Calculating the OEE of the whole factory

Ask the expert, Source : TheManufacturer.com
Published : 24 Sep 2009 10:51

Question: How can I calculate the OEE for the whole factory, taking in consideration that the production line consists of many separate stations feeding each other, some of them are M/Cs and others are manual assembly lines? So should we calc OEE for all stations separately and put factor for each station or only calc OEE for M/Cs and for assembly line calc efficiency?

OEE should be viewed as a Diagnostic Tool rather than a reporting or benchmarking tool for a business or for a process. The reason for this is that there are often incomparable factors between lines, notably the level of complexity that exists or the level of automation or the level of recent investments etc. These often make reporting and comparing lines within a business not entirely value add as it will lead to many repetitive internal discussions – you may have already had these. I think this is probably your dilemma given you have manual lines (where for OEE purposes only Productivity and Quality considerations are really involved) and Machines (where different type of machines and product families can affect the OEE factors – a fully automated/dedicated machine to one product with no changeovers and little or no manual intervention will probably only be interested in the Availability and the Quality). You can see how the different scenarios affect not how you calculate OEE but how you interpret and use OEE.

When OEE is used as a diagnostic tool then the approach is different. Here we would look for the constraints within a process – sometime this is know but sometimes it is not known. As with Goldratt in The Goal, if we do not really know what the constraint is the ‘convict’ one – i.e. make a claim to what reasonably could be a constraint and begin to work with it. Now the reason we are interested in constraints is that every minute lost is never recovered, every constraint must run under two simple principles 1. Never Starve a Constraint 2. Never Block a Constraint. Therefore if we want our process to truly flow then we need to look at the constraints – the strategy we are adopting, the performance and how we can liberate more beneficial capacity from them. This is where we must make sure we understand what beneficial capacity means rather than just capacity – capacity is the output that can be produced whereas beneficial capacity is the output that can be sold. There is no point is being able to produce more if you cannot sell more – it will only become stock (a Waste in this instance!).

So I would suggest you find the constraints and apply OEE. The OEE is applied in the same way for a constraint and a non constraint or a manual process versus a fully automated process – the only difference is how you use the analysis. Like I said previously a constraint which is a fully automated process dedicated to one product then the OEE challenge is around optimising Availability and Quality. However a process which is fully manual then the OEE challenge is around optimising Productivity and Quality.

This, I hope, helps in questioning the fundamental approach for OEE in your business – this is where you start. Is it to diagnose and improve or is it to benchmark and report?

Question: Regrading OEE in the Quality term, we usually calculate Quality with reference to the Right first time figures, although we have rework for some parts, but such rework is done offline, how can that be closed and included in the integrated calculations for the line?

This is a common approach to show the simple relationship between the output and the input. I would suggest this is the approach that is taken initially when using OEE and then the analysis of Availability x Productivity x Quality (OEE) will tell you which one of these factors is hurting the business most. If you discover that the quality rate is the biggest issue then you will need to start using Rolled Throughout put Yield (RTY) rather than First Time Yield (FTY). In RTY the data collection process will track the scrap and rework (online and offline) at each process step – this is crucial if you want the OEE diagnostic tool to resolve a quality issue. As RTY is a difficult data collection exercise, when the process is complete, the analysis complete and the improvement actions taken and verified then you can revert to the FTY method again. So you see we are using different tools that give you different levels of granularity to either collect and diagnose versus collect and improve.

What do you mean by "OEE should be viewed as a Diagnostic Tool rather than a reporting or benchmarking tool" did you mean that we shouldn't set it as a measure in our Score Card or be important measure in our KPI?

I think you should ask how your business wants to use OEE:-

1. As a diagnostic tool. If so then use OEE on the constraints of the business which if the OEE improved the capacity of this constraint then you could these products. When this is applied to manual lines then most common issue found using OEE will be Productivity and Quality. When it is applied to fully automatic lines then the most common issue found using OEE will be Availability and Quality. When it is applied on Assembly Lines (which can be a mix of manual and automatic machines) then you may wish to apply it on the constraint in different sections on the Assembly Line. For example and engine for a car is built from a Short Block Assembly then the Cylinder Header Assembly meets the Short Block Assembly then the Front End System Assembly is added (in very simple terms). Therefore using OEE on each of the 3 areas would be valuable.

2. As a Reporting / Benchmarking tool. If so then you must be very careful about comparing the performance of a line which has perhaps only 5 stations with a line which perhaps has 25 stations. The level of process complexity will affect the OEE performance. It is very hard to prevent businesses adding OEE as a KPI. Yet be very sensitive to how this is interpreted and used. You cannot compare Apples with Oranges – they are different.

3. For Quality to get a true reflection of quality you must include reworks. Reworks done either on or off line should be included. The better measure for this would Rolled Throughput Yield (RTY) as FTY ignores reworks and just looks at scrap. I would suggest that applying RTY is done if the Quality component of your OEE analysis is the major source of concern. Then apply RTY – diagnose the cause – fix the cause – verify the cause is fixed and then return to an FTY type measure.

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