Here is an interesting example. Look at the following OEE data for two sequentia

Question

Here is an interesting example. Look at the following OEE data for two sequential weeks.

Question - OEE is improving. Great job! Or is it? Dig a little deeper and the picture is less clear. Most companies would not want to increase Availability by 5.0% at the expense of decreasing Quality by 4.5%.Provide your answer to this question with an explanation as to why i.e a rationale.

Here is additional data you will need to answer this question, as recorded for the first shift:

Calculate the OEE. (4 points)

Hint: OEE is calculated by multiplying the three OEE factors.

Formula: Availability × Performance × Quality

First Calculate the Availability, then Performance and then Quality

Availability

Availability is the first of the three OEE factors to be calculated. It accounts for when the process is not running (both Unplanned Stops and Planned Stops).
Formula: Run Time / Planned Production Time

Planned Production Time

The OEE calculation begins with Planned Production Time. So first, exclude any Shift time, where there is no intention of running production (typically breaks)

Formula: Shift Length - Breaks

Run Time

The next step is to calculate the amount of time that production was actually running (was not stopped). Remember that Stop Time should include both Unplanned Stops (e.g., Breakdowns) or Planned Stops (e.g., Changeovers). Both provide opportunities for improvement.

Formula: Planned Production Time Stop Time

Performance

Performance is the second of the three OEE factors to be calculated. It accounts for when the process is running slower than its theoretical top speed (both Small Stops and Slow Cycles).

Formula: (Ideal Cycle Time × Total Count) / Run Time

Performance can also be calculated based on Ideal Run Rate. The equivalent Ideal Run Rate in our example is 60 parts per minute.
Formula: (Total Count / Run Time) / Ideal Run Rate

Quality

Quality is the third of the three OEE factors to be calculated. It accounts for manufactured parts that do not meet quality standards.
Formula: Good Count / Total Count

Good Count

If you do not directly track Good Count, it also needs to be calculated.

Formula: Total Count Reject Count

Include your answer and calculations for each of the above parts of the equation.

OEE Factor Week 1 Week 2 OEE 85.1% 85.7% Availability 90.0% 95.0% Performance 95.0% 95.0% Quality 99.5% 95.0%

Explanation / Answer

OEE calculation for the first shift data:

Let us calculate all the parameters which will be required for calculating OEE.

Planned Production Time= Shift Length - Breaks = 480 - (2*15) - 30 = 420 minutes

Run Time = Planned Production Time Stop Time = Planned Production Time Down Time = 420 - 47 = 373 minutes

Availibility = run time/planned prouction time = 373/420 = 88.8095%

Performance = (Ideal Cycle Time × Total Count) / Run Time = (1second x 19271)/ 373 minutes = (1second x 19271)/ (373 x 60) = 86.108%

Quality = Good Count / Total Count = (19271-423)/19271 = 97.805%

OEE = Availibility x Performance x Quality = (88.8095%) x (86.108%) x (97.805%) = 74.794%

Now let us answer why increasing the availibility at the expense of quality is not a good idea:

Increasing the availibility of equipemnts/machinery will increase the production output. But this increase in production output would mean an increase in the input raw material. Any production process requires some input raw material which is processed by the machines to give the final output. Let us assume that 1 unit of raw material is required to prouce 1 unit of product. And let us assume that we are proucing 100 units of product by consuming 100 unit of raw material. Assume Quality accuracy is 100%. Which means by consuming 100units of raw material we are producing 100 units of good product.

When the availibility of equipments increases by 5%, then the production will increase to 105 units and the consumption of raw materials will be 105 units. Now let us say that quality accuracy is around 96%. Which means that out of 105 units only 101 units product is good and rest is rejected. Which further means that we produced 101 units of good product by consuming 105 units of raw material.

If we compare the two statements highlighted in bold, it is clear that if we compromise on quality the rejection rate goes up and raw material watage increases. Which means the raw material cost per unit of good output increases.

Hence there has to be a trade-off between increase in availibility and decrease in quality. If we compromis on quality too much, then for a minute increase in production, the raw material consumption increase significantly.

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