From SCDigest's On-Target E-Magazine
- Jan. 27, 2015 -
Supply Chain News: Leveraging the Overall Equipment Effectiveness Metric to Drive Manufacturing Improvement
IDC Manufacturing Insights Presents its Take on Measure First Developed in 1960s, Says It is Key Aspect of Smart Manufacturing
SCDigest Editorial Staff
The analysts at IDC Manufacturing Insights are out with a new report that again pushes the use a manufacturing metric developed in the 1960s by a man named Seiichi Nakajima called Overall Equipment Effectiveness, or OEE, but with IDC's own specific take on how it should be calculated.
In IDC's new research note on "Smart Manufacturing - The Path to the Future Factory," analysts Robert Parker, Marc Van Herreweghe, and Lorenzo Veronesi first noted that in just the past few years, perceptions by corporate executives relative to US production have changed for the good, with companies more willing to make investments in domestic production rather than assuming the smart course was to sooner or later move the work offshore, largely to Asia.
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IDC Says the that the OEE equation can in turn be extended to include a line or cell (a collection of equipment), a factory, or a whole factory network. |
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What Do You Say?
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While the reshoring trend may be overhyped based on the data, it does appear the US and some Euro companies are taking domestic manufacturing more seriously again, and maybe be interested in investing to make those operations more productive.
However, it is also clear that traditional, labor-intensive factories are a thing of the past. The trend now is to more advanced manufacturing, which generally implies a lot of automation and far few but generally more skilled shop floor employees to work with the technology to get products produced.
IDC prefers the term smart manufacturing, which it defines as "the convergence of data acquisition, analytics, and automated control to improve the overall effectiveness of a company's factory network," which defines a separate issue from the level of plant automation.
Increasing Operational Effectiveness
IDC believes that increasing operational effectiveness will be a critical element of transforming to smart manufacturing.
To that end, IDC offers its definition of the operational equipment effectiveness metric. It involves use of four supporting measures:
Efficiency: Actual output versus expected output. So if expected output is 10 units per hour and actual output is 11, efficiency is 110%.
Utilization: Availability and use of equipment - if a machine is running 99 out of 100 hours, utilization is 99%. Note downtime or lack of work could impact utilization.
Productivity: Is equal to efficiency times utilization. In this example, it would equal 108.9%, from 110% times 99%.
Reliability: Basically, a quality metric - how many good parts are produced as a percent of total parts. If there is one bad part out of 1000, reliability equals 99.9%.
From there, calculating OEE is a simple exercise: productive times reliability. In this example, that would equal 108.79%, from 108.9% times 99.9%.
IDC notes that there are other important measures that relate to factory efficiency beyond just machine efficiency. They include:
• Labor efficiency: How many machines can factory personnel manage.
• Material efficiency: Optimizing setups and production sequences so less material is sacrificed to scrap.
• Energy efficiency: Optimizing the consumption of energy in the process, which may include running the equipment slower.
In general, increasing the OEE metric should lead to more revenue and higher levels of profitability for a given plant. However, it is not always quite that simple, as the impact depends in part on other factors.
(Manufacturing Article Continued Below)
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