Grade school math teachers are fond of saying that numbers can’t lie. Maybe so, but they can be misleading.
In the case of manufacturing, it is a common standard to measure plant productivity by looking at Overall Equipment Effectiveness or OEE. It is measured by looking at how effective a plant is running in the areas of availability, performance and quality. However, holding OEE as the primary metric of success for a plant can be problematic and even short sighted.
Here is a case in point. On one plant’s floor we have a 70% OEE number. On another plant floor we have a “world-class” rating of 90%. It would seem to be an open and shut case that the 90% plant floor is more effective. A closer look shows that just isn’t always the case. Let me explain further.
Aiming for a Target
Pressure is strong from Plant B management to hit a world-class target of 85% or 90% OEE. Achieving that high number is the one, key goal for that plant. Bonuses and incentives have been tied to hitting or surpassing that target, investors or board members are counting on a high number, and plant management careers depend on it. The result is an infusion of stress and worry among workers and managers, which increases and compounds the stress.
The 90% Plant B should have seen the problem. Further analysis revealed that the site spent countless hours analyzing and justifying what things should impact their OEE calculation. In order to keep the percentage high, Plant management decided that meetings, changeovers, manpower shortages and total productive maintenance (TPM) activities should all be treated as non-production time. At the same time, they decided to use demonstrated cycle times to calculate OEE instead of using optimal cycle times. This artificially inflated OEE even further.
You can see the trap. They justified the high number by ignoring vital plant processes and activities. And instead of solving problems along the way, they ignored them in the name of better final numbers. The problems were allowed to fester and grow.
Plant A reporting 70% OEE, on the other hand, has a different outlook. This company’s executives understand the key to true success is surfacing and focusing on the problems as they arise in real time. They set goals based on improvement and the number of problems solved. In their example, an improvement of 10 percentage points in OEE was realized over the past year, moving up their OEE from 60% to 70%. Incentives at Plant A are based on the number of problems solved and improvement percentage points, period. The final number isn’t the final goal; improvement is.
Unlike at Plant B, Plant A is taking an aggressive approach in how they achieve improvement. They look at every second of time that the line or process is not running as a lost opportunity. This includes meetings, training, setups, changeover, preventative maintenance, etc. Plant A understands that stopping the line for a team meeting or preventative maintenance is lost time for production. Workers focus on improvements to help decrease the time required to perform preventive maintenance. They conduct efficient and effective team meetings in a timely manner.
By structuring bonuses and incentives more appropriately to surfacing and solving problems, Plant A workers are always seeking to expose weaknesses in the system or suggesting ways to improve the system.
Shifting the Focus to Fixing Problems
Over many years, OEE has become a key metric for measuring productivity improvement for manufacturers. By setting OEE as the one success metric, OEE numbers are elevated to unreasonable and artificial heights. Manufacturers are trying to hit “world-class” percentage numbers at the expense of overall plant efficiency. In trying to look perfect, they’re focused only on what is working, and often ignoring areas that need improvement.
This leads to a circle of inefficiencies. The pressure to reach high, ever-improving OEE numbers motivates plant managers and workers to over-inflate efficiency results or report only positive data. However, when workers are motivated only to reach high OEE percentages, they are not necessarily improving operations. They might tend to justify not properly reporting all production stoppages, or discount line downtime. There’s no accountability for solving problems.
Instead, manufacturers need to shift focus to finding problems quickly and solving them. By focusing on improvement, you are empowering workers to look for inefficiencies in production and make corrections, instead of asking them to ignore problems in the name of a false narrative about high OEE.
Given a mindset of constantly seeking to improve, plant management can maintain a focus on accuracy and transparency, which leads to more reliable data. That improved data allows managers to truly solve problems by reducing downtime, scheduling preventative maintenance, and justifying needed capital expenditures.
It’s counterintuitive, but true. Focusing on fixing processes, not just posting numbers, creates a culture of continuous improvement that brings lasting change to the manufacturing floor. When management can see the difference and communicate that difference to its employees, a plant floor can celebrate a culture in which accuracy and truth in their data is encouraged and expected. Instead of a vicious circle of trimming data to meet a pre-determined metric, plants have a virtuous circle where accuracy and truth lead to constant refinement where both the plant and its employees achieve accelerated improvement, more efficiency and, ultimately, greater success.
Bob Argyle is Leading2Lean’s Chief Customer Officer (CCO), and builds partnerships with manufacturers where best practices can be leveraged to help them achieve greater and greater success. Bob brings twenty-four years of manufacturing experience in the automotive industry, and was trained in the U.S. and Japan on the philosophies and implementation of the Toyota Production System (TPS). www.leading2lean.com