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This white paper is intended to serve as a guide forprofessionals in the pharmaceutical, medical device, life
sciences and other regulated manufacturing industries whowant to understand what Overall Equipment Effectiveness
(OEE) can deliver for their business.
A Managers Guide to OEE
UNDER CURRENT ECONOMIC
CONDITIONS, SEVERE GLOBALC O M P E T I T I O N A N D
P O S T P O N E M E N T O F N E W
EQUIPMENT PURCHASES ARE
CAUSING BUSINESS EXECUTIVESTO BE SENSITIVE ABOUT ALL
ASPECTS OF MANUFACTURING
OPERATIONAL COSTS. IN THIS
ENVIRONMENT, IT PAYS TOCONSIDER BOTH CREATIVE AND
P R O V E N M E T H O D S T H A T
MANUFACTURERS CAN USE TOBRING THEIR PRODUCT TOMARKET ATMINIMUM COST.
" O V E R A L L E Q U I P M E N T
EFFECTIVENESS" (OEE) IS AMETHOD THAT MEETS THISOBJECTIVE.
BENEFITS
An OEE so l u t i on can enab l e
manufacturers to achieve world-class
status. More specifically, it can provide
benefits in three key areas:
Reduced equipment
downtime and maintenance costs,
and better management of the
equipment life cycle.
Labour efficiencies and
increased productivity by improving
visibility into operations and
empowering operators.
Increased productivity by
identifying bottlenecks.
Increased rate of qualityand reduced scrap.
1. Equipment:
2. Personnel:
3. Process:
4. Quality:
SCOPE
The need for OEE is indicated by the
Industry Week 2001 census of Key
Performance Metrics for manufacturing.The survey shows that the top 4% of
world-class manufacturers benefit from
a low 2% (median value) of unscheduled
machine downtime . This means thatthe remaining 96% have an opportunity
to improve performance by reducing
unscheduled downtime. Downtime
reductions can be readily achieved byusing OEE to gain visibility into machinestatus and to perform root-cause
analysis of problems.
Fundamentally, OEE is a performancemetric compiled from data on MachineAvailability, Performance Efficiency and
Rate of Quality that is collected eithermanually or automatically. These threedata points are calculated as follows:
OEE is calculated from these factors:
OEE also captures reasons for downtime
(due to machine conditions, materialstatus or quality issues) and can
encompass the individual machine level,
a line or cell level, or the entire plant. At
the plant level, OEE metrics can becorrelated with other plant metrics to
provide Key Performance Indicators
(KPI ’s) . With enterpr ise level
technologies managers can monitor OEEplant metrics and drill down to find root
causes of problems, getting minute-by-minute updates to enable real-time
process improvement.
1
1. Availability
2. Performance
3. Quality
=Total operating time
=
Potential output in T
=Time for total output
(Toperating - T down)
Total output in
Time for good output
Top
op
OEE = Availability * Performance * Quality
.
.
.
“With Enterprise-level
technologies Managers
can monitor OEE plant
metrics and drill down
to find the root causes
of problems, getting
minute-by-minute
updates to enable real-
time process
improvement”
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A GUIDE TO OEE(OVERALL EQUIPMENT EFFECTIVENESS)
HISTORY
VALUE PROPOSITION
1. REDUCED DOWNTIME COSTS
The first application of OEE can be traced
to the late 1960’s when it was used bySeiichi Nakajima at Nippon Denso as a
key metric in TPM (Total ProductiveMaintenance). According to Nakajima,
"TPM is a plant improvement
methodology, which enables continuous
and rapid improvement of themanufacturing process through the useof employee involvement, employee
empowerment and c losed- loop
measurement of results.”
In the mid 1990’s, coordinated bySEMATECH, the semiconductor wafer
fabrication industry adopted OEE to
improve the productivity of their fabs.Since then, manufacturers in other
industries throughout the world have
embraced OEE methodology to improve
their asset utilisation.
Implementing an adequate OEE systembrings immediate financial benefits tomanufacturing operations. Some of
these benefits are listed below.
When a critical machine is inoperable, itbrings downstream operations to astandstill. This can negatively affect
delivery commitments to the customer,
which in turn impacts cash flow and
revenue. For example, in a typicalsemiconductor fab (based on year 2000data), it is estimated that each hour of
downtime for a critical unit of process
equ ipment can t rans la te in toEUR100 ,000 o f l os t revenue .
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1. Reduced downtime costs.
2. Reduced repair costs.
3. Increased labour efficiencies.
4. Reduced quality costs.
5. Increased personnel productivity.
6. Increased production capability
Conversely, reducing downtime by 1%on the 50 most critical tools in a typical
fab can provide revenue opportunities
a n d c o s t s a v i n g s n e a r i n g
EUR100,000,000 annually.
OEE enables predictive maintenancethat can dramatically reduce repair
costs. As the historical database of
downt ime reasons grows, themaintenance department can discern
trends to predict an impending failure.
Also, by interfacing the OEE system to a
CMMS (Computerized MaintenanceManagement System) system, the
maintenance department can take
proactive steps to do predictive
maintenance. For example, themaintenance department can order thenecessary part in advance and get better
rates. It can allocate repair personnel
from an existing pool of resourcesinstead of hiring someone on an
emergency basis. This can result in huge
savings compared to repairing a
machine after the breakdown hashappened.
Due to current economic conditions,
most manufacturing companies havedownsized considerably. Consequently,
manufacturers are eager to optimise theproductivity of their existing workforce.
An OEE system helps, because it notonly captures downtime reasons, butalso shows capacity loss data and cycle
times. With this information,
management can better judge themost appropriate allocation of staff to
optimise the line balance and the
utilisation of resources.
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2. REDUCED REPAIR COSTS
3. INCREASED LABOUREFFICIENCIES
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As indicated in the introductory section,
Rate of Quality is a percentage of goodparts produced versus the total parts
produced. Thus, an OEE system mustcapture the quantity of total parts
produced, the number of scraps and
defects and the reason for defects.
Because this information is captured at aspecific machine or line level, thiscapability actually captures quality in the
context of the part produced. By tracking
context-rich quality data using OEE,production managers can identify root
causes and eliminate further costs
associated with rework and scrap.
Improving the focus on quality at everystage of production also reduces
warranty costs. In the previously cited
Industry Week survey, world-class
manufacturers benefit from first passyields of 97% (median value), while
scrap and rework are 2% (median value)
and warranty cost is 1%.
An OEE system enables the shop floor to
go paperless. Typically, facility operators
and supervisors spend an enormous
amount of clerical time recording,analysing and reporting downtime
reasons and root causes on paper, then
further explaining these reports to
management. An OEE system capturesand reports downtime and efficiency
automatically. This saves time lost in
non-value added reporting activities andallows personnel to focus on morevaluable tasks. With OEE, everyone from
the plant floor to the boardroom is more
informed,more often, more easily.
4. REDUCED QUALITY COSTS
5. INCREASED PERSONNEL
PRODUCTIVITY
6. INCREASED PRODUCTIONCAPABILITY
INDUSTRY APPLICATIONS
AUTOMOTIVE MANUFACTURING
The net effect of reduced machinedowntime, higher productivity of
operators and reduced defects is theability to achieve higher production
levels with the same amount of
resources.
Three scenarios from different industriesi l l u s t r a t e w h e r e O E E h e l p s
manufacturers improve productivity and
get better visibility into their operations.
An automotive company was trying to
extract additional productivity out oftheir assembly lines by improvingequipment availability. They had already
reduced all known causes of downtime
through diligently applied processengineering steps. To further improvethe process, they implemented a
downtime detection and efficiency
calculation (OEE) system. Within twoweeks of implementing the OEE system
in the department that was identified as
the plant’s bottleneck area, they noticed
that overa l l p roduct iv i ty wassignificantly affected by hundreds of
brief line stoppages caused by a simple
mechanical misalignment that was not
recorded by operators. By observingthese downtimes on the OEE system, it
was determined that the cumulativeeffect of these brief unscheduled
downtimes was the primary cause ofdowntime in that department. Without
an OEE system automatically detecting
all events, these downtimes and their
effects on overall productivity wouldhave gone unnoticed. After process
engineers fixed the alignment problem,
eight more vehicles per day could be
produced by the plant without addingresources.
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“The net effect of
reduced machine
downtime, higher
productivity and
reduced defects is the
ability to achieve higher
production levels with
the same amount of
resources”
FOOD & BEVERAGEMANUFACTURING
MEDICAL DEVICE
MANUFACTURING
At a food manufacturing facility, an OEEsystem helped supervisors to detect that
operators of a particular production linewere deliberately and prematurely
slowing down the bottleneck machine.
This was done to keep the machine from
automatically slowing when a fault wastriggered by surge bins being filled
whenever downstream machines were
delayed. If proper settings had been
maintained, the bottleneck machinewould have operated at rated speed untilthe surge bin buffer zones filled with
stock which the downstream machines
would eventually consume, therebycatching up with the line-limiting
machine as designed. Tampering with
the machine speed changed this
process. With the OEE system,management was able to detect the
tampered settings, view the production
conditions and understand what was
happening to the process.
Recently a large Medical Device
manufacturer started a project to
improve the capacity of an artificial joint
production facility one specificallydesigned to create replacement hips and
knees. Although the process was fairly
well understood from a manufacturing
process standpoint, new machining-
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centres were required to keep up withnew product introductions as their
business expanded. Plant managers
knew that the existing machinery was
not operating at full capacity but had nodata to reference when seeking ways toimprove capacity to accommodate new
p r o d u c t i n t r o d u c t i o n s . A f t e r
implementing a data collection systemwith analysis software based around
OEE, however, the plant managers were
able to quantify the productivity of ten
work cells within six months ofimplementing the system. Each work
cell has an average of five machines
dedicated to producing a particular joint.
Using the new system, the manufacturerwas able to identify downtime-related
reasons in real-time, thereby indicating
the cause of bottlenecks and identifying
where improvements could be made tothe actual machining process to enhance
the yield of individual machines. In this
case, both production rate data and
quality information were being used toimprove the overall operation.
Based on the results from the past year,
the manufacturer has been able to avoid
the large capital expenditure associatedwith purchasing a new machining-centrewhile still being able to support the
introduction of three new products. In
addition to the improved productioncapacity, the plant has improved their
overall quality and reduced rework time.
OEE SYSTEM COST ESTIMATION
Since an OEE system is scalable, its cost
can also be scaled to yield an appealingROI. For example, manufacturers can
start by implementing a pilot system,encompassing a manufacturing cell or
even part of a line, wherever they think
an opportunity for improvement exists.
Depending on the size of the pilot,manufacturers can choose to buy off-the-shelf OEE products and implement a
system quickly through internal
engineering resources or hire theservices of outside integrators.
The following variables influence the
estimated cost of an OEE system:
- Number of machines to interface
- Number of manual data entryterminals and mechanism for data
entry
- Automatic vs. Manual data collection
- Integration with other plant data
applications (e.g. ERP,CMMS)
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“Since an OEE
system is scalable,
its cost can
also be scaled
to yield an
appealing ROI.”
1 David Drickhamer, "IW Census targets key manufacturing metrics", November
1, 2001, Industry Week Magazine.
2 Simon Bragg, "Implementing OEE", ARC Insights, Insight#2003-07E, February
12, 2003, ARC Advisory Group.
3 International Technology Roadmap for Semiconductors 2002 Update.
T h e O E E Model
OEE = Availability % x Performance % x Quality %
OEEsystems PerformOEETM
OEEsystems offers a powerful yet easy-
to-use application (PerformOEE™) thatenable manufacturers to achieve new
levels of operational excellence bymaking business sense out of plant data
in real time. Our OEE offering allows
plant managers and production
personnel to perform in-depth analysisto significantly improving plantoperations and overall business
profitability.
Scalable from a single production unit tom u l t i - p l a n t i m p l e m e n t a t i o n s ,OEEsystems’ software solution is highly
configurable and produces outstanding
results for companies in a variety ofindustries. Easy to install, administer
and maintain, our solution is designed to
work seamlessly with the hardware and
software solutions that are already inyour plant , adding powerful data
collection, visualization and analysis
capabilities.
OEEsystems’ OEE Solution
( P e r f o rmOEE™) p r o v i d e s t h e
mechanism to collect manual data, aswell as the machine interfaces to
automatically pull data from PLC's,CNC's and other industrial automation
devices. Our solution is also ideal for
industries that require electronic
records, electronic signature and audittrails for regulatory compliancepurposes.
Not only is OEEsystems a software
solution provider, but we’re also aleading provider of Lean Manufacturing,Operational Excellence and Business
Excel lence projects for g lobal
manufacturing companies in Ireland, UKand Europe. Through our committed
approach to delivering tangible and
measurable results, our dedication to
robust project implementation and ourtrack-record of delivering sustainable
competitive advantages for our
customers, we can also help your
business to achieve new levels ofoperational and business excellence.
Page 7
OEEsystemsGurtnafleur Business Park,Clonmel,Co. Tipperary,IRELAND
Tel. : +353-(0)52-70384Fax : +353-(0)52-81987
OEEsystemsStansted Centre,Parsonage Road,Takeley, Essex,CM22 6PU
Tel. : +44-(0)1279-874240Fax : +44-(0)1279-874347
www.oeesystems.com