OEE - Overall Equipment Effectiveness and the New Project.

It is about time I am updating this blog again, as I have been managing a project in Austria since April. Since it is an active project, I cannot say who the client is and what he produces. But they are producing something MTO (Make to Order) which is made of metal and which one can find in most buildings. 

I think I should write about a few features of the project in the next few entries - what I am doing here, what I am learning, etc...

The project is about raising efficiency levels in the factory and the good thing about it is, it is a coaching project where I am coaching everyone from key operators to the managing director in efficiency raising techniques. 

We are tasked to do mainly 3 things - implementing OEE, doing some core SMEDs, and installing a "Lean Corner" (daily review meetings, action plans, etc). 

OEE Definition in German

 This poster about the OEE definition is in German but it shows the 3 areas OEE is looking at - Availability (V for Verfügbarkeit), Performance (L for Leistungsgrad) and Quality (Q for Qualität). OEE itself is calculated as a multiplication of all the 3 of them. 

What does one do?

One of the things I ought to write down is an account of what I would typically do on a project. In the last few years I was busy with manufacturing and supply chain projects. When looking at those subjects below I would normally check first if these exist and if, if they are effective and efficient.

ORGANISATION:
The organisation is lean
Frontline supervision exists
Separation between Planning and Operations
Training plans for workers and management are in place
Flexibility charts exist, are up to date and used

PLANNING:
Independent Planning department
Planning tools installed based on production standards
Plans are fixed and adhered to
Production standard hours for each product or product group
Communication link between Planning and Production, Procurement and Sales
Reports to measure planning attainment
Procurement arranges JIT deliveries to meet production plan
Planning reviews and manages stock
Obsolete stock is managed (and prevented from existing), scrap and rework are dealt with
There are regular stock reports with action plans

MANUFACTURING:
The shift system is effective
The factory is clean and cleaning plans exist
Production standard hours are known and used
A production plan is agreed upon and followed regularly
KPIs and reports are sufficient and effectively used, also communicated
Daily Planning and Review Meetings with frontline supervision exist
Weekly Planning and Review Meetings among management exist
An agenda for both meetings is in place, also an Action Plan which is used religiously
There are tools for Active Supervision on the shop floor (such as short interval controls)
Machines are used and capacity is known
Scrap is dealt with and hopefully avoided
There are breakdown registers at each machine which would then go into the daily report
Link between Production, Maintenance, Planning, Logistics
Change over procedures are in place (SMED)

MAINTENANCE:
Plans for regular and preventative maintenance are in place and managed
Maintenance reaction time to breakdowns is quick
There are KPIs which show how much time was used for preventative and breakdown maintenance
Machines have a repair history and are assigned with work orders
There is an effective meeting structure in place within Maintenance and to other departments
Engineers are trained and cross-trained

QUALITY:
Quality procedures are in place
Quality is a strong department and independent
Quality processes are well embedded within the production processes
Sampling is done according to plan, tests are undertaken timely
Regular communication to Production and Planning, also to R&D
Quality is not only a topic for the Q department, but Production should feel the need for quality too
Effective internal review meetings are in place, with agenda and action plans

This was just me thinking out loud. There are of course many more subjects within a usual project. I can only think of "new article development" and "article deletion" which have both a tremendous effect on manufacturing and planning. And the list goes on and on. 

All in all, I know what's going on in any operations department, where to look at and what do to do fix problems and implement an ideal organisation and processes.

Organisation for an Operations Department

I just passed the 1000 visitors threshold on this blog; motivation enough to write something I feel very strongly about - the organisational structure for any operations department. Once I have done that I can talk about KPIs. When I say operations I mean mainly production and manufacturing. 


The biggest ever "no go" is something I tend to find in most production departments - production planning is reporting to the production manager. What a blunder! 


Generally, there is not a single positive result when having this structure in place. The main reason for this is that production managers usually think in terms of fix cost degression, which means, the more material runs through a machine the cheaper the product becomes since fix costs tend to zero out with rising volume. 


The problems with this way of thinking are: 

1. Batch sizes are bigger than the market need, which means rising stock levels, full warehouses, old stock which might get out of date, hence cannot be sold anymore. The cost implication of this is: rising working capital (stock value), rising warehouse costs, rework and obsolescence.  
2. The factory is more likely to run under capacity constraints, as bigger batches bind capacity. This is a cost factor, as widening capacity is linked to further costs (overtime, more working hours, etc).
3. Bound capacity can result in lack or loss of customer satisfaction, as promised time lines for delivery might not be hit. 
4. A blown up organisation which is not reflected by real customer demand. 

So, what's the way out? In order to get away from this "batch size dictatorship" by the production department, a separate planning department must be established which does not report to the production manager but is independent. 

The planning department fixes the production plan and forces production to produce what's really needed. 

I have implemented loads and loads of organisations like these and will explain more in further blog entries. Obviously, I will talk about KPIs for both departments (planning and production), too. It is just too much for a single blog entry as I just realised, and, on a more practical note, as author of this blog, I need a few more topics to write about anyway.  ;-) 

Isle of Man

I have forgotten one project. The company was situated on the Isle of Man and produced kettle switches. It was an extremely peculiar project. The local director, a Welshman, had to sleep on a camping site as his company did not want to pay for a hotel; he also had to pay for his flights home every week or fortnight.

And what I have also learned, one ought to wave good-bye to the ferries leaving the island, otherwise it would bring back luck.

Our hotel, the poshest one in town, and an old Victorian one, was the draftiest place on earth with the worst service ever, and beds with mattrasses hanging through to the floor.

We were always scared on Friday afternoons that there was no storm, as otherwise Manx Airways would not leave the airport and we were caught on the island for the whole weekend. Scary thought.

The project as such was rather basic. It was a production project where we improved machine and labour efficiencies. I was responsible for the training and coaching.

One of the managers was a girl called Sue. She was from Liverpool. I had absolutely no clue whatever she said. I just sat there and happily smiled at her and nodded... ;-)

Otto Bock - Subsidiaries

I already mentioned that Viola was responsible for one subsidiary. The company had another one though, in Rhineland-Palatinate. This was the responsibility of Michaela who was also heavily involved in production and R&D.

She implemented the management system we developed for the headquarter - action corners, shop-floor controls, etc.

Proudfoot in those days went through another merger and bought an Austrian company called Czipin & Partner. Michaela and Tilia were from there. Our project was the only one in the world which combined people from all 3 companies - (original) Proudfoot, IMR and Czipin.

Otto Bock - OTP Installation again

I have one more picture of Viola and thought I can write one more entry about OTP.

Her main fields, apart from the overall OTP process, were logistics and one of the subsidiaries (the location in Thuringia in which they produced wheel chairs).

In logistics, which was mainly warehousing, Viola managed to cut down throughput time and work with an extremely difficult manager who was not easy to deal with. It was an effective combination of charm and professionalism.

In the production subsidiary she implemented the management control system we also installed in the headquarters.

I need to say, Viola was one of my best consultants on the job. She lives in London now, and I should get back in touch at some stage.

Otto Bock - Production (3)

In the end, and as far as I remember, we managed to split planning from production, and also got the disciplines installed. Bernd was hired as production manager and the old one sent into his pension.

What we did not manage was to lay off the surplus workers. But this was due to political reasons.

With the management system we implemented they finally could talk about real issues and take actions accordingly.

On the photo is Edgar and myself. In those days we got a web-cam as the latest thing to have. We were supposed to talk to headquarters with it from then on. We installed it, but in fact, never used it.

Otto Bock - Production (2)

The production director was not overly cooperative, especially when it came to segregating planning from production. He saw that would be a loss of power. I always had the feeling he was "sitting it out", hence waiting till the project was over and then go back to the old ways.

The Otto Bock production process was extremely difficult and I have never ever seen anything like that again. In the usual scenario there are 2 or so production steps (imagine, food and chemical industry with mixing and filling as those 2 steps), but talking artificial limbs, those steps are enormous. There were workshops for wood, metal, and when talking metal, there was a smith, welding, etc, then there was a rubber part (the the fake skin), etc. So, the logistics within production alone was a nightmare for planning. Bear in mind, standards were not defined.

We implemented a management control system, supervisory shop-floor tours, action corners in order to display and discuss daily results and action variances, etc.

On the photo one can see our consultant Bernd who was responsible for production after Thomas left the team.

Otto Bock - Production (1)

The main 2 problems production had were:
i) the production department was also responsible for planning,
ii) SAP standard hours were missing or wrong.

These 2 are the main 2 production problems which I have found in my career so far. Production is like a monster, it is always hungry and wants big portions, hence the batch sizes tend to get bigger and bigger and measurement is only done in kg, as this shows a good productivity. Productivity is a measure of volume/hours.

And talking about SAP standards, whenever SAP is being introduced, standard hours seem to be estimated rather than thoroughly measured. Of course, once one puts estimates in it, the planning function of SAP and any other production planning tool is completely out of order.

On the photo is Edgar. He was part of the production team and dealt with the master schedule and trained consultants and task forces.

Automotive Supplier (3)

So, what did we do on that project and what did I learn?

1st: We tried to implement an SOS programme, which is similar to 5S, but basically only 3S. That did not work out, but I learned that cleanliness in a factory is a must. One cannot even imagine how dirty that factory was. Nearly every machine leaked and oil was everywhere. The ground was as slippery as Lake Constance in winter.

2nd: I learned all about Gate Management in R&D. We did not implement a new process in that department but left a very detailed document of how their development process should be running.

3rd: Efficient and effective daily review meeting. Also not implemented, but we left a detailed paper of what should be done, said, actioned.

4th: Logistics. We streamlined the process and gave advise on organisational development.

One can see, there was a huge barrier to implement our suggestions which we developed with the staff there. So, we left at least all those documents for times when they got their quality issues sorted out.

5th: I learned to write reports and how to "cover up my arse" in front of clients. Those were said to be the basic talents a consultant must have.

Automotive Supplier (2)

This client produced pumps for motors. The project was about to sort out their efficiencies in production. To give out the result of the project in advance, it was a nightmare and we did not achieve the savings. The problem was, they were squeezed by the car manufacturers so much, that they wroked overtime like mad; their biggest problem was quality. They just could not produce the right quality for those pumps and henceforth did not manage the right quantities in time for their customers.

So, efficiency came second, in fact, efficiency did not come at all.

And the other problem was, the project was stipulated by the headoffice and the local plant manager did not care at all. And once staff knows that, they don't care either. The project manager on the project was brandnew in that role, and I was not overly good then either. All of those factors were not in our favour.

Then, the client told us, our project director, who visited once a week or so, smelled strongly of alcohol all the time. And he did. And since he bullied us, we did not know whether we can tell the headoffice in Paris.

From my today's point of view, we were just ovely stupid and made all the basic mistakes one can make. But then, afterwards one is always better.

Automotive Supplier (1)

The next analysis was in a little town in west Germany, about 75 mins away from Düsseldorf airport and I think in the middle of the "Bergisches Land". The town, the factory, the hotel, to name it with one word, it was a dump, a major dump. And the company was a mess, a super major mess.

This was the worst of the 3 business reviews we took part in. I think within that 1st week I probably got about 10 hours of sleep all together. There were not enough consultants on the job, hence the few of us had to do it all.

So yes, the analysis took 2 weeks, and it was converted into a project. I was one of the consultants and responsible for production and logistics. Needless to say, I did not really have any experience in production at all, neither did I in logistics. And all I learned a few years in my ice-cream project was sort of forgotten by then.

I think we have reached the year 2000 now and the project lasted from February/March till late summer.

Machine Utilisation

A last study which I want to share (I have to stop at some stage as there are endless ones to talk about) is a machine utilisation study. This is especially interesting in a manufacturing environment where clients normally want to make sure that machines are running non-stop so that they get a higher return on investment.

The consultant, normally whilst observing a production supervisor on the shopfloor, also has a look at a selected set of machines. He checks every 5 minutes whether those machines are running, not running, broke down, or being repaired. On a pie chart afterwards one can see the utilisation degree on that very day.

Encore!

I started with IMR in 1999 and got a trainee week in Düsseldorf on a project where the client produced soup. It was a production process project. It looked very straight forward. Interesting was, IMR had a different methodology than my old company. The result was the same, savings, but the way towards those savings was much smoother. There was no consultant with a whip and a trainer to soothe the pain, but the consultant did all by himself. The only problem was, formal training was really missing as the coaching skills of consultants who were evaluated against hard cash savings and not people's behaviour change were rather thin.

Well, I knew why they wanted me. That was clear.

Straight after that week there was a company meeting in Paris. All was very posh, something I was not used to from my American company. The French certainly knew how to live.

A few weeks later I was assigned to a couple of business reviews till I finally ended up on a project in Germany.