chain—hershey-s-bittersweet-lesson.html

Waiting is a waste that frequently occurs in any manufacturing operation. This is often caused by either poorly balanced work areas or unreliable processes; and sometimes both. The key is to be able to spot waiting waste as it’s happening and take quick action to eliminate it by getting to the root cause and preventing it from happening again. Fortunately, waiting is one of the easiest types of waste to see as it’s happening. It only takes one to be present, engaged, and seeking waiting waste. A great tool for this is to install a high-visibility indicator that detects movement. When the expected movement is not occurring, it can be expected that the process step is waiting and an alert can be provided. Continuous Improvement happens when people actively seek out opportunities to reduce and prevent waiting waste whenever it occurs. This happens when the appropriate cultural behaviors are being promoted.

Impruver also helps you see waiting waste in the form of lost efficiency. In Impruver, waiting waste would either show up as Rate Loss (if the line is running but below standard rate) or Unplanned Downtime Loss (if the line is stopped and the stoppage is recorded). This enables you to not only capture losses but also to quantify the financial impact that waiting waste is having on your business.

 

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.

How to Do a Stress Free Lean Implementation

Manuficient - Top Performers

Lean is said to be the “Machine that Changed the World,” which a fantastic book written by Jim Womack, Dan Jones and Daniel Roos. According to Wikipedia, “Lean manufacturing or lean production, often simply “lean“, is a systematic method for the elimination of waste (“Muda“) within a manufacturing system.” We are now learning that Lean has applicability across far more industries than just manufacturing such as healthcare, finance, education, and many others. However, implementing lean has been a major challenge for business leaders across all sectors, including manufacturing. A study released by McKinsey stated that “70% of Continuous Improvement initiatives fail”. This is a striking statistic considering how popular Lean and other Continuous Improvement initiatives are.

If you go into any of those factories where Lean has failed (and even some where it has succeeded), you’ll quickly find that it generally leaves a bad taste in people’s mouths. Be it because some companies have gutted workforces and administrative jobs under the guise of Lean or that people had to give up things that they held sacred in the name of cutting waste…many people harbor a disdain for Lean. How did an initiative designed to improve product and process quality turn into such a reviled and despised creature?

In conducting and studying many examples of Lean implementations I’ve determined that three key ingredients are needed for success. Those ingredients are:

  1. Technical Expertise. Lean isn’t that hard to learn but somebody needs to know what they’re doing in the beginning at least. This could be an inside or outside person or group. Eventually, everyone needs a strong lean competency and it needs to become a requirement for staying with the company or getting promoted
  2. Commitment. Leaders need to visibly show their commitment and make decision consistent with a Lean culture.
  3. Motivation. If the people at the top or bottom don’t want to do it – it won’t happen. A Lean implementation requires substantial changes in behaviors, the slaughter of sacred cows, and debilitating power struggles. It’s not easy for anybody.

In all reality, the last item trumps the previous two. Let’s face it, people will eventually do what they’re motivated to do as long as management gets the heck out of the way. Do you really need an engineering degree to do 5S or make a few changes to reduce waste and inefficiency? The answer is no. So …the easy way to implement Lean is by pairing the implementation with things people are motivated to do such as:

  • Look good in front of their bosses and peers
  • Get recognized for a job well done
  • Compete and win
  • Have input on the way things are done
  • Prove themselves by getting results
  • Be judged fairly
  • Help others
  • Be a valued contributor to the business
  • Remain gainfully employed
  • …the list goes on and on.

So, to implement Lean, you need to motivate people to eliminate waste and be more efficienct; then give them the tools and support to do what they will be super-motivated to do. To do this, follow these steps:

Step 1Implement OEE. This will tell you and everyone else exactly how much efficiency loss you have, what types of losses you have, and where the biggest opportunities for improvement exist, etc. OEE will serve as your scoreboard for how good everybody actually and undoubtably is. It also puts everyone on the same playing field in terms of measuring productivity. [Week 1 – 8 but continue tracking perpetually]

Step 2Start highlighting success stories for people doing things better. Share Personal Records, Record Breaking Weeks for the team, Best-Practices, Top Performers for the Day or Week, and so on. This will create a culture that feels like winning…and send a message that winning means getting better, which means…increasing efficiencies. All of a sudden, getting better is starting to feel “good” and perhaps even “fun and exciting”. [Week 6 – 15 but continue into perpetuity]

Step 3Provide a continuous stream of tools and techniques for getting better. Teach people root cause analysis, value stream mapping, SMED, kaizen events and anything else they are clamoring to know by this point in the process. You should also consider taking engineers, managers, and key personnel to other factories who have a really good Lean program so they can benchmark ideas. These factories love to show off the great work they’ve done to implement what a vast majority of companies struggle with. [Week 10 on]

That’s it. Pretty easy right? Well there are always varying levels of depth and complexity of tools that can be applied but you can cross those bridges when you get to them. It’s important to follow these three steps in sequence and allow time for each step to take hold in the organization. Most companies try to implement lean by doing step 3 and then step 1 or they just start of with a massive cutting of headcount. Implementing OEE is not as easy as this article makes it sound and neither are the other 2 steps. Fortunately there’s a tool that virtually automates the first 2 (and most difficult) steps called the Factory Operating System (fOS) at www.factoryoperatingsystem.com. This is the best tool out there for implementing Lean or any other Continuous Improvement initiative. In this system, calculating and tracking OEE requires less than a minute per production run to input data and it spits out OEE by line, shift, person, team, product, timeframe, or any other way you want to slice it. It also highlights top performers, record breaking weeks, personal records, and other success stories across your operations chain of command. It’s super-powerful and it’s free, which makes it really great!

Implementing Lean can be a great step toward reducing operating costs, increasing capacity, reducing lead time, improving product quality among many other wonderful things. Don’t make the mistakes most companies make by failing to motivate your people before slamming them with tools, jargon, and complex ideas that will just scare them away. Let the motivation come first, then they will be a) creating their own tools and b) asking you for more tools and techniques to get their systems to operate more efficiently. This way you create a demand for Lean instead of pushing it on people and creating a painful experience for everyone that probably won’t even sustain results. A manufacturing efficiency expert such as those at Manuficient can help you to implement Lean in a non-abrasive way that systematically encourages your people to do better everyday.

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.

How to Implement OEE in One Day

Manuficient - Excellence Compass

OEE (or Overall Equipment Effectiveness) is the ultimate tool for measuring and eliminating process waste. Wikipedia defines it as “a hierarchy of metrics developed by Seiichi Nakajima[1] in the 1960s to evaluate how effectively a manufacturing operation is utilized.” OEE combined with rigorous process improvement efforts can drive significant cost savings, reduce stress of daily operations, and increase manufacturing capacity. Simply put, you’re not doing Continuous Improvement or Lean if you’re not using OEE. The metric itself is taken by multiplying Availability (%) x Rate Attainment (%) x Yield Attainment (%).

To implement OEE effectively, you need to track each of these indicators on a continuous basis and perform the OEE calculation for a line, shift, factory, or entire manufacturing network on the interval that you see fit. Here are a few steps to implement OEE:

  1. Capture the % Availability. This is the efficiency lost while the line is not in operation (but the labor force is on the clock). Create a spreadsheet that allows line operators to input the time it takes to start up the line (from clock-in to steady state). Also capture other planned downtimes such as changeovers and shutdown times. Finally, capture each unplanned downtime loss as well.
  2. Capture the % Yield Attainment. This is a measure of the efficiency lost due to producing sub-par quality product. This calculation is done simply by taking the total good units produced divided by the total units produced.
  3. Capture % Rate Attainment. This is essentially the efficiency lost while running less than the maximum possible run rate. To capture this this, develop maximum theoretical run rates for each product on each production line. This should be done by an Industrial Engineer or trained professional. If you don’t have one on staff, you can contract someone to do it or use what I call the maximum empirically demonstrated rate, which is the fastest rate the line has demonstrated in it’s history for the given product. From there, track your total throughput and divide by your theoretical max rate to get your % total losses. Then subtract out % Availability and % Yield Losses. The remaining losses are rate losses.

Then multiply the three indicators across and the result is your OEE, which is a measure of perfection. 100% OEE represents zero efficiency losses. Once you have began tracking these metrics on an ongoing basis, you can aggregate this data to calculate your OEE anytime you want. The more frequently you can report this information, the more actionable the metric is for you. You certainly don’t want to wait weeks or months to find out there is a serious problem; but daily reporting is usually sufficient. Reporting by shift is even better.

With all of that said, the best way I’ve seen to implement OEE is a tool called Impruver at www.impruver.com. It’s the best free tool out there and it calculates and reports OEE for you by product, line, shift, and even team or individual team members. You could simply have your operators enter each production run into the system and the tool does the rest. It takes less than a minute to enter a production run. It even sets your theoretical max rates for you based on your best demonstrated rate. Then it updates the standard automatically when a run is entered that exceeds the previously established rate. In other words, you don’t have to set or update production standards – the tool does it all for you. It’s great!

 

OEE is the benchmark for measuring factory performance and can be used across all industries to highlight areas that can be made more efficient. It’s a metric that can be used to drive substantial cost savings along with targeted process improvements.

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.

The Politics of Performance: The Relationship Between Results & Rhetoric in Business

Manuficient - Chess Piece

There is an interesting mix of performance and politics present in any group of people who share resources and work together. Performance can be viewed as any activity needed to help the organization to achieve its goals. If it’s a basketball team, performance can be viewed as either scoring points or stopping the other team from doing so. I like sports analogies when discussing performance because it’s one of the most objective ways to measure results. In sports, it’s difficult to deny that Michael Jordan scored a ton of points, which greatly contributed to his team winning a lot of games.

In most other businesses, performance can be viewed as activity that contributes to productivity or sales, a safer work environment, better quality product or service, or any other of the organization’s performance goals. Since these things are rarely, if ever, achieved in a vacuum, it’s not so evident who deserves credit for what aspect of success or failure. This is especially true in the absence of high-fidelity data down to the blocking and tackling level, which is often not practical for most businesses – outside of professional sports of course. Usually, everyone involved played a role in either creating success or causing failure. Who’s to say that what one person did was so much more significant that what the next person did to improve performance? Sure, this guy is in here 16 hours per day but who can say that he is productive for even one minute per day? Likewise, this other lady comes late and leaves early every day but who’s to say that her contribution didn’t accounted for 99% of the outstanding results?

In the absence of granular data and a thorough / objective evaluation of people’s actions and the impact thereof, their contributions are typically measured by one thing – other people’s perception of their performance. And perceptions are shaped by…you guessed it – politics.

Politics often have little to do with actual performance. It determines who gets access to resources, promotions, bonuses, fired, blamed, their way in a disagreement, and sometimes even life and death. Politics is about jockeying for power or control over resources; and exists as a result of scarcity. Scarcity can come in many forms such as financial, credit / credibility, titles, authority, privileges, promotions, etc. One of the rules of politics is – what gets repeated becomes reality; if not immediately, then eventually if it’s repeated enough and by enough people. This is why professional politicians develop “talking points” so that the same themes get repeated and ultimately accepted as truth. Unfortunately, politics can enable people with terrible performance to win and people with outstanding performance to lose. When this happens (as it does more often than you would think) the entire organization loses. The reality is that the poorest performers tend to get really good at politics for the sake of their own survival. Superstar performers are rarely good at politics since they believe the world is generally fair and their results will speak for themselves. However, whenever good results are produced, there are always a few over-ambitious and under-performing sharks waiting for the opportunity to take more than their share of the credit. Likewise, whenever teams do fail, these same people have toolbox full of techniques to deflect blame to someone else.

It can be annoying that we have to play the politics game; especially if you’re no good at it. However, it’s one of those things that will either propel your business to success or accelerate it’s failure. As business leaders, we tend to talk about performance as if politics doesn’t exist. But oh it does – and it has everything to do with how the business performs. But what is the right mix of politics and performance?

Internal politics is never value added but may be necessary. The ultimate goal of politics is to influence people’s decisions in one way or another and to shift / sustain power. There is a certain amount of value-added work that must be done in order for the business to achieve it’s objectives. Leadership should always look to minimize the amount of political behavior and maximize the amount of value-added activity. To do this, there must be a fair way to measure progress against equally challenging targets. Then grant power to those making the strongest strides toward achieving those targets. Thus, adverse political behavior should not be rewarded as it only begets more political behavior. However, when actual high-performance is adequately rewarded, it encourages stronger performances across the board.

The following leadership characteristics encourage adverse political behavior:

  • Favoritism
  • Gossip
  • Being aloof; unaware of people’s actual contributions
  • Incompetence; not understanding the value of people’s work
  • Granting unequal access to face-time, coaching, and mentorship
  • Creating or failing to eliminate scarcity of resources or recognition
  • Failing to acknowledge strong contributions or distribute recognition fairly
  • Punishing productive or progressive behaviors (even if they fail)
  • Accepting gossip as fact without sufficient investigation
  • Promoting based on political prowess as opposed to verified performance
  • Failing to recognize people’s (or your own) prejudice when considering a point of view
  • Failing to hold people accountable adverse political behavior

On the other hand, the inverse of these behaviors promote strong performance and help keep adverse political behavior to a minimum.

Political behavior can also be beneficial. The truth is that we are all the same; breathe the same air and bleed the same blood. We can accomplish a lot as individuals but a lot more by working together. The process of determining who will lead the group is done through politics. The better job we do of gathering and assessing people’s quality and quantity of contributions, the better results we get when we assign power to someone. We also need to assess our leaders’ capacity for respect for others and ability to get results through people. Unfortunately, by not having adequate systems in place, it’s difficult to truly size up someone’s contributions; and often use other people’s perceptions to make these pivotal decisions instead. What’s the solution? Be systematic. Continuous Improvement assumes you have a system in place to improve. Without a system (or standard) for assigning power to people, you have nothing to perfect. Once you have something, you can effectively assess each success or failure on its own merit and use that information to engineer a more perfect system over time.

One example of a great system for assessing true performance is the Factory Operating System (fOS). It helps to evaluate the members within the manufacturing operations chain of command based on the same metric. The metric is based on the principle of OEE (Overall Equipment Effectiveness) but improved so that it can measure the performance of people, assets, and entire systems. OEE is regarded as the benchmark for measuring performance against perfection and assessing the gap to World-Class execution, or 85% OEE. The fOS calculates the performance of shop floor operators, managers, and executives alike. It considers the performance of the leader to be an aggregate of their direct reports’ performance, which ties everyone in the chain of command up to the CEO to the execution on the shop floor, which is where value is created for the customer.

 

 

Why Downtime is so Deadly in Manufacturing

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Downtime is the ultimate disruption in productivity. It not only limits how much can be produced in a day, it also drains the energy and morale of your production teams. When you look at downtime, you have to consider the time that the machine spent down – and the loss in rate while approaching shutdown and starting back up. You can calculate your total labor cost per hour and easily add up what it cost your business for every hour of accumulated downtime. These are the more apparent costs of downtime. However, there are more destructive and insidious factors of downtime that are not as apparent. These are more around the subconscious and reactionary measures that are taken as a result of poor machine uptime and reliability.

The ultimate costs of poor reliability are poor customer service and high operating costs. There are several visible indicators of “out of control” downtime and poor reliability: Finished Inventory, Dis-jointed Processes, and Production Capacity Imbalance.

Finished goods inventory build-up

In a perfect world, factories would not carry finished goods inventory. In this case, when a customer places an order, the factory would quickly produce what is needed from start to finish and then ship within the customer’s expected delivery window. This would lead to a significant cost savings in itself in the form of reduced finished goods obsolescence, reduced administrative costs for forecasting, reduced finished goods damage, reduced finished goods management or handling costs, reduced finished goods storage space and many others. The reason that companies build finished goods inventory is because they don’t trust that their production systems can deliver “on-demand”. This is largely due to unpredictable downtime.

Dis-jointed processes and a lack of continuous flow

Manufacturers often try to “shield” a reliable process from an unreliable process by disconnecting process steps. By doing this, the reliable process can continue to produce while the unreliable process struggles to sustain flow. Subsequently, work-in-progress (WIP) inventory begins to build up after the reliable process as it waits for the unreliable one to get its act together. This WIP is essentially what I like to call “cash sitting on the floor.” It’s almost like a savings account that accrues no interest – only depreciation, and sometimes to the point of complete obsolescence. The value of the WIP is money that the business can’t use for more productive purposes, such as equipment upgrades, product marketing, or even employee bonuses. It also reduces the lead time, or the time required for an order to be processed from start to finish. Finally, it increases operating costs caused by additional material handling, staging, and storage. This is primarily caused by unplanned and unexpected downtime.

Un-level process capacities

When one process experiences more downtime, we tend to seek ways to increase the maximum speed, or line rate, through those processes through engineering efforts. This allows us to consume the huge stockpile of WIP that tends to accumulate whenever we can get these unreliable processes to run. When we increase the capacity through a process step, we incur extra labor, technology, and engineering cost; all this instead of fixing the real problem, which is to eliminate the downtime. Often times, we run these processes at unstainable rates trying to get “caught up” and end up doing further damage – resulting in more unreliability.

Why not take the time to understand the areas that are experiencing the most downtime and attack them head on. It may be best to start with the bottleneck process and then spread up and downstream from there. In the end, you want highly reliable and balanced capacities across all processes. At that point, your true lead time becomes predictable. This allows you to re-connect your production processes, establish true continuous flow, and start cutting back on your finished goods inventories.

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.

Why Lean Can’t Succeed Without Operational Discipline

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Managing people and building the perfect manufacturing system are works of art. There are an unlimited amount ways to effectively get the desired result – being the perfect system and its flawless execution. However, manufacturing itself is an exact science; it is not an art. There exists one-right-way (ORW) of doing every single thing needed to execute the core functions of a factory. There is no need to re-engineer and execute a new process for each individual unit of production. This is immensely inefficient. In the absence of work standards, you are likely doing some version of this. The ORW minimizes cost and safety risk while maximizing service, quality, and morale. The essential job function of a front line supervisor or manager is to a) determine the ORW for all required actions needed for executing operations and b) ensure that everyone is doing it every time. This is why the world needs front line supervisors / managers. The supervisor’s effectiveness can be measured in terms of the number of deviations from the ORW of their direct employees. In other words, the manager’s performance can be primarily measured in terms of operational discipline, or the consistency of actions in which operations are executed. In an ideal state, one would possess the capability to evaluate the exact actions of every person / machine in the production process to ensure strict compliance to standard procedures. Since this is not practical in today’s world, we usually only evaluate compliance to standards after there has been a significant failure; sometimes resulting in some poor soul’s chastising or even worse, public shaming and/or termination. Many companies have turned to (or are turning to) Lean manufacturing to develop the operational discipline needed for operational excellence.

If you break down Lean Manufacturing into it’s two base components, what you are left with is:

1) Industrial Engineering – This is the process of designing and implementing the perfect manufacturing system. It requires understanding the expected outputs of the system and making the changes needed to minimize cost and safety risk while maximizing service, quality, and morale. The key aspect here is making changes to the system. Lean manufacturing applies many IE techniques that happened to be developed in Japan, such as kaizen, poke-a-yoke, 5S and others. Although IE techniques vary in degree of complexity, just about all of them can be taught to a person of average intelligence within a few days or so. The creators of TPS and Lean have done an amazing job of simplifying the discipline of IE for the common factory worker to understand and employ. Significant improvements in manufacturing efficiency can be gained with just a base level competency in IE. The more involved tools and methods are typically highly specialized for a given situation and result in marginal additional improvement. (This excludes the equipment / plant design aspects of IE, which can be highly technical as well).

2) Operational Discipline – This is the systematic and consistent execution of necessary actions. As stated above, this responsibility falls within the core job function of a front-line supervisor / manager. This does not require an Industrial Engineer, Lean expert, consultant, or other specialized technical background. This just requires good managers; being those who are highly disciplined and consistent as well. Managers are typically empowered with all the tools and resources needed to control their employees’ behaviors such as performance reviews (for career advancement), incentive programs including bonuses and pay increases, and others. Many companies launch Lean initiatives believing that Lean will automatically create operational discipline. This is not exactly true. Although Lean can help design and implement systems that help drive operational discipline, Lean itself cannot make the administrators of the Lean system more disciplined. Only effective leadership can ensure or increase discipline. Lean is not a substitute for leadership.

This brings me to the main point of my post. Your Lean initiative cannot succeed without sufficient operational discipline. Lean is a system; but all systems need competent and disciplined administrators. As a manufacturing leader, you don’t need Lean to develop competent and disciplined managers, supervisors, or shop-floor employees. You don’t need a Lean practitioner or Industrial Engineer to establish Standard Operating Procedures and ensure everyone is following those procedures without deviation. These are manufacturing fundamentals that help you get the most out of a Lean expert or IE should you choose to consult / employ them. It’s like saying that your basketball team of 6-year-old’s is struggling because they need more advanced plays. In actuality, they would dominate just by boxing out on rebounds, minimizing turnovers, moving their feet on defense, and making their layups (This was also true for my adult men’s league team so it’s something I’m quite passionate about). With that said, your Lean / IE / Consultant can help to accelerate your CI journey by applying industry best-practices and proven techniques for improving performance. However, if you find that your Lean initiatives aren’t sustaining, then maybe you’re not ready for Lean. You may want to take a step back and figure out how to increase operational discipline.

 

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