OEE in the Lean News

I saw a post from Michel Baudin, Is OEE a Useful Key Performance Indicator?  I don’t think it is.  A few years back I wrote a blog about OEE and how it is very unclear as to what is really happening in a facility.  It violates nearly every rule as to what is a clear and relevant metric.

Michel’s post started out with a bit from Jeffrey Liker’s post about OEE.  This is the piece I found interesting from Jeffrey Liker:

Ignacio S. Gatell questions whether companies using OEE really understand it, can explain it clearly to their customers, and understand what it means to compare OEE as a KPI across plants. He questions whether even plant managers understand how it is calculated and what it means.

The only good argument for OEE is that at a macro-level in a plant it provides a high level picture of how your equipment is functioning.

I have to agree with Liker’s statement.  OEE is good for a macro level idea of what is happening but you can’t understand what is happening without splitting it up into the components.  Seems like Michel Baudin is thinking the same thing.

It is an overly aggregated and commonly gamed metric that you can only use by breaking it down into its constituent factors; you might as well bypass this step and go straight to the factors.

This is one of those blogs that gives me some of my sanity back.  OEE seems to be so entrenched in “good business practices” it is hard to get people to move away from it.  I get a lot of looks like I am completely crazy when I bring up my point of view.  Thanks, Jeffrey and Michel.  I see I’m not the only one now.

Buying New Equipment? Use What You Got.

During some recent blog reading, I was spurred to think about a past situation when a company I worked for was buying new equipment and how WRONG this decision was.

I had been with the company for about four weeks when I heard about a capital expenditure my director had just approved to buy nine more of a patented machine.  My company owned the patent.  That would give us a total of 99 of these machines.

First question I asked, “Why are we buying more of these machines?”

The response was a typical one, “We they need more capacity because we are meeting the demand.”

I didn’t ask anymore questions at that point.  I decided to go and see for myself.  This was easy because the corporate offices we were in was part of the main manufacturing building.  I had to walk about 100 yards.

During my observations I found two things:

1. The overall OEE of the 90 machines was around 35-40% when it was running.
2. At anytime I never saw more than 50 of the 90 machines running.  This was because we never had enough people to run all the machines.

SAY WHAT?!?!!

After a few hours of direct observation, it was clear there was no understanding of what was really going on.

First, attack changeovers and downtime to get the OEE of the machine up to the 75% range.

Second, why buy more machines if we can’t staff them?!

By my calculations, if the OEE was raised to the 75% range, not only would we not have to buy more machines we could get ride of about 20-25 machines we already had.  That would mean our current staffing would be pretty close to what we needed.

I presented this to my new boss and the director, but by this time it was too late.  The money had been cut and were pretty much crated and on the road to our facility.

This is why companies should question any new capital expenditures.  Companies should be maintaining and using what they have first.  The OEE should be at least 70% if not higher before considering adding more capacity through spending.

Do not make any decisions about capital expenditures until the current state is thoroughly understood.  The best way to do that is to go and see for yourself.

Think Inside the Box

I saw a post last week on the Harvard Business Review blog about thinking inside the box.  The title caught my eye, but when reading the post it wasn’t what I had expected.  The post was about how to find ideas for innovation and improvement from within your company.  Great premise and I completely agree.

My thoughts about thinking inside the box have to do with creating and living by standards.  I work for a company with an extremely large creative staff.  At one time the largest creative staff in the world.  So, standards were frowned upon because it was thought to “box in” the creative talent in their designs.

As lean started to be implemented throughout the company, standardized work and product standards were an uphill battle.  After some discussion, we were able to get some standards in place.

The most interesting part has been the reaction from the creative staffs.  After working within the standards, they have said they have become more creative.

Thinking inside the box (or within the standards) has freed them from thinking about certain aspects of product design and allowed them to be creative within the space given to them.

This is a concept that is commonly misunderstood with lean.  Standardized work and product standards are not there to hamper creativity or take the thinking away from the work.  They are there to free up the peoples minds to think about the work in new ways.  Not think about the mundane aspects of the work.

Don’t fight standardized work, use to become more creative.

Inverse Inventory Effect

Conventional thinking says, “The more inventory there is on-hand the better the serviceability rating and on-time delivery rate.”

Have you heard that one before?

Lean thinking says the inverse is true.  “The lower the inventory on-hand the better the serviceability rating and on-time delivery rate.”

How can this be?

I have read studies and heard others talk about the lean perspective.  Even more compelling, I have implemented and witnessed the lean thinking perspective be proven right time and time again.

Traditional thinking of more inventory is better seems to make sense, but what happens is the inventory is never of the right product needed at that time.  The economic scales of mass production says to produce a lot of the product when running it to minimize setup and overhead costs.  Following this thinking means the company does not switch over and start to produce Product B early enough and is out of stock on Product B when ordered but there is an abundance of Product A in the warehouse.

Lean thinking produces just the amount of each product needed so when it is ordered there is enough and overall there is less inventory.

I watched as assembly line employees got upset because we took 80% of their component inventory away from the assembly line storage.  The assemblers thought they would never have enough product to keep the line running.  We explained they would have only 2 hours of component stock at the line and the line would never shut down.  By the end of the third day, the assemblers were happy with the new inventory system because they had more space, but more importantly they had the right components at the right time.  They reduced the time the line was down waiting on components by 90% compared to when they had a ton of inventory at their finger tips.  This occurred one-by-one across all five assembly lines in almost exactly they same manner.

Less inventory does deliver better serviceability and on-time delivery rating.

This does not mean just go out and reduced the inventory without a plan just to reduce it.  It is being mindful of what is needed, when and how to get it there on-time.  It is easier to see what is there when there is less.

What is your experience with reducing inventory?

Turning the Question Back on Ourselves

Part of the improvement process is to ask, “What problems, issues or opportunities are there?”

This seems like a very good question to ask.  A question that would get to the root of what can be done to improve.  People start to give answer after answer about problems and issues.  Notes are taken.  Work is assigned.

Not  until recently have I taken the time to look at the responses given to the question above.  Closer examination shows a large portion of the responses are pointing the finger outwardly.  We could do that if leadership does this.  We could have lower costs if our customers would let us design our relationship.  We could have a faster changeover if management would let us buy the newest equipment.

These are TRAPS!  Traps that I have fallen into myself. Traps that lead us to try and justify new equipment that may not be needed or spend energy convincing leadership or customers to do something different so we can stay the same.  In the end, the improvement isn’t made or it is not nearly as significant as it could have been.

We have to turn the question around on ourselves.  Ask what can we do to help leadership help us?  What can we do within the parameters of our relationship with the customer and still deliver on their needs?  How can we get the same effect of the new equipment without buying the new equipment?

We can’t always point the finger outward.  We have to point the finger inward and try everything we can to get where we want to go.  When we do this well, we get greater improvement and others will respect us more for solving the issue.

More Outsourcing Coming Back to U.S.

A couple of weeks ago there was an article in the Hartford Business Journal talking about more offshore outsourcing that was returning to the U.S.  The article sums up why companies are returning the best:

The argument goes: when total cost is considered, production is cheaper locally; there is less concern about quality and intellectual property theft when dealing with a domestic company; and with new lean practices, more streamlined production lowers domestic costs.

“Company after company has learned by keeping things closer together, that leads to a stronger overall value chain,” said John Shook, chairman and CEO of the Lean Enterprise Institute, based in Cambridge, Mass. “I see a lot of companies bringing things back.”

This is a hard lesson for companies to learn.  As mad as I would like to get over companies making the choice to chase cheap labor, I have to remind myself they were playing with the rules as they understood them.  Ten plus years ago, value stream accounting was not known.  The only system most people knew was the standard costing system.  This view did not take into account the quality and lead time aspects of chasing cheap labor.

Value Stream accounting is now more widely known, thanks to efforts like the Lean Accounting Summit.  If companies continue to chase the cheap labor costs, I really don’t have any sympathy for them.  The article lists other reasons Arcor sees offshoring as not a good idea:

Arcor has advantages over offshore companies when competing for local work, Francoeur said. Particularly when a client is developing a new product, there’s a lot of back and forth between Arcor and the customer, which would be slowed significantly if the client had to wait days for a project to be shipped from an offshore company.

New products tend to be more sensitive to copying and intellectual property concerns, and clients trust local companies more when dealing with sensitive information, Francoeur said.

With more and more companies learning total cost is better the more local you are to your market, no matter where in the world you are located, hopefully, it will be come the norm to stay local. We have to continue to talk about total costs and keep pushing the topic with leaders in our companies.  We can use the companies that left and came back as examples and eventually we will get there

Using Reviews to Highlight Your Talents

It’s that time of year when employers have their managers do mid-year performance reviews.  The discussion usually centers around what work has been accomplished so far this year, what are the plans for the second half of the year, and have any of the priorities changed.

One question asked on our mid-year review form is, “Name one to three strengths and how we can use them better.”

I hated this question, because what I think are my strengths, I have others tell I need improve on.  For example, I usually don’t have an issue speaking my mind and giving my point of view.  I think that is a good thing.  Others have an issue with it.

Everything I came up with sounded so generic.  It didn’t feel like it was actionable or added any value.

After reading Now, Discover Your Strengths I realized I could use this as an opportunity to help my manager understand my talents more fully.  I used some examples from the Talent Assessment to show how my natural talents could be utilized in the context of my work.

I felt like the pressure of coming up with something generic and non-action driven was off of me.  It was an opportunity to give my manager a better insight into what makes me, me and fulfill the requirements for my mid-year review at the same time.

Review time always seems to be a dreaded time.  Use the time to give your manager more insights to your talents and help them see ways to utilize you in an expanded capacity.

Asking the Right Question to Create Innovation

This is part of my reflections from the OpsInsight Forum in Boston.

One of the breakout sessions that I attended at the OpsInsight Forum focused on innovation.  David Silverstein from BMGI led a great discussion on how to ask a different question in order to stir new innovation.

(Side note: He had innovation in his presentation…be didn’t use any slides.  It was a per discussion.  Almost like you ran into him in the hall.  Very well done.)

Here is the simple question that David presented to stir the creative juices: “What are wee hiring the product/service to do?”

David then gave a couple of examples to drive home his point.

Example #1:

In the 1880s, candle makers wanted to be more innovative.  If they wanted to improve, what were they working on?  Making candles that don’t drip?  Scented?  Candles that burned longer?  Burned cleaner?  Easier production processes?

Now ask the question, “What are we hiring the candle to do?”

Answer: Create light.

Asking that question, allowed others to invent the light bulb.  Unfortunately, the candle makers were not part of that innovation and their business was significantly effected.  Had the candle makers asked that question, maybe they would have invented the light bulb.

Example #2

Today if you go to a lawn mower producer and ask about what innovations they have you will get different responses.  Some of them might be: Developing a cleaner fuel engine, self-guided mowers, or mowers that run like the Roomba vacuum.

What if the lawn mower producers ask the question, “What are we hiring the lawn mower to do?”

Answer: Cut the grass because it keeps growing and we want our lawns to look nice.

So what if the grass didn’t grow?  There would be no need use a lawn mower and our lawns would still look great.  Well, scientist have already designed no mow grass.  (Links to articles here and here.)

The candle makers and lawn mower producers are focused on the product and not what the product is hired to do.  In one case, candle makers became a rare breed.  For lawn mower producers it is a matter of time.

The other significant thought David talked about was connecting the dots to create something innovative.  He referenced the phrase, “Connect the dots.”  When you connect the dots you have thought of something in a new or innovative way.  The more dots you have in your head the easier it will be to connect dots.  Dots in our head is information and learning.  If we continue to keep learning, it will be easier for us to eventually connect the dots.

The best time to connect the dots is between 10pm and 6am.  During our sleep.  At that time, our brain is accessing everything we have learned, read, been taught over the years trying to connect dots.  The brainstorming session is just the extraction of those connections you have already made.  That is why so many times when we are relaxing or sleeping “something just hits us.”

It was a very interesting presentation/discussion around innovation.  A new question to drive innovation.

Human Resource’s Role in Lean

I am a firmly believe the Human Resource department needs to be a leader  in the transformation of  the culture during a lean implementation.  HR can and should play a role in helping with training of lean tools and concepts as well as the cross training of employees so the staff is more flexible.  HR can help with people having trouble transforming from a traditional culture to a lean culture.

A common  way to understand lean in is through two pillars: Continuous Improvement and Respect for People.  In my opinion, the greatest impact the HR organization can have on a lean transformation is the education on what respect for people really means and looks like.

Lean is about people and gaining everyone’s engagement in continuous improvement.  One reason an organization would like everyone engaged is to show respect for them.  It shows they value their brains and hearts and don’t look at them as solely hands and feet.

So if lean is about people, who better to educate and train on skills and behaviors to show the respect for people principle than HR?

HR can help with personality assessments, like the Myers-Briggs Type Indicator.  This allows people to get a better understanding of how the people they work with think.  When the group understands each other they can show respect for how one another operates and thinks.

HR can also train the group in skills on how to have open and honest communication based on your relationship with a person or group of people.

HR can also give training on the Woodstone Principles that are aligned with lean thinking.  The principles are:

1. You are accountable for your performance
2. You are accountable for the performance of your stake holders
3. Subordinate your agenda for the betterment of the company

Finally, HR can help by educating on how to include people. When people feel included in the business they are more likely to understand and engage in the improvement of the business.

Lets respect Human Resources and ask them to use their knowledge in people to help the organization become better at showing respect for people.

Production Sacrificed in the Name of Changeovers

Is it ever OK to value the number of changeovers you do in a day over your production numbers?  I say no.

I was with a customer recently that did just this.  The customer has done a great job of setting production goals for a press per shift.  On the production board, they write the production numbers in green if the meet or exceed the goal and in red if they do not.

Normally, this is great.  The customer is making the problem visible and easy to see.  Then I noticed that a number below the goal was written in green.  So, I asked about it.  The customer replied the operator did a lot of changeovers that day so we give them green if they do so many changeovers but don’t hit the production goal because the changeovers eat up a lot of their time.

The managers were giving a built in excuse for the operators to not meet the production goal.  If the goal was set with capability and meeting customer demand, then why is it alright to produce anything less than the goal?  This tells me they are not putting a big enough emphasis on changeover reduction.

The question should be changed to understand what is the changeover time needed.  If the largest number of changeovers I need to do in a shift is X and I am accounting for time T to do the changeovers, then my changeover time target should equal T/X.  Example: I allow 1 hour for changeovers and I need to be able to handle 10 changeovers in a day, then my changeover time target should be (60 min) / (10 changeovers) or 6 min/changeover.

If my current changeover time is more than 6 minutes, then I should be doing some sort of SMED (Single Minute Exchange of Die) activity to get the time to 6 minutes or less.

The number of changeovers can never be an excuse for why it is ok not to hit a production goal.  The mindset should be to continue to reduce the changeover time and ideally eliminate the changeover time so the production goals can be met.