Overall Equipment Effectiveness. Robert Hansen C.
generates free cash (i.e. cash from operations), economic profit, and earnings from operations.”3
As part of the Decide II simulation, each team must make decisions covering the full range of functions, including:
The simulation also works in many of the key issues facing industry today, including:
Within each round of decision making, the teams use information from a variety of reports generated as part of the simulation, including:
Participants in the simulation quickly build an appreciation of how complex individual businesses can be. They also see the importance of balancing the use of resources, assets, information, inventories, prices, and sales in order to generate net profit. Because the simulation involves several rounds in a competitive setting, participants also see how one set of decisions affects another set of decisions and results later in the process.
For our particular team, the biggest lesson was to realize the importance of maximizing factory output without the use of overtime. That efficiency, combined with an appropriate market price, helped us develop a healthy business. In our simulation, labor was a very large part of the manufacturing cost. Therefore, minimizing overtime was of vital importance. In other settings, the primary cost may be in automating a process, with labor a minor cost factor. In this case, maximizing the equipment use, even if overtime is necessary, may well be the better choice.
The simulation reinforced the sense that the size of the opportunities for business improvement varies proportionately with the level of information sharing throughout the company. For the best decisions that lead to profitable results, decision makers in the company need information, for example, not only the cost of manufacturing each product, but also margins, compensation and reward policies.
I once worked in a factory area where assets were used to make difficult-to-manufacture products at slower speeds. The level of output ran counter to local expectations of productivity, and the morale of the workers was low. However, once the information was shared that these products provided much greater net profit than standard goods produced elsewhere, morale improved. This understanding helped the group accept the challenge of making these difficult products effectively and overall effectiveness increased. Also, the reward system for the factory could be adjusted accordingly. Remember, what is measured is extremely important. Just measuring barrels/hr or widgets/shift does not measure the business results because profit margins vary with different products.
1.4 Leadership for Teams
Effective factories usually have coordinated teams that work synergistically with a common purpose. The teams, which are from all areas of the factory, have win-win relationships with their interdependent areas and services.
According to a panel of five reliability consultants at the year 2000 annual conference of the Society of Maintenance Reliability Professionals (SMRP), successful initiatives and programs are primarily driven from the top down rather than from the bottom up. In fact when asked, the panel couldn’t relate a single successful experience with a bottom up initiative unless it was first communicated to and accepted by the area leadership.
My own experience supports the concept that successful programs can be implemented at the level of the ‘Champion’ on down. This can be seen where successful programs develop in one work center without ever transferring to other factory areas. When the person who championed the program leaves or transfers, all too often the work center does not sustain the high performance. However, the champions are able to generate new initiatives in other areas once they establish a rapport with the new community.
Management support and area leadership significantly influences the success of initiatives. To sustain a level of excellence, the total community--management, the line organization, and support groups--has to be of one mind. High performance work groups bridge the ‘top down’ syndrome by acceptance of synergistic team leadership.
Nearly everyone comes to work with a desire to do a good job and to be part of a successful unit. Your job and the security of your business depend on strong productivity and top effectiveness. Frustration comes when priorities are not clear and reinforcement is awarded inconsistently. Thus, a single metric--measuring the community as a whole--can be powerful in bringing everyone together.
Let’s look at an example. I once facilitated a workshop activity aimed at improving the changeover time between orders for a packaging operation. This area had four similar flow-lines working around the clock seven days a week. The area had four shifts with four crews per shift, or a total of sixteen crews. Because each flow-line had two to ten changeovers per day, reducing the changeover time for the work area would greatly improve effectiveness. A workshop for developing quick changeovers using a methodology called Single Minute Exchange of Die (SMED)4 was selected for this task. SMED or quick changeover is covered in section 8.3 of this book.
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