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Calculating ROI for an OEE                                  System                                                John Rob...
Pan-industrial CustomersKEEPING INDUSTRY MOVING AND IMPROVING...
Proven Track Record in the FoodIndustryKEEPING INDUSTRY MOVING AND IMPROVING...
Workshop•    What is OEE and why should we consider it?•    Where are we now.... where do we want to be....     and when?•...
What is OEE and why is it important?•    A standard index of manufacturing efficiency•    Based on...     •   Utilisation ...
Where are you now?•    Tractor factory     •   120+ tractors per day•    Milk bottles     •   1.3million bottles per      ...
What improvements are required andwhen?•    SILT Same In Less Time•    MIST More In Same Time•    Management performance• ...
How will an OEE system help?•    OEE     •   Availability     •   Performance     •   Waste•    Energy Monitoring•    Util...
What is the cost?•    Moderate OEE scores: 50% - 80%     •   Low product value     •   Low tech environment     •   Manual...
When will our new OEE system startto pay back?•    Software systems are only facilitation     tools•    Fast gains from lo...
When will our new OEE system startto pay back?•    Software systems are only facilitation     tools•    Fast gains from lo...
Higher OEE means Higher Unit Margin•    Significant increases in Unit Product     margin can be delivered:     •   Low mat...
ROI: BakeryReturn on Investment perproduction line                     Costs                                              ...
ROI: Tractor FactoryCosts                                                     £  OEE system                               ...
ROI: Spirit Bottler                                  Costs                                                                ...
What about other investmentopportunities?•    Where to spend capital?     •   In the most inefficient areas•    Aunt Bessi...
Summing Up•    Know where you are now•    Understand what areas are likely to provide     opportunities for improvements• ...
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Manufacturing Conference Workshop 2 - Return on Investment (ROI)

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OEE,overall equipment effectiveness, ROI workshop

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Manufacturing Conference Workshop 2 - Return on Investment (ROI)

  1. 1. Calculating ROI for an OEE System John Roberts Managing Director, Operations, Idhammar Systems 15th November 2012©Copyright 2012 Idhammar Systems Limited
  2. 2. Pan-industrial CustomersKEEPING INDUSTRY MOVING AND IMPROVING...
  3. 3. Proven Track Record in the FoodIndustryKEEPING INDUSTRY MOVING AND IMPROVING...
  4. 4. Workshop• What is OEE and why should we consider it?• Where are we now.... where do we want to be.... and when?• What improvements are possible?• How will an OEE system help?• What is the cost?• When will our investment start to pay back?• What about other investment opportunities? KEEPING INDUSTRY MOVING AND IMPROVING...
  5. 5. What is OEE and why is it important?• A standard index of manufacturing efficiency• Based on... • Utilisation • Line availability • Manufacturing performance • Product quality• Why use it.... • Compare performance within industrial sectors • Measure of continuous improvement on a line or within a site • Highlight inefficiencies • Drive improvements in efficiency KEEPING INDUSTRY MOVING AND IMPROVING...
  6. 6. Where are you now?• Tractor factory • 120+ tractors per day• Milk bottles • 1.3million bottles per day• Bread Bakery • 600,000 Loaves per • Problem areas? day • Waste• Canning plant • Manpower costs • 1.5 million cans per • Equipment reliability day • Materials supply• Spirit Bottler • ....... • 100,000 bottles per day KEEPING INDUSTRY MOVING AND IMPROVING...
  7. 7. What improvements are required andwhen?• SILT Same In Less Time• MIST More In Same Time• Management performance• Delivery deadlines• Energy savings• Waste reduction• Staff motivation and engagement• Manpower costs KEEPING INDUSTRY MOVING AND IMPROVING...
  8. 8. How will an OEE system help?• OEE • Availability • Performance • Waste• Energy Monitoring• Utilisation• Productivity• Quality Monitoring KEEPING INDUSTRY MOVING AND IMPROVING...
  9. 9. What is the cost?• Moderate OEE scores: 50% - 80% • Low product value • Low tech environment • Manual data capture • Spare production capacity • £2k - £5k per line• High OEE scores: 80% - 95% • High product value • Automation and SCADA • Tight production schedules • £5k - £12k per line KEEPING INDUSTRY MOVING AND IMPROVING...
  10. 10. When will our new OEE system startto pay back?• Software systems are only facilitation tools• Fast gains from low OEE plants• More time required for better performing plants• Time will be required to deliver a cultural change• Management is the key KEEPING INDUSTRY MOVING AND IMPROVING...
  11. 11. When will our new OEE system startto pay back?• Software systems are only facilitation tools• Fast gains from low OEE plants• More time required for better performing plants• Time will be required to deliver a cultural change• Management is the key KEEPING INDUSTRY MOVING AND IMPROVING...
  12. 12. Higher OEE means Higher Unit Margin• Significant increases in Unit Product margin can be delivered: • Low materials cost • Stable energy usage • People are available Margin/Unit Produced Vs Throughput 30% 20% 10% 0% -10% -20% KEEPING INDUSTRY MOVING AND IMPROVING...
  13. 13. ROI: BakeryReturn on Investment perproduction line Costs £ High volume OEE system 4,000 Moderate / high waste Internal manpower £ Low material cost allocation at start up 1,000 £ Low product unit price Total 5,000 Low profit margin High energy cost Potential Savings per Significant quality monitoring 1% Manual data capture Day Value now improvement £ £ Some opportunities for manpower Product sales value 40,000 400 reduction Daily throughput 80000 £ Sales revenue per unit 0.50 £ Margin % 10% 40 £ £ Cost of Waste 1,500 15 £ £ Manpower 2,500 25 £ £ Energy 2,500 25 £ £ Quality management 100 10 £ Total 115KEEPING INDUSTRY MOVING AND IMPROVING... on Investment Return 43Days
  14. 14. ROI: Tractor FactoryCosts £ OEE system 100,000 Internal manpower £ allocation 20,000 £ Total 120,000Potential Savings 1%per Day Value now improvement £ £ Product sales value 13,000,000 13,000 Daily throughput 130 Return on Investment £ Sales revenue per unit 100,000 £ for the site Margin 8% 1,040 Low volume £ £ Low waste Cost of Waste - - £ £ High product unit price Manpower - - Steady energy usage £ £ Significant quality monitoring Energy - - Automated data capture with £ £ Quality management - - manual input £ Few opportunities for Total 1,040 manpower reduction KEEPING INDUSTRY MOVING AND IMPROVING...Return on
  15. 15. ROI: Spirit Bottler Costs £ OEE system 15,000 Internal manpower £ allocation 1,500 £ Total 16,500 Potential Savings 1% per Day Value now improvement £ £ Return on Investment Product sales value 28,000 280 per line Daily throughput £ 7000 Sales revenue per unit 4.00 High volume Margin 12% 33.6 Low waste £ £ Moderate product unit price Cost of Waste - - £ £ Steady energy usage Manpower 800 8 Automated quality monitoring £ £ Automated data capture with Energy 500 5 manual input £ £ Some opportunities for Quality management - - £ manpower reduction Total 47KEEPING INDUSTRY MOVING AND IMPROVING... Return on
  16. 16. What about other investmentopportunities?• Where to spend capital? • In the most inefficient areas• Aunt Bessie’s • Identified low OEE scores in a packing area • The financial result of reducing this problem area was assessed • An Improvement project was approved • New equipment was installed • OEE improved and the investment was recouped• The OEE system was used to clearly identify the specific area that would most benefit from a capital improvement project KEEPING INDUSTRY MOVING AND IMPROVING...
  17. 17. Summing Up• Know where you are now• Understand what areas are likely to provide opportunities for improvements• Understand that this is not an IT project• Take the project seriously • Publicity and internal marketing • Get a senior sponsor • Act on the data • Allocate responsibilities KEEPING INDUSTRY MOVING AND IMPROVING...

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