OEE and lean manufacturing

OEE improvement can help you evolve your lean manufacturing practices and create more value for customers

When companies adopt the lean manufacturing approach toward eliminating waste and focusing on producing value for customers, they face the challenge of verifying the effectiveness of their lean initiatives. Overall Equipment Effectiveness (OEE) is an important metric in accomplishing this.

Lean manufacturing is about customer value

Lean manufacturing and production has been around for more than 50 years. From its initial practice in manufacturing, it quickly moved to services, banking, hospital management, air transport, and other industries. Companies continue to embrace lean thinking and refine it with sophisticated analytics and modern technology.

When you first learn about lean manufacturing, you may think it’s all about efficiencies and saving costs. That is part of it, but, more crucial: lean focuses on the value companies deliver to customers. If a product, a service, a process, or a production facility is not optimized for creating customer value, it produces waste.

If you want to retain your customers and effectively meet their needs, you need to avoid waste. To accomplish this, you have to understand how it comes about.

Lean production principles: Understanding the 7 types of waste

Lean practice traditionally identifies seven basic types of waste – in the activities and concerns related to transport, inventory, motion, waiting, overproduction, over-processing, and production defects. Sometimes, you find resource waste as an additional category.

Some of these wastes take place directly within your production processes and others connect to them upstream or downstream from production.

At the immediate level of production, you find:

• Overproduction: Companies manufacture above demand.
• Over-processing: Bad design in tools, machines, or products results in wasteful activity.
• Defects: Defective production output needs to be identified and understood, so that you can make a correction.

Other types of waste can worsen these production wastes or, in turn, be made more damaging by them:

• Inventory: Companies pile up materials and products in passive inventory that is neither used in production nor shipped to customers.
• Transport: You move products and items that are not required for processing. This waste is closely related to inventory-related waste.
• Waiting: People and workflows pause when machinery is set up for different products, needs to be maintained, or when shifts change.
• Motion: People, vehicles, and equipment walk or move more than necessary for production processing.
• Resources: Poorly planned production or badly functioning equipment waste people’s time, materials and components, power, machine components, and other components of the production process.

Manufacturing companies have tried different approaches to eliminating waste. Very often, they have introduced process optimizations to refocus workers and operations on value creation.

OEE is an effective metric for lean manufacturing

It can be extremely difficult to verify the results of an assignment that is as complex as waste reduction in a production company. Organizations have adopted standard metrics that help them assess the outcomes of their most important activities. One of these is Overall Equipment Effectiveness (OEE). It’s applied to machinery, industrial assets and production lines.

OEE measures percentages of machine uptime, production quality, and throughput performance, and combines them in one overall value. Machine uptime, quality, and throughput touch on the three key wastes of overproduction, over-processing, and defects, as well as the other five we mentioned – especially inventory, waiting, and resources.

• Machine downtime could result from as planned maintenance or setup adjustments or unplanned breakdowns. It could be a consequence of over-processing, forcing people and processes to stop work, and waste resources. Improving machine uptime or availability would help address those wastes.
• Performance losses might result from slower than desirable throughput or short interruptions when the machine or production line idles unproductively. Improving performance levels would also make a difference in avoiding wastes associated with inventory, waiting, transport, motion, and resources.
• Quality could be compromised by creating output that falls outside of customer specifications – production rejects – or by reduced yield, which results in defective output at the start of a production project until it achieves the targeted results.

OEE tracking becomes truly effective with live data from your industrial assets

Production companies work hard to bring their OEE levels within acceptable ranges. They can realize large savings and bottom-line improvements by doing so. Their customers will be happier with the outcome, and people’s skills, materials, and industrial assets will be used more effectively.

However, OEE assessment as a manual data-gathering process is always behind actual production events. When you finally understand what happened with your machinery and production lines last week or yesterday, it may already be too late to avoid a failure or loss from poor performance or quality. On the other hand, inefficient OEE calculations mean you don’t generate the savings and improvements that could be possible – an indirect, but nonetheless real, loss.

A promising alternative to post-fact OEE assessments is real-time, machine condition-based monitoring. You gather live data from connected sensors on your industrial assets and use analytical tools to identify how your OEE and component values are trending this very moment. With today’s technology, putting this in practice can be affordable and simple.

Once you improve OEE, you can avoid generating many types of waste. Your lean manufacturing takes a step forward and you become better at creating value for customers.

5 best practices to improve OEE with condition-based monitoring