Overall Equipment Effectiveness (OEE) is a key performance indicator (KPI) used to measure performance in a given process, and is calculated by combining constituent components of availability (uptime), (performance) rate, and quality/yield. OEE is a simple metric that provides a wealth of information that is useful for directing an organization’s resources including engineering, continuous improvement, safety, quality, and even outside contractors.
While OEE is an extremely valuable tool for operations management, organizations must take care to avoid the pitfalls associated with a “singular” KPI driving activities on the shop floor. Used strategically, OEE can be a valuable key in unlocking a manufacturer’s production potential.
Overall Equipment Effectiveness: A Strategic and Practical Improvement Tool
1. A White Paper from
Myrtle Consulting
Delivering Operational Improvement
Used strategically, overall
equipment effectiveness can be
a valuable key in unlocking a
manufacturer’s production potential
Abstract
Overall Equipment Effectiveness:
A Strategic and Practical
Improvement Tool
By Lotfi Maroizy
Steve Wamsley
Overall Equipment Effectiveness (OEE) is a key performance indicator (KPI) used to
measure performance in a given process, and is calculated by combining constituent
components of availability (uptime), (performance) rate, and quality/yield. OEE is a simple
metric that provides a wealth of information that is useful for directing an organization’s
resources including engineering, continuous improvement, safety, quality, and even
outside contractors.
While OEE is an extremely valuable tool for operations management, organizations must
take care to avoid the pitfalls associated with a “singular” KPI driving activities on the
shop floor. Used strategically, OEE can be a valuable key in unlocking a manufacturer’s
production potential.
2. A White Paper from
Myrtle Consulting
Delivering Operational Improvement
Introduction
Overall Equipment Effectiveness (OEE) is a metric that has become a go-to standard across numerous industries. With its roots in
automotive manufacturing and assembly, this calculated KPI has become the measurement standard for food & beverage (F&B),
consumer packaged goods (CPG), processing, life sciences, and other “classical” discrete manufacturing/assembly industries and
sectors. It has taken on many forms and assumed alternate identities, and has appeared in a variety of locations from the shop
floor to the corporate war room, and everywhere in between. Planned strategically and implemented tactically, OEE can truly live
up to its billing for the operation. It can improve stability and overall equipment performance, unlock capacity, and drive the right
behaviors on the shop floor to sustain improved performance. However, it is extremely important to use caution when drawing
general conclusions based on OEE metrics.
Although very simple in nature, OEE performance varies across (and within) industries/processes and is extremely sensitive to
individual factors and/or regulations. Therefore, it should always be treated carefully, addressed on a case-by-case basis, and
supported with site-specific data.
The chart below shows the distribution of performance in OEE across a number of different discrete manufacturing industries.
Myrtle Consulting’s Approach to OEE
Myrtle Consulting takes a unique view of OEE compared with popular industry perspectives. Our approach to using OEE is simplified
and concise, and avoids much of the “noise” surrounding this metric. Myrtle’s OEE Implementation Strategy applies a combination of
traditional, time-tested tools and disciplined, reasonable methods to execute an OEE-driven initiative in the organization. It is built on
three anchor points: choke modeling, the Myrtle OEE management system, and results planning. Each of these three components is
critical to properly and effectively leveraging OEE to impact improved productivity across the organization.
3. A White Paper from
Myrtle Consulting
Delivering Operational Improvement
Anchor Point #1: Choke Modeling
Since OEE is a true measure of operation throughput, it
is critical to understand the choke point of the operation.
Choke points are known by many aliases: Herbie, jug,
constraint, bottleneck, line governing operation (LGO),
limiting resource, and bad actor. No matter which name
we use, a choke point is an obstacle or limitation that
prevents or slows progression or movement from one
part of the manufacturing process to another. Contrary
to popular belief, a choke point is not always limited to
the slowest part of the operation. A choke point can be
any process in the operation that limits throughput via
any means, not just speed. Examples may include things
like excess downtime, excess scrap, poor yield, unavailable equipment or unavailable human resources. All of these choke
points can be sources of OEE deterioration.
Myrtle’s OEE Implementation Strategy calls for identification of choke points through analysis and observation. By focusing
on one process at a time, rather than the entire factory or operation, it is possible to keep improvement efforts manageable
until the organization is more mature and learned, making it easier to consider additional areas. If the transformation is
project-based, focusing on one area will allow teams to make a quick, measurable impact and limit the dangers associated
with scope creep.
Often, companies identify the constraint and then apply the Kaizen strategy whereby cross-functional teams work
together proactively to achieve improvements in the manufacturing process. However, this step is often premature. First,
it is important to understand the causal factors behind the choke point and to use data to prioritize the choke points
according to the volume of losses they are causing. This can be accomplished by pulling data from a loss accounting system.
Otherwise, a simple log sheet at the operator station can provide immediate value if managed/updated by the operator. A
simple log sheet provides reliable information to plan around and act upon, while providing ancillary benefits of operator
ownership and potential solutions (by engaging the persons closest to the choke point). While waiting for some data to
accumulate on the log sheet, it is important to interview other employees with knowledge of the process.
Employees in maintenance, supply chain or engineering may have additional design, vendor, or other performance data
that could be useful for problem solving. Simple problem-solving tools can reveal recurring themes and improvement
opportunities, which should be captured in the project/improvement plan.
Identifying and understanding choke points is critical to successful use of OEE and provides the basis for driving
continuous improvements.
Myrtle’s OEE
Implementation Strategy
Myrtle’s OEE Implementation
Strategy is built on three anchor
points: Choke Modeling, the
Myrtle OEE Management System,
and Results Planning.OEE
Rapid
Results
Choke
Modeling
OEE
Management
System
Results
Planning
4. A White Paper from
Myrtle Consulting
Delivering Operational Improvement
The charts below demonstrate simple problem solving that should be applied when identifying the root causes of choke points.
Anchor Point #2: OEE Management System (OMS)
The second anchor point, the Myrtle OEE Management System (OMS), provides a simple framework for focusing on the
choke point at all times, while providing communication to the organization and tracking/measurement of tactical activities.
Myrtle’s OEE Implementation Strategy starts by focusing on elements that are closest to the shop floor and which
are observed and/or acted upon at the shortest intervals. Despite a narrowed focus on improvement in one area or
one process, organization leadership must be mindful of the overall effect of process changes in performance across
departments, and ensure that the support functions are robust and effective in enabling the production process.
Short-interval controls (SICs) at the choke point and hourly/daily/shiftly performance meetings are examples of these.
This “lower” portion of the OMS would also include classical Kaizen or workshop planning and execution. As the team is
streamlining (or installing if non-existent) these pieces of the management system, the leaders are doing likewise in the
realms of forecasting and planning elements of the OMS. Once matured, this ensures that the team is always aligned with
the strategy of the organization.
Anchor Point #3: Results Planning
The final anchor point, results planning, provides a link and a checkpoint from the initial analysis through the delivery of
OEE improvements. Done properly, results planning clearly lays out the road map to project delivery and creates a simple
vehicle for all project team members, participants, and others in the client organization to understand what initiatives
must be accomplished and in what order or time frame. Results planning also provides this path using multiple sources
and boiling them down to the critical project activities, assumptions, and risks that must be understood, overcome, and
completed in order to make the maximum impact toward achieving the established goals.
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Delivering Operational Improvement
The key elements of a robust results plan include:
• AVS/analysis: interviews, data, observations, studies
• Risk assessment / Prioritization
• Quick wins (Choke points / performance focused)
• Preliminary financials
• Focused glide paths/blueprint
Interviews, data, observations and studies all lend insight into general themes and challenges related to choke points and
are validated by those closest to the shop floor. Once validated, these themes should be used to create hypotheses that can
be investigated further. A risk assessment balances improvement plans by laying out potential negative effects from outside
influences or even those controlled by the client organization internally. It is important that risks are communicated and
revisited throughout the project duration, in order to ensure validity and provide a “sanity check” of guiding assumptions.
Focused choke points and performance driven quick wins also populate the results plan. These are results that can be
generated quickly and easily, and provide a mechanism to continually engage the shop floor and remedy those nagging
issues that individually may not seem like much, but cumulatively add up to significant OEE losses.
Preliminary financial data is also a necessary element of the results plan, as it helps drive understanding of where the
initial performance baseline exists, as well as the actual mathematical savings that could be expected from a focused OEE
improvement project.
The final piece of the results plan is a detailed glide path or blueprint. This blueprint outlines the overall initiatives that
must be completed and specifies a timeline for these activities. This allows the team to have short-, medium-, and long-
term visibility into the deliverables and can also be used to show progress over time. The effectiveness of this element is an
absolute direct function of engagement, as it should be developed with the input of the team that will actually be making
the changes and doing the work.
It is essential that the draft version of the results plan be reviewed and mutually approved by all stakeholders. In addition
to providing direction and visibility on “how” the team will achieve results, the mutual approval step of results planning
ensures the alignment of stakeholders: from those on the plant floor to external third parties and executives.
Avoiding Potential Pitfalls
Caution should always be used when using OEE, as potential pitfalls exist at every turn. Here are some tips for avoiding the most
common pitfalls associated with using OEE to improve productivity in the operation.
Avoid “plant-wide” OEE calculations – The larger the problem, the more difficult it is to fix. Myrtle’s approach calls
for using OEE to identify and prioritize the top sources of loss and resolve problems one at a time. By addressing one issue
at a time, companies can make gradual but sustainable progress and prevent analysis paralysis associated with plant-wide
OEE calculations that yield problems that are too big to tackle quickly and effectively. Calculate OEE at each choke point to
truly measure the problem as well as success in overcoming the problem.
Ensure good quality data – It is imperative that the data used to make decisions is quality data. Skewed, incorrect
data can lead to a dangerous situation of addressing the wrong problems. If the loss accounting system is not in good
working order, it’s better to implement manual processes like the simple log sheet. The data does not have to be
sophisticated, but it does need to be correct. Good data points to the biggest sources of loss, so that those can be tackled
first for maximum benefit.
6. A White Paper from
Myrtle Consulting
Delivering Operational Improvement
Involve all stakeholders –
Engage operators and support staff.
Leverage their experience, insight
and passion. Whether consultants,
executives or operators, often
individuals or small groups set out
to address OEE and choke points
on their own. However, the most
qualified to provide insight, ideas and
even solutions are the operators who
are on the plant floor day in and day
out. Engage them in the process for
improved adoption and long-term/
quicker success.
Keep it simple – Use simple
glide paths or blueprints to manage
and communicate activities and
results. Mounds of data and reports
are great for analysis, but to get
everyone on board and moving in
the same direction, present clear,
digestible material.
Conclusion
Used strategically to steer tactical
improvement initiatives, OEE can be
an incredibly useful tool in gaining
improvements in performance and
sustaining those gains. With an integrated
team-based approach to improving
maintenance processes as a way to impact
OEE, and driving rapid results at the shop
floor level, OEE improvements can be
quickly realized and sustained for the
long-term. By implementing Myrtle’s OEE
Implementation Strategy, companies have
a significant opportunity to leverage OEE to
improve their operations, productivity and
overall business results.
Success Stories
Using Myrtle’s OEE Implementation Strategy,
companies can achieve long-term sustainable
improvements in business operations. The
examples below demonstrate the returns in
critical KPIs gathered over the course of the
projects.
Major Beverage manufacturer
• Achieved a 15 point OEE increase across 4
high-speed bottling lines, representing a 28%
improvement, sustained since project conclusion.
• Historically over budget by $2MM - $3MM, the
company finally made budget in 2015.
• Implemented enabling processes: centerline
approach, changeover and startup
improvements, and intense focus on operator
training, along with an integrated team
resolution process, enabling a 60% reduction in
micro-stops.
• Following this 12-month project, the company
achieved and has sustained each month since
project conclusion, BDP well above 90%.
Snacks Manufacturer
• Achieved a 5 point OEE gain (7-8% improvement)
sustained across 2 production lines.
• Implemented standard work methods for
changeover/sanitation, reduced delayed
startups.
• Implemented team problem solving approach
with maintenance & operations.
7. A White Paper from
Myrtle Consulting
Delivering Operational Improvement
About Lotfi Maroizy - Lotfi Maroizy is a Director with Myrtle Consulting Group where he helps clients drive sustainable
results through behavioral change within their organizations. He has led dozens of projects for leading brands in food & beverage,
consumer packaged goods, chemical, mining and life science industries. His capabilities allow him to lead companies in the
areas of process design, performance improvement, maintenance & reliability programs, cost reduction initiatives, revenue
enhancement, corporate restructuring, M&A and due diligence, and planning and integration to drive significant financial
benefits. Lotfi earned his MBA from the University of St. Thomas in Houston, and his Bachelor of Finance from EDHEC School of
Management in Casablanca, Morocco.
About Steve Wamsley - Steve Wamsley serves as Transformation Manager at Myrtle Consulting Group where he focuses
on industrial engineering techniques and Lean Six Sigma tools to eliminate waste, reduce complexity and variation, and facilitate
the overall operational improvement of production or business processes. The long list of major clients he has served includes
Nestlé, Kellogg’s, GM/Ford/Chrysler and Remington Arms. Steve has a Bachelors of Science in Industrial Engineering and a Masters
of Science in Manufacturing Management from Kettering University.