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Taking aim at OEE

Is your company on-target with your OEE program? If not, you may want to reconsider.

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With times as lean as they are, isn’t it also time your packaging production lines were lean, too? That’s lean as in Lean Manufacturing or Six Sigma or Overall Equipment Efficiency (OEE) or other production standards of performance. Although for some companies these terms are old hat, and others may know what OEE is, many don’t know how to proceed for their operations.

First of all, what is it? OEE is easier to define by what it isn’t. Surprisingly, it isn’t necessarily about finding bottlenecks, nor is it about labor reductions in production nor is it about cost cutting. It’s about finding constraints. Drags on OEE include scrap, rework, downtime, and lower-than-planned output (see sidebar).

OEE expert Paul Zepf of Zarpac Inc. ( says “OEE is a tool, a window into your operations to help you make good business decisions to make more money.”

“OEE is about accountability at the individual station,” adds Dennis Cocco, founder and chief product strategist for OEE software provider Activplant ( “It can become an eye opener because you can’t hide behind the data.”

Although OEE can be assessed manually, for any modern or high-speed operations, the best assessment tool is software that uses line data from programmable logic controllers. The software can crunch the numbers and graphically simplify finding the areas of concern. It’s one thing to capture the data, it’s another to make sense of it, and yet another thing to act upon it.

It’s said that you can’t control something unless you can measure it, and OEE formulae come in various plays on a common theme. One equation favored by Zepf is this: OEE = Output divided by the scheduled time multiplied by the normal rate. The answer, in percent, basically looks at what should have been made (or packaged) versus what actually was.

OEE can quickly get more complex as companies drill down further and define it for their particular applications. Take the case of a global pharmaceutical company that developed a 20+ page OEE document to ensure personnel among different plants stay literally on the same page. Why so complicated? It chose not to be identified, but our source there answers the question this way: “What exactly is the definition of a work day here? What specifically is scheduled downtime? We have internal debate regarding, for example, planned downtime for a scheduled meeting, with the argument that that time shouldn’t be used in OEE calculations, those kind of discussions. Yet we had to have a standardized common baseline. I can’t overstate the importance of that to those looking at OEE or you’ll be comparing apples to oranges.”

Thus the use of software provides key benefits, including these:

• It automates and can simplify the data collection process.
• It provides precise, consistent data.
• It removes the emotion or bias associated with data collection.
• It helps with early detection of problems through trending.

OEE numbers for packaging ops

According to the experts, a typical initial OEE for a packaging operation is in the 50-60% OEE range. “I have seen packaging operations as low as 25 percent and high as 80 percent for bottling lines,” says Cocco, “but 50 to 60 percent is pretty typical. It’s rare to see a company upwards of 65 percent.”

Of companies including Tropicana and Procter & Gamble that have embraced OEE, one thing they have in common is that they are all successful companies. Coincidence? Cocco doesn’t think so. He points to the automotive industry as proof, where operations with high OEE are thriving and those with low OEE are failing or shuttered.

OEE tends to attract the most attention during economic downturns, as the U.S. is currently experiencing. “That’s when plant personnel begin to ‘clean up’ the operations to make them more efficient,” Zepf says. “Then in good times they crank up production to blow away the competition.”

Cocco agrees with Zepf’s observation that attention to OEE rises as the economy falls, but that cyclical nature is changing. “OEE is getting to be more a must-have than a may-have,” says Cocco. “With competitive pressures coming from all directions, everyone must start to think about efficiencies. No longer can operations get away with being inefficient anymore.”

Activplant’s software has had good penetration into automotive operations, an industry where OEE has been used for years, Cocco says. “Outside of automotive, virtually everyone else is using our product on the packaging side of their business,” he adds.

Once a company has a grasp of its OEE, it can look to improve it. The problem is where do you start?  One surprising fact is that the first, major gains in OEE for a packaging production line can largely be accomplished without touching machinery. “I’ve found in most cases it needs to start with management,” says Zepf, explaining that management determines scheduling, asset usage, lunches, breaks and meetings.  “Everyone goes to lunch and production grinds to a halt, and later they wonder why they lose a lot of productivity.”

Cocco agrees wholeheartedly. “The first 15 percent improvements come from process and people issues, not equipment issues,” asserts Cocco. “You can get those without lifting a wrench. It’s all about properly utilizing very capable equipment.”

Zepf points out that for OEE to gain traction at a company, the only way to gain the inertia needed to make things happen is from the top. There also needs to be an OEE project champion, adds Cocco. “That’s who drives the actual implementation,” he says. “It could be an engineer or a continuous-improvement leader or a production supervisor. There needs to be someone who takes ownership.”

Misdirected OEE fixes

However, it’s been said that while data is helpful and may even be crucial, obtaining an OEE number is not nearly as important as knowing what to change on your packaging lines. Or knowing what not to change; that’s because managers can unproductively look in the wrong direction trying to increase OEE, according to Zepf. One of those is going after labor savings. “There is nothing about labor in OEE,” Zepf asserts. “OEE makes you look at how effective and efficient the process is. The thinking should be that once you get your OEE around 80 percent and you still have people standing idle, then you can look at labor.” He tells of one company trying to eliminate a $50,000 position with benefits, yet at the same time was experiencing scrap and rework costs in seven figures.

Another misdirected strategy is to chase after cost-saving improvements that may backfire due to OEE results. “A company can try to shave its packaging materials costs one-tenth of a cent each to save a half-million dollars a year, but then they have more problems with the machinery and it has to be slowed to run the new materials,” Zepf explains. On the other hand, the pharmaceutical operation mentioned earlier improved the quality of its packaging materials to reduce machinery issues and saw its OEE increase. “We saw that improvements in the quality of the raw materials had an impact on OEE as well,” says our source at this pharma manufacturer.

Another aspect that management traditionally focuses on is bottlenecks, and again that may not be where the OEE problem lies. “Looking for bottlenecks is an oversimplification of the OEE process,” notes our pharmaceutical contact. Another decoy is that an excessive amount of attention is often paid to a line’s most expensive piece of equipment, such as the filler. That equipment may not be—and likely isn’t—where the major constraints may be, according to Zepf.
While major consumer package goods companies like P&G have taken the lead on OEE, Zepf believes that the best opportunity for OEE is with smaller and medium-sized companies. “Those companies need a foundation on OEE in order to grow,” he says. “Although staff at such companies are usually too busy ‘fighting fires’ to tackle OEE, that’s a clear indication that OEE will be a useful tool to help them gain control of their operations and solve their problems.

 “I’m amazed at how many people collect numbers and data, but then never do anything about it. You have to recognize what you have and then physically go out and change something. Target one thing and then change it and see what the results are. Then go on to the next problem, and solve them one at a time.”

Cocco concurs. “There are a thousand problems in a plant. If you tackle one constraint a week, you will see remarkable improvements.”

How remarkable? Zepf says that if a company understands OEE and its own operations, is “psychologically ready” to address change, and makes good decisions, “it’s not difficult to gain 10 points within about six months.”

The pharma company mentioned earlier, which has formalized its OEE program over the past six years, has made dramatic gains in the OEE of its operations. Those were found through scheduling and changeover procedures as well as using higher quality packaging materials to reduce machinery constraints, he says. Specifically, it has improved its OEE from well below 40% to circa 50%. “And we are just starting to discover the importance of our packaging operations,” he says. “It’s a continual education.”

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