Overall Equipment Effectiveness. Robert Hansen C.

Figure 1-3 Case Study showing Actual Output and OEE Computed Output in 1997 Correlation is >.9

      TEEP numbers can be used to speculate on the potential capacity of an existing plant. The last increments of reaching total capacity usually have higher unit manufacturing costs especially if labor overtime is involved. The final increments need to be evaluated from business and OEE perspectives. With focused improvement projects for OEE and TEEP which makes every hour of operation more effective, it is quite possible that future capacities with overtime will be manufactured at less than current (before OEE) standard unit costs without overtime.

      The strategy at many companies is to run their factories 24/7 – 24 hours a day, 7 days a week – and to produce the maximum amount of product possible. These companies often can sell everything they can make; they may also be the lowest cost producer. In some cases, the capital investment in equipment and facilities is quite large; and using the asset around the clock maximizes return on investment. In other cases, the process is continuous and, therefore, expensive or difficult to shut down and start up. A 24/7 strategy may also be appropriate for a portion of the year to meet seasonal demands. Understanding the total size of the hidden factory becomes important. For factories that are already running 24/7, the hidden factory represents an opportunity for increased capacity.

      Because TEEP categorizes all events around the clock, it is the metric that should be used when you develop a business case for more capacity or capital expansion. TEEP can be a good indicator of the capacity that is still available within an existing asset. Developing this hidden factory is beneficial because it is cost effective. Other advantages would be the hidden factory could be developed sooner. It also comes with fewer risks than new or modified equipment and systems.

      According to a presentation at the 1999 Society of Maintenance Reliability Professionals conference, Rohm and Haas Corporation determined that developing hidden capacity of existing factories was ten times less expensive than building new capacity. Consider how favorable this savings is to return on assets.

      Even areas that are not yet filled to capacity can benefit significantly by improving the effectiveness of non-production activities. One such benefit is the ability to respond immediately to unexpected increases in production schedules.

      An important operating strategy for all companies is to maintain the balance between production and production capability over both the short and long term. Maintaining this balance helps a company sustain strong net profits on a consistent basis. To maintain this balance between production and production capability, companies must effectively manage required off-line activities; they must not delay or cancel required work. Section 6.1 provides a case study of how managing shutdown and maintenance work provided ten additional production days per year for a plant. Frequently, decisions by management to delay equipment shutdown and maintenance work in favor of generating more product for current orders, can lead to a poor performance that jeopardizes current and future orders.

      OEE ignores planned downtime whereas TEEP brings into focus the necessary activities required when not planning to make product. These activities include equipment shutdowns and planned maintenance stops, experiments, new product development, meetings, training, and planning for staff needs, shift schedules, and manufacturing strategies. TEEP also records all online rework that affects the key equipment.

      Companies must make good business decisions regarding how they allocate time for the various activities that impact the key assets. If all activities are highly effective, then planning and scheduling become straightforward and less reactive. Non-production tasks should take place as scheduled; they should deliver the anticipated results (expected throughput) with high reliability (quality). Opportunities to leverage part of the hidden factory can come from targeted improvements on non-production tasks. Examples include:

      Reduce planned maintenance downtime (see section 6.1 for a case study).

      Use pre-assembled equipment modules to “swap out,” reducing replacement time.

      Execute only statistically designed experiments (minimize guessing).

      Staff work areas appropriately to cover lunches, breaks, week ends, and holidays.

      Train and educate workers off-line.

      Hold multiple meetings to communicate with employees before or after shifts. This avoids work stoppage for full community meetings.

      Improve reliability of delivery.

      Improve transitions to new equipment modifications (see section 9.1).

      When proactive leadership drives improvements in both production and non-production activities, the increased effectiveness from the entire work community improves the bottom line. When the focus is only on production, and non-production activities are ignored or undervalued, poor work practices develop in off-line work that eventually impacts OEE.

       1.7 The Bottom Line: Good Goods at Lowest Cost—Now!

      The dynamics of the world, both internal and external to the factory, generate great uncertainty about what the future will be for any one course of action taken today. This uncertainty, often the source of “analysis paralysis,” can cause corrective actions to be delayed day after day. Because of global competition, every company must strive to be the best it can be at delivering quality goods, on time, at attractive prices, today. Highly effective factories are certainly advantageous. They increase your company’s ability to leverage stronger financial benefits and sustain more favorable positions relative to its competition.

      In many cases, the threat of plant shutdowns and job losses occur before the workforce accepts change. This scenario doesn’t have to happen! Instead, management must determine the true size of the hidden factory and proactively set a course of action that leads the company to world-class numbers.

      Where does this leadership start? It starts at every level of the factory. Promoting change should be like discovering gold and then communicating to the rest of the organization about the potential treasure. Once the organization grasps the