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Welcome to LeanExecution!

Posted by Redge on July 1, 2009

Welcome!

If you are a first time visitor interested in getting started with OEE, click here to access our first post “OEE – Overall Equipment Effectiveness“.  This is the post that started it all.

We have presented many articles over the past many months featuring OEE (Overall Equipment Effectiveness) and related topics.  We recognize that the those who have been following us are more interested in reading our latest posts without having to click through the links or surf the sidebar to see them.  The latest post will appear immediately below this welcome message.

Questions, Comments, Future Topics

Your comments and suggestions are appreciated.  Feel free to leave a comment or send your feedback to us by e-mail at leanexecution@gmail.com or vergence.consulting@gmail.com.  We respect your privacy and will not distribute or sell your contact information to any third parties.  What you send to us stays with us.

Visit us often.  We are continually presenting fresh content and updates to our templates.

Until Next Time – STAY lean!

Vergence Business Associates

Posted in Advanced Lean Manufacturing, APQP, Availability, Capacity, Cost Control, Eliminate Waste, Lean, Lean Metrics, OEE: Overall Equipment Efficiency, Performance, Problem Solving, Process Control and OEE, Quality, Quality Factor, Root Cause Analysis, Terminology, Training, Trouble Shooting, Uncategorized | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

Instant Turnaround for Overall Equipment Effectiveness (OEE)

Posted by Redge on July 5, 2009

Instant Turnaround

Did you know that your leadership style may be affecting your Overall Equipment Effectiveness?  A highly engaged and motivated workforce is the one single distinguishing trait of the top companies in industry today.  Most leaders and managers alike recognize that having the right people on the team are key to the success of their companies.  The vision and mission statements of many companies include statements like “… our people are our greatest asset …” or “… we will attract and retain the best talent …”  If we believe these statements are true , then we would envision a working environment where everyone is an engaged team member of a seamless organization that is fully supported by the management team.  Does this describe the culture of your organization?

What does this have to do with OEE?

LEAN is a CULTURE and one of the key metrics of lean is OEE.  So, could it be that OEE is a direct reflection of the culture that exists in your company?  What are the trends showing?  Does the data reflect a high-velocity company striving to improve its operations to become the new definition of agile or lean?  Who is leading the charge to improve performance?  Where is your team?  If your team isn’t behind you – where are they?

What motivates your employees to bring themselves to work everyday?   Their motivation to work is probably not the same as your reason for being in business.  This presents one of the first challenges that the management team will have to address - aligning company and employee goals where they become synonymous and mutually beneficial.  This doesn’t mean we’re going to rewrite the business plan, but rather, we relate how achieving company goals will enable the employee to achieve theirs.  The key is making your company the place where they want to work – a company they can be proud of and even more so because they are a part of its continuing success.

We contend that self-motivated employees work harder – they take the initiative to get things done – quickly.  Many operations are dependent on people who control their level of productivity.  It can be a difficult challenge to motivate people to work harder than their own perceived value.  The resistance to improve is rooted in the expectation that people will be required to do more work for the same value.  If you are operating in a union environment, the employees tend to be more sensitive to changes in their work structure.

In contrast to their external behavior, people want to be challenged and they are willing and wanting to do more.  However, they will not automatically give you their discretionary effort unless they have earned your trust and respect first.  Without it, they will only give you the value of what they think their time is worth.  Becoming interested in what people are doing, acknowledging their performance and treating them with respect is at the core of an instant turnaround.

When people become engaged and their achievements are recognized they will take ownership of their operation.  OEE results will improve as employees suggest ways to improve their processes and strive to achieve new goals.  None of this will happen unless the executives and senior management team take an active role to become part of the action.

How to get your Instant Turnaround

We just completed a review of Instant Turnaround:  Getting people excited about coming to work and working hardby Harry Paul and Ross Reck, PH.D.  You will learn how to tap into and harness the discretionary effort of everyone on your team.  This book tells a story that reveals how your leadership style and that of your front line management team affects and directly impacts the performance of your team.  This leadership style works.  A lean culture is dependent on the engagement and effective interactions of all of your employees – including the executive management.  This book teaches a simple yet powerful strategy to tap into and harness the discretionary effort that every employee is wanting and willing to give - if the conditions are right.

Get it now: Instant Turnaround!: Getting People Excited About Coming to Work and Working Hard

What is your leadership style?

A true leader is and holds people accountable, works with integrity, is approachable, listens, inspires, smiles, and even knows how to have fun.  The list of leadership traits and characteristics is long and many great leaders would count themselves as falling short on many of them.  If your team shares mutual respect and trust, you are working in great company.  If your team fears you, why should they stay?  Remember, most people want to belong to a winning team!  If you manage by walking around (MBWA), you will certainly have an opportunity to communicate your praise and expectations to your team.  They will respond in kind!

Until Next Time – STAY lean!

Posted in OEE: Overall Equipment Efficiency, Performance | Tagged: , , , , , , , , , | Leave a Comment »

OEE Topics for July – 2009

Posted by Redge on July 3, 2009

We changed our theme!

Today was another day to do a little maintenance. We spent a little time revamping our look and feel. We hope you enjoy the changes and find our site a little easier to navigate.  We updated our Free Downloads page to present another more direct venue using Box.Net. If you’re already on WordPress, you already know how great this widget is. Downloads could never be faster or easier.

We also took some time today to update some of our pages. We would suggest, however, that the best detailed content appears in the individual articles that we have posted.

Happy July 4th to our friends and neighbours in the United States!

Upcoming Topics for July – 2009

  1. Tracking OEE Improvements:  We have noticed an increase in the number of requests to discuss tracking OEE improvements.  We have been working on a few different approaches even for our own consulting practice and look forward to sharing some thoughts and ideas here.
  2. How OEE can improve your Cost of Non-Quality.  It’s more than yield.
  3. What OEE can do for your Inventory.  Improvements should be cascading to other areas of your operation – including the warehouse.
  4. Innovation – Defining your future with OEE
  5. OEE and Agile - Going beyond lean with OEE.
  6. Best Practices – OEE in real life, in real time

If you would like to suggest a topic for a future post, ask a question, or make a suggestion, please leave a comment or simply send an e-mail to LeanExecution@gmail.com or vergence.consulting@gmail.com.  We do appreciate your feedback.

Until Next Time – STAY lean!

Vergence Business Associates

We respect your privacy, your information will not be shared, sold, or distributed to any third parties.  We will only use your e-mail to communicate with you at your request.  You will not be subject to any advertising or marketing campaigns.

Posted in Advanced Lean Manufacturing, APQP, Availability, Capacity, Eliminate Waste, Lean, Lean Metrics, OEE: Overall Equipment Efficiency, Problem Solving, Process Control and OEE | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

Canada Day

Posted by Redge on July 1, 2009

Happy Canada Day to our fellow Canadians!

Celebrate in style.

Until next time – STAY lean!

Posted in Advanced Lean Manufacturing | Tagged: | Leave a Comment »

Renovations are under way!

Posted by Redge on June 28, 2009

We are in the process of updating our site.  Stay tuned for more features and updates to come.

Thank you for the opportunity to serve you even better.

Vergence Business Associates

Renovations

Posted in Uncategorized | Leave a Comment »

Cost Weighted OEE and other free OEE Spreadsheet Templates

Posted by Redge on June 27, 2009

OEE Spreadsheet Templates – One Click Closer:

As the days of summer are upon us, we thought it would be good idea to make it easier for you to access our free downloads so you can spend more time doing the things you want to do.  We have updated our site and we are pleased to offer you four ways to download our OEE spreadsheet templates:

  1. We added a new page to the sidebar titled “FREE OEE Templates
  2. We also added a new Link List to the sidebar titled “Download Files”
  3. We made the FREE DOWNLOADS orange Box file little larger and easier to read.
  4. We will make an effort to include direct access links in the content of our posts.

Your OEE templates are literally a click away – saving you time and effort.

Cost Weighted OEE – Advanced OEE Template

We have received numerous requests for our “Cost Weighted OEE” template.  Many people are starting to realize that the OEE factors for availability, performance, and quality are not directly correlated.  Of course, we have also discussed our concerns in this regard on several occasions and will state again that OEE is not a stand alone metric.  As a vantage point metric, it can provide a valuable perspective on operations in real time, however, it is only one part of the overall equation.

Rex Gallaher wrote an excellent article titled “OEE Oxymoron; Are all factors truly equal?” that was published by ReliablePlant.com on February 18, 2009.  This article also conveys the premise that the OEE factors are not equal.  Understanding the financial impact of each of the OEE factors will assure that efforts and energy are focused on activities that will provide the greatest return on investment for your company.

To celebrate our site updates, we thought we would give you at least one more reason to see how our download venues work.  A copy of the Cost Weighted OEE Template is now available through all three of our download venues or you can Click HERE to get immediate access to the file. 

For a detailed discussion of OEE and how it can (and should not) be used to identify opportunities to eliminate waste and reduce costs, click on one of the links below:

  1. OEE and Cost Control - Published in December, 2008
  2. 6 Things OEE is NOT! - Published in April, 2009
  3. Make or Break with OEE - Published in May, 2009

In light of the current economy, many companies have been forced to look inward to find “new” money.  OEE is one of the few lean metrics available that can help your organization to focus on the greatest opportunities with measurable returns.  We trust the templates and spreadsheet solutions that we offer here will help you in your quest.

For more information, click on the Categories section of the sidebar to search for other articles on our Blog that may be of interest to you.  They can provide significant insight into the many aspects of operations and OEE and may serve as part of your ongoing training efforts.

We appreciate your feedback.  Please feel free to leave a comment or send an e-mail with your suggestions for a future topic, comments, questions, or concerns to leanexecution@gmail.com or vergence.consulting@gmail.com

Until next time – STAY lean!

Vergence Associates ICON 03-07-09-15-20

Posted in Advanced Lean Manufacturing, Cost Control, Lean Metrics, OEE: Overall Equipment Efficiency, Process Control and OEE | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

How OEE can improve your Inventory

Posted by Redge on June 18, 2009

Once you have established a robust OEE system, you should also be reaping benefits in other areas of your organization.

We will be offering some insights into the other performance metrics such as inventory over the next few weeks. Improved availability, performance, and quality will all have an impact on your inventory and materials management processes. Inventory turns is one metric that should be improving as your OEE improves. If not, perhaps there is an opportunity to integrate OEE even deeper into your organization.

In a truly lean organization, other vantage point metrics will provide evidence of a well integrated OEE system. Metrics such as delivery, quality (ppm), labour efficiency, lead time, mean time between failures, mean response times, down time, turn over, and financial performance indicators are all directly or indirectly affected by improvements to your operation and OEE.

We will discuss the impact of OEE on these “other” metrics over the next few posts. Remember, we also offer excel templates at no cost to you. Click on the “BOX” files on the sidebar to get your free templates today! Our templates offer more than a simple OEE calculator – they can be used immediately with little or no modifications to suit your processes.

Until next time, STAY lean!

Vergence – Lean Execution Team.

Posted in Advanced Lean Manufacturing | Tagged: , , , , , , , , , , , | 1 Comment »

OEE Training – Online

Posted by Redge on June 15, 2009

Getting Started

Online Training is more rampant now than ever.  If you want to learn about OEE and how to calculate it correctly then we have all the information you need right here.  Simply click on the categories of interest to you and research your specific topic or Click Here to get started.  This is the first article that got us started in November of 2008.  All of our online content is presently available at no charge.

Free Spreadsheet Templates

We offer several OEE Spreadhseet Templates that are available at no cost to our visitors and clients. Feel free to click on the “Free Downloads” template on the sidebar.  This is a new feature and trust that you will find this a much easier solution that provides immediate access to our documents.  If you can’t find what you are looking for, contact us by e-mail (leanexecution@gmail.com) or leave a comment with your suggestions for other templates that you would like to see available on our site.

Advanced Visitors

We trust that the content presented here is of interest to you as well.  We have provided many articles of interest related to OEE and Lean.  Simply review the categories and posts available or visit our pages for more information.  Our articles present detailed discussions and best practices applicable to the featured topic.

If you have any questions, comments, or suggestions for a future topic, simply leave a comment or send an e-mail to leanexecution@gmail.com or vergence.consulting@gmail.com.  We respect your privacy.  We will not share, disclose, sell, or distribute your e-mail or personal information with any third parties.  Your e-mail will only be used to contact you at your request.  You will not be subject to any advertising or marketing campaigns.  See our privacy policy for more details.

Until Next Time – STAY lean!

Vergence Business Associates

Posted in Lean Metrics, OEE: Overall Equipment Efficiency, Training | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

How to Calculate the Quality Factor for OEE

Posted by Redge on June 14, 2009

How to correctly calculate the Quality Factor for OEE

Most people assume that the quality factor for Overall Equipment Effectiveness (OEE) is determined by simply calculating the yield of good parts from the total parts produced.  Unfortunately, this logic does not hold true when calculating the quality factor beyond the individual part or process.

We will show you how to correctly calculate the Quality factor and determine a truly weighted result that is consistent with the definition of Overall Equipment Effectiveness.  Although OEE itself does not have a unit of measure, it is based on the effective use of time.

The Quality Factor Defined

Although OEE itself is expressed as a percentage, all of the individual OEE factors are based on time.  Yes, even the quality factor:

The quality factor measures the percentage of time that was used to make or manufacture an acceptable quality product at rate or standard.

We have witnessed too many organizations that attempt to immediately convert the Quality Factor into a Cost of Non-Quality, Parts / Million (PPM), or other type of metric.  This is not the intent of the quality factor from an overall equipment effectiveness perspective.  Again, OEE measures effective use of time.

While it is not our intent to delve into a cost of non-quality discussion, we agree that understanding the cost drivers is in the best interests of the company to minimize losses.  This includes any investment that must be made to improve OEE.

We would also encourage you to download a copy of our Excel spreadsheets (see the BOX file on the sidebar).  There are no charges or fees for downloading these files and we request that these products remain available as such.  Now, let’s move on to the Quality Factor.

Free Download ->>> Click here to download a copy of the example developed in this post! <<<-Free Download

Where did the time go?

By definition, OEE is used to determine how effectively the time for a given machine, process, or resource is used: 

  • Availability:  Planned (Scheduled) versus Unplanned downtime
  • Performance:  Standard versus Actual cycle time
  • Quality:  Value Added versus Non-Value Added time

All of the OEE factors pertain to time.  From our definition above, the factors are independent of people (labour) required, parts produced, defective product, or the value of these items.  However, when we review many OEE templates, and more specifically the quality factor calculation, the time element is lost.

The true Quality Factor formula

The simple yield calculation works for a single process or part number but not for multiple machines or part numbers.  A simple example will demonstrate the correct way to calculate the Quality factor for a single part.  We will expand on this simple example as we go along.  Click here to download your free copy of the spreadsheet used in this post.

Note:  We are using the standard rate for the Quality time calculations as the Availability and Performance factors already account for downtime and cycle time losses respectively.  Quality is based on the pure standard rate or cycle time only.

EXAMPLE:  Machine A – Production Summary

Part Number

Rate / Minute

Total Produced

Defective

Quantity

Yield %
Quantity

1

2

800

10

98.75%

Totals

——-

800

10

98.75%

Averages

2

800

10

98.75%

As we can see from the table above, machine A produces part number 1 at a standard rate of 2 parts / minute.  A total of 800 parts are produced of which 10 are defective and scrapped.  The simple yield formula will correctly calculate the Quality factor as:

Quality Yield = (800 – 10) / 800 = 790 / 800 = 98.75%

From an OEE perspective, however, our interest is not how many parts were scrapped, but rather, how much machine or process time did we lose by making them.  From our example, 10 defective parts results in a loss of 5 minutes: 

Lost Time = 10 parts / (2 parts / minute) = 5 minutes

The quality factor actually tells us how effectively the time was used to make good or acceptable parts.  From our example, the time required to make ALL parts at the standard rate is 400 minutes (800 parts / 2 parts / minute = 400).  Our Quality factor can easily be calculated as follows: 

  • Value Added Time = Total Time – Non-Value Added Time
  • = 400 – 5
  • = 395 minutes

Total Time (All Parts) = 400 minutes

Quality Factor = Value Added Time / Total Time
                               = 395 / 400
                               = 98.75%

Although the results in this case are the same, the method is uniquely different.  Since this is based on a single machine, the cycle times are cancelled in the formula as shown below:

= (800 – 10) / 2 parts per minute / (800 / 2 parts per minute)

The YIELD pitfall revealed:

Our calculation method becomes relevant when we start looking at the production of different parts running through the same machine or process.  The easiest way to demonstrate this is by extending our first example.

Let’s assume we are also using machine A to produce two additional part numbers.  The production data is summarized in the table below as follows:

EXAMPLE:  Machine A – Production Summary

Part Number

Rate / Minute

Total Produced

Defective

Quantity

Yield %
Quantity

1

2

800

10

98.75%

2

8

1600

160

90.00%

3

1

800

20

97.50%

Totals

——-

3200

190

94.06%

Averages

4

1067

63

95.42%

If we calculate the Quality factor for machine A, the simple yield formula will provide a misleading result.  Note that we’ve provided the process yield factor for each line item part number as we have already determined that the ime factors cancel for individual parts.

The average Yield % from the table above is 95.42%.  We will demonstrate that this result is also incorrect.  Remember, we’re interested in the percent of total time used to make a quality product (also known as Value Added Time).

The real question is, “What is the overall Quality factor for machine A?”  The simple yield formula would suggest the following:

Simple Yield Quality Factor = (3200 – 190) / 3200 = 3010/ 3200 = 94.06%

This percentage is misleading and – as we will demonstrate – the WRONG result.

Calculating the True Weighted Quality Factor

Let’s take the table from above and expand on it to reflect our TIME based calculations.  We will calculate the time required to produce all parts (Total Time) and the time lost to produce defective parts (Lost Time).  Remember, these times are calculated at the standard cycle time or rate.  The resulting table appears below:

EXAMPLE:  Machine A – Production Summary

Part Number

Rate / Minute

Total Produced

Total Time

Defective

Quantity

Lost Time

Yield %
Time

1

2

800

400

10

5

98.75%

2

8

1600

200

160

20

90.00%

3

1

800

800

20

20

97.50%

Totals

——-

3200

1400

190

45

96.79%

Averages

4

1067

467

63

15

95.42%

 From this table, we can quickly calculate the true weighted quality factor as follows:

           Quality Factor = Value Added Time / Total Time
                               = (1400 – 45) / 1400
                               = 1355 / 1400
                               = 96.79 %

Putting it ALL together

From the discussion above, we have combined the results into the table below:

EXAMPLE:  Machine A – Production Summary

Part Number

Rate / Minute

Total Produced

Total

Time

Defective

Quantity

Lost Time

Yield %
Quantity

Yield %
Time

Delta

1

2

800

400

10

5

98.75%

98.75%

0.00%

2

8

1600

200

160

20

90.00%

90.00%

0.00%

3

1

800

800

20

20

97.50%

97.50%

0.00%

Totals

——-

3200

1400

190

45

94.06%

96.79%

2.72%

Averages

4

1067

467

63

15

95.42%

95.42%

0.00%

The true weighted quality factor can be found in the Yield % Time column (96.79%).  This result fits the true definition of Overall Equipment Effectiveness. 

The table also shows that the differences between the methods can lead to a significant variance between the results (96.79% – 94.06% = 2.72%): 

  • = 94.06% (Simple)
  • = 95.42% (Average)
  • = 96.79 % (Weighted)

We can quickly prove which answer is correct quite easily.  Referring to the table below, the only factor that resulted in the correct time calculations is the Yield Time % factor (96.79%).  The table shows that the true Value Added Time or Earned Time is 1355 minutes and the total time lost due to defective parts is 45 minutes.  Exactly what we expected to find based on our earlier calculations.

Quality Factor – Validation Table – All Times are in minutes

Method

“Yield %”

Total Time

Earned

Lost Time

Delta Time

Yield Quantity %

94.06%

1400

1316.9

83.1

38.1

Average Yield %

95.42%

1400

1335.8

64.2

19.2

Yield Time %

96.79%

1400

1355.0

45.0

0.0

What does all this mean in terms of time?  The results shown in this table clearly demonstrate that a seemingly small delta of 2.72% between the different methods of calculating the Quality Factor can be significant in terms of time.  The Delta time indicated in the table is the difference between the calculated lost time for Method and the actually calculated lost time of 45 minutes.

If this machine was actually scheduled to run 450 minutes per shift on 2 shifts the results would be even more dramatic over the course of a year.  Assuming the machine is loaded with the same part mix and there are 240 working days per year:

Annual Working Time = 240 * 450 * 2 = 216,000 minutes

The following table summarizes the results on an annualized basis: 

Quality Factor – Annualized Results – All Times are in minutes

Method

“Yield %”

Total Time

Earned

Lost Time

Delta Time

Yield Quantity %

94.06%

216,000

203,169.6

12,830.4

5896.8

Average Yield %

95.42%

216,000

206,107.2

9892.8

2959.2

Yield Time %

96.79%

216,000

209,066.4

6933.6

0.0

The “Yield Quantity %” method indicates the actual lost time that could be incurred annually is 12830.4 minutes (28.51 shifts).  Relative to our “Yield Time %” method, this is overstated by 5896.8 minutes, the equivalent of just over 13 shifts.  Similarly, the “Average Yield %” method indicates a total lost time of 9892.8 minutes (21.98 shifts).  Relative to our “Yield Time %” method, this is overstated by 2959.2 minutes or approximately 6.6 shifts.  This further exemplifies the need to understand the correct way to calculate the Quality Factor.

Let’s continue to re-affirm the validity of our calculation method.

Individually Weighted Quality Factors

We will now show you how to calculate the individually weighted quality factors for each part number or line item.  The weighted “time based” quality factor is calculated using the following formula for each line item part number: 

Weighted Line Item = (Value Added Time)
Total Time for All Parts

Where, Value Added Time = Total Time – Lost Time

 We have simplified the table from our example to show the time related factors only.  The table showing the time weighted quality factors from our example is as follows:

Part Number

Rate / Minute

Total Produced

Total Time

Defective

Quantity

Lost Time

Yield %
Time

Weighted % Yield Time

1

2

800

400

10

5

98.75%

28.21%

2

8

1600

200

160

20

90.00%

12.86%

3

1

800

800

20

20

97.50%

55.71%

Totals

 

3200

1400

190

45

96.79%

96.79%

Averages

4

1067

467

63

15

95.42%

 

As we can see from the table, the sum of the “Weighted % Yield Time” percentages is the same as the “Yield % Time”.  The time based formula is once again validated.  We will now take this table one step further to reveal where the real opportunities are to improve the Quality Factor and Overall Equipment Effectiveness.

Improving the Quality Factor

The Yield % or the Weighted Time % do not provide any real indication of the contribution of each part number to the overall weighted quality factor.  We can see from the table that part numbers 2 and 3 both resulted in 20 minutes of lost time compared to part number 1 where only 5 minutes were lost.

Since part numbers 2 and 3 resulted in an equivalent loss of time, we would expect that they would also result in an equal contribution to improve the Quality Factor.  To demonstrate this and to appreciate the real improvement opportunity, we added two more columns to our table as shown below – “Weighted % Process Time” and “Yield % Opportunity”:

Machine A – Weighted Quality Factor – EXAMPLE  

Part Number

Total Time

Weighted

% Process Time

Lost Time

Value Added Time

Yield %
Time

Weighted % Yield Time

Yield % Opportunity

1

400

28.57%

5

395

98.75%

28.21%

0.36%

2

200

14.29%

20

180

90.00%

12.86%

1.43%

3

800

57.14%

20

780

97.50%

55.71%

1.43%

Totals

1400

100.00%

45

1355

96.79%

96.79%

3.21%

Averages

467

33.33%

15

452

95.42%

32.26%

1.07%

The weighted process time was calculated by dividing the process time for each part number by the Total Time.  Once again, we can validate our weighted Quality Time by multiplying the “Weighted % Process Time” by the “Yield %” for each line item. 

To make sure we understand the calculations involved, let’s work out one of the line items in the table.  For Part Number 1, 

  • Weighted % Process Time = 400 / 1400 = 28.57%
  • (1)  Weighted % Yield Time = 28.57% * 98.75% = 28.21%
  • (2)  Weighted % Yield Time = (400 – 5) / 1400 = 28.21 %

Note that we showed two ways to demonstrate the Weighted % Yield Time to once again validate the quality factor calculation method.

The opportunity to improve the OEE for the three part numbers is the difference between the Weighted Process Time and the Weighted Yield Time.  For Part Number 1,

            Improvement = 28.57% – 28.21% = 0.36%

Similarly, the improvements for part numbers 2 and 3 are as follows: 

  • Improvement Part Number 2 = 14.29% – 12.86% = 1.43%
  • Improvement Part Number 3 = 57.14% – 55.71% = 1.43%

Three Key Observations

  1. First, the results of the calculations are consistent the actual observed down time.
  2. Second, although the yields for part numbers 2 and 3 are significantly different, each has the same NET impact to the final OEE result.
  3. Third, when add the total “Yield % Opportunity” (3.21%) for all three part numbers to the total “Weighted % Yield Time” (96.79%), the result is 100%.

This last calculation once again demonstrates that the Quality Factor calculation presented here is consistent with the true definition of OEE.

The formula for the Quality Factor is:

Total Time to Produce Good Parts @ Rate / Total Time to Produce ALL Parts @ Rate

One Final Proof

Our method will produce a result that is consistent with the formula OEE = A * P * Q.  Using our example, it is clear that if Availability and Performance are both 100% and the Quality Factor is 96.79%, the final OEE for all parts will also be 96.79%.

Consistent with the definition of OEE, using our example, 96.79% of 1400 minutes is 1355 minutes.  This is the time that was used to make good or acceptable quality parts.  Similarly then, the time lost making all defective parts is 45 minutes (1400 – 1355 = 45).

The Impact to Operations

OEE is typically used by the Operations team for capacity planning, labour planning, and to determine how much time to schedule for a given resource to produce parts.  The above examples clearly demonstrate that even a small delta can have significant capacity, labour, and scheduling implications.  From this perspective it also becomes a relatively simple task to determine the direct labour costs associated with the production of defective parts.

Purchasing, Materials, Scheduling (Lead Times), Inventory (Stock), Finance, and Quality are all affected by inaccurate data and, in this case, OEE calculation errors.  Of course these errors are not just limited to the Quality Factor itself.

There are other significant losses and costs related to quality as well.  It is not our intent to pursue a discussion on the cost of non-quality as we recognize there are many other factors (internal and external) that must be considered to truly understand the real cost of non-quality for activities such as sorting, inspection, scrap (material losses), rework, re-order, machine time, and administration.

In the real world, someone may just be preparing a plan to improve the Quality of parts running on Machine A to reduce excessive labour and material costs.  We can only wonder what method they used to calculate the “savings”.  Inevitably, many companies approve the project and the funding only to realize the savings fell well short of expectations or will never materialize at all.

In Closing

We would contend that the differences in the calculation method presented here and those found elsewhere are significant.  In our example case, the difference is 2.72%.  We demonstrated that this can be significant when annualized over time.  Similarly, the opportunity for improvements using our method is clear and concise.

Now when someone asks you how to calculate the Quality Factor, you can confidently show them how and tell them why.

The example used in this post can also be downloaded from our BOX File on the sidebar or CLICK HERE.  This is offered at no charge and of course will make it easier for you to use for your own applications.

Thank you for visiting – Until Next Time – STAY lean!

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Posted in Advanced Lean Manufacturing, Lean, Lean Metrics, Quality, Quality Factor | Tagged: , , , , , , , , , , , , , , , , , , | Leave a Comment »

OEE and the Quality Factor

Posted by Redge on June 10, 2009

Many articles written on OEE (ours being the exception), indicate or suggest that the quality factor for OEE is calculated as a simple percentage of good parts from the total of all parts produced.  While this calculation may work for a single line part number, it certainly doesn’t hold true when attempting to calculate OEE for multiple parts or machines.

OEE is a measure of how effectively the scheduled equipment time  is used to produce a quality product.  Over the next few days we will introduce a method that will correctly calculate the quality factor that satisfies the true definition of OEE.  The examples we have prepared are developed in detail so you will be able to perform the calculations correctly and with confidence.

Every time a part is produced, machine time is consumed.  This time is the same for both good and defective parts.  To correctly calculate the quality factor requires us to start thinking of parts in terms of time – not quantity.

If the cycle time to produce a part is 60 seconds, then one defective part results in a loss of 60 seconds.  If 10 out of 100 parts produced are defective then 600 seconds are lost of the total 6000 seconds required to produce all parts.  Stated in terms of the quality factor, 5400 seconds were “earned” to make quality parts of the total 6000 seconds required to produce all parts (5400/6000 = 90%).  Earned time is also referred to as Value Added Time.

As we stated earlier, for a single line item or product, the simple yield formula would give us the same result from a percentage perspective (90 good / 100 total = 90%).  But what is the affect when the cycle times of a group or family of parts are varied?  The yield formula simply doesn’t work.

The quality factor for OEE is only concerned with the time earned through the production of quality parts.  Watch for our post over the next few days and we’ll clear up the seemingly overlooked “how to” of calculating the quality factor.

Until Next Time – STAY lean!

We appreciate your feedback.  Please feel free to leave a comment or send an e-mail with suggestions or questions to leanexecution@gmail.com

We respect your privacy – What you share with us, stays with us.

Posted in Advanced Lean Manufacturing, Lean Metrics, OEE: Overall Equipment Efficiency, Process Control and OEE, Quality | Tagged: , , , , , , , , , , , , , , , | Leave a Comment »

 
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