Do you have an OEE calculator? TBM Operations consultants share their framework for demonstrating process improvements in financial terms so you can convince senior management that OEE improvement should be a top priority in 2022.

1. Beyond Compliance
Webinar & Podcast Series for Process Manufacturers
How to Calculate the
Financial Impact of OEE
with David Hicks and Michael Hatto

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3. Casual but Professional Format
✔Ask questions! (Q&A at end)
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Before We Get Started

4. BEYOND COMPLIANCE
Today’s Panelists
David Hicks
Vice President, Maintenance Excellence Practice Leader
• Leads large-scale client engagements and operational
diagnostics.
• Strong background in analytics, quality, asset utilization,
management system, and lean transformation.
• Maintenance Excellence Practice Leader
Michael Hatto
Senior Management Consultant – Maintenance & OEE SME
• Leads large-scale client engagements and operational
diagnostics.
• Deep expertise in operations, lean manufacturing, 2P/3P,
TPM, set-up reduction, OEE improvement, cell development,
and management system.
• Creator of the TBM OEE calculator.

5. BEYOND COMPLIANCE
TBM is the Global Lean Transformation Leader Since 1991
Proven Results Track Record
with thousands of case studies delivering a minimum
3X annualized ROI within 12 months
Seasoned Consultants
who have a minimum of 25+ years of senior operations
management and lean implementation experience
Comprehensive Management
System
to align strategy through execution & sustain improvements
Global Footprint
serving hundreds of clients on four continents, in
nine languages
Recognized Leader
driving business excellence and end-to-end
business process transformation since
1991. Work with Shingijutsu documented
in book ‘Lean Thinking’.
Contenders
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Leaders
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of
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High
Low
TBM
Consulting
R&G Global
Consultants
EFESO
A.T. Kearney
Note: Challenger and Contender names omitted for improved readability.
TBM recognized as a Production Operations Consulting
leader for client impact & depth of expertise.
Global Operations
Management
Consulting Firm
150+ operations consultants globally positioned,
delivering services in nine different languages
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6. BEYOND COMPLIANCE
Webinar Agenda
• OEE overview
• Approaches for calculating the
financial impact
• Preparation, building support and
breaking down value
• Additional benefits
• Key takeaways

7. BEYOND COMPLIANCE
OEE Overview
Total Time to
Produce
Remaining
Operating Time
Remaining
Operating Time
Remaining
Operating
Time
Availability
Losses
Performance
Losses
Quality
Losses
Six Losses
Components
of OEE
1. Breakdowns
2. Set-up and
adjustments
Availability
Performance
Quality
Net time to produce!
This is the time you THINK you have to produce!
5. Rework/defects
6. Start-up yield
3. Minor stoppages
4. Reduced speed and
feeds
“What happens when a piece of equipment
breaks down on the job?”

8. BEYOND COMPLIANCE
Calculate OEE to Surface Issues & Identify Where to Focus
Availability
39.2% OEE
(Performance
Efficiency)
Rate of Quality
Running
quality
product
69.1%
65.4%
86.8%
X
X
39%
Quality loss
45%
Performance
loss
69%
100%
84%
Changeover
EA = 100%
Losses
reduce capacity
from 100%
Planned
downtime

9. BEYOND COMPLIANCE
START UP CHANGEOVERS BRIEF STOPS
Hidden Gems of OEE Improvement
1. Variation in Standards
2. First Hour
3. Speed & Consistency
1. Scheduling
2. Set Up
3. Ramp Up
1. Downstream Equipment
Failures
2. Ideal Cycle Time
3. Micro Stops

10. What best describes your org’s ability to
quantify the financial impact of OEE?

11. BEYOND COMPLIANCE
Approaches for Calculating OEE
Calculate OEE by individual line Calculate consolidated OEE
across multiple lines

12. BEYOND COMPLIANCE
Preparation
• Gather relevant information
• Determine the basis period – PY, TTM, other…
• For the basis period, determine cost info: DL, Energy, Fixed OH, IDL, etc.
• Capture Quality, Performance, Availability
• Calculation basis – garner agreement on the Jumping off Point for each of the
three categories
• Calculate “pure” OEE; gain operations agreement on the OEE %
• If you already are tracking, compare the “pure” number with your tracked number
and rationalize the difference

13. BEYOND COMPLIANCE
Building Support
• Meet with the plant controller or finance
representative
• Using their numbers, step them through the
logic of the value proposition
- Do you agree this is true, then that must be
true…agreed?
• Goal is to gain acknowledgement and
support that, all resources remaining equal,
incremental throughput is essential “free”
other than materials and minor energy costs

14. BEYOND COMPLIANCE
Calculating OEE & Value Inputs
• Direct labor per unit is an incremental benefit
• For each additional OEE point gained, the benefit is slightly reduced as the basis has
changed
• Energy/Utility costs–I use half of plant cost and include in the $ amortized
across the incremental units
• This can be honed if the plant tracks utility costs by work center
• The direct labor /energy benefits can be seen as the most obvious and easily
“sold”. But, if using absorption accounting…
• Other fixed costs can and should be similarly included in the value creation
thoughtware – indirect labor, factory overhead allocations, other?

15. BEYOND COMPLIANCE
Calculation Example

16. BEYOND COMPLIANCE
Example Graph

17. BEYOND COMPLIANCE
Talk in Numbers to Gain Executive Support
It’s imperative to express the impact of OEE improvements in financial terms
OEE Calculator
Demonstrates Savings
Assumptions:
• Absorption accounting approach.
• You can sell as much as you make.
Outcome:
• Calculate labor impact based on
current OEE level and labor spend.
• Calculate a portion of utility savings
and add to labor savings.
Scenario 1
Assumptions:
• Sales are fixed.
• Target is to reduce headcount
Outcome:
• As you achieve improvements in
OEE, you will reach plateaus where
labor can be removed.
Scenario 2

18. BEYOND COMPLIANCE
Additional Potential Benefits
Other, nonlinear, benefits should be considered:
• Hidden quality issues
• Capital avoidance
• Additional growth as a result of customer goodwill (on time deliveries)
• Alternately – stemming demand erosion as the result of late deliveries
• Employee engagement via problem solving, awareness, general sense
of caring
• Evolve to a learning organization

19. BEYOND COMPLIANCE
Key Takeaways
1. Include Stakeholders from the start
2. Develop logical thoughtware based on your situation
3. Support from the financial team is critical
4. EVERY point of OEE is valuable
5. Be thorough and honest with yourselves

20. Q&A
BEYOND COMPLIANCE

21. BEYOND COMPLIANCE
David Hicks
Vice President & Practice Leader
Maintenance Excellence
• 610.662.3489
• dhicks@tbmcg.com
Michael Hatto
Senior Management Consultant
Operations & OEE SME
• 585.329.9115
• mhatto@tbmcg.com
Contact the Speakers
Find out more at: www.tbmcg.com

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