When defining project goals for clients, we start with management goals and KPIs. OEE is almost always one of the top three KPIs and often comes from the CFO. The argument for OEE is that machine hour rates are very high because of high acquisition costs, so the machines should always be running.
This seems plausible at first glance, but a closer look proves it to be a fallacy. Machine costs (such as purchase price and depreciation) are fixed costs, and do not change whether a machine is running or not. In addition, management can only affect variable costs in the short and medium term
Most importantly, however, is that material costs make up the largest proportion (50 – 80%) of production costs.
Just-in-time production continues to be the most cost-effective production system:
“Produce only what is needed, only when needed, only in the quantity that is needed.”
This philosophy and method is for both MTS and MTO production in all industrial sectors—for the automotive or food industry and for mechanical/plant engineering, shipbuilding or aerospace technology. OEE-focused management causes push production, longer stagnation times between processes and excessive inventories—especially of semi-finished products. The consequences are:
- High space requirement and inefficient space utilization.
- Higher material and resource costs, including additional personnel costs if production is above demand.
- Lack of transparency in the factory.
- High costs for process control.
- The paradox of the higher the stocks, the more missing parts.
- Lack of cash flow.
All these factors impact production costs negatively.
Customers expect products to be of good quality, reasonably priced and delivered on time. To guarantee on-time delivery, very realistic short and long term production scheduling is essential. Production scheduling must guarantee:
- Finite capacity scheduling for all main and sub-resources—including machines, changeover team, machine operators, fixtures, and others.
- Comprehensive end-to-end scheduling of the entire value chain: no micro-area scheduling that can reduce efficiency.
- Optimal sequence scheduling for synchronizing all parallel and merging processes.
- Avoiding stagnation before bottleneck processes, which set the pace for the entire production area.
- Changeover time minimization (e.g. from higher to lower temperature; from lighter to darker color; from thicker to thinner material or vice versa).
A one-sided focus on OEE is not the solution for increasing efficiency and reducing costs. Rather, optimal and consistent production scheduling for the entire value chain is what it takes to find real efficiency gains in your production.
