Article by Dario Gozzi
Performance monitoring is essential for success. Understanding the main KPIs can give new vigor to the business strategy and improve decision-making processes. To achieve the objectives of efficiency, service level and process quality, the essential KPIs are at least three: OEE index; WIP and waste; Lead time and delays.
OEE Index: one of the fundamental KPIs
OEE (Overall Equipment Effectiveness) is a KPI expressed as a percentage that represents the overall performance of a production resource or a set of resources, whether human or not. The overall performance value is considered in relation to the time in which the resources are available to produce. The OEE index represents the measurement par excellence of manufacturing productivity and is composed of 3 key concepts of production: availability, efficiency and quality.
Availability. This value refers to the availability of the machine in relation to the scheduled production. For example, when a machine stops, it generates a cost. Keeping the production status under control is the solution to avoid generating costs. There are only two possibilities in this case: the machine can be productive or non-productive. To measure its availability, simply compare the established run time with the actual run time of the machine.
Efficiency (or performance). It is established based on the amount of waste produced by using the machinery at a lower speed than the planned (and optimal) one. The efficiency data is obtained by comparing the actual work cycle times with the ideal ones.
Quality. It can happen that during production a product is created that does not fully comply with the expected quality standards. The quality parameter is based precisely on the calculation of the amount of time that has been wasted to create a non-compliant product (totally or partially).
The OEE calculator
The OEE is a KPI that immediately provides an idea of the real state of the production department and helps to understand its potential. The presence of a low percentage means “there are problems”.
It must be said that the OEE indicates if there is a problem, but does not show where it is present. At this point, if the OEE value does not indicate where the problem may be, it can be found in its formula:
OEE = (Te / Td) x (Pr / Pp) x (Pc / Pr)
Td corresponds to the available hours per day
Te reflects the actual operating time from which to subtract the machine downtime
Pp is the number of products that should be produced during the Te time
Pr is the actual number of products produced
Pc refers to the compliant products produced
In the case of a low percentage value, the responsibility will be identified in the three factors that make up the equation (it could be just one, it could be all of them).
WIP and waste: how to evaluate process performance
The WIP (Work In Process or Work In Progress) indicates the number of pieces (or batches) that are being processed and that for some reason are suspended. This value is used to evaluate the system performance, i.e. for the same batches produced, the solution that corresponds to the lowest level of WIP is preferred. In this way, the company can reduce the costs due to the immobilization of raw material and semi-finished product stocks (in the warehouse). Production waste can be determined by various factors, for example incorrect materials, incorrect tolerances, etc. and it is essential to monitor waste to analyze costs and understand their origin.
Lead Time and delays for order monitoring
Lead Time is the time interval necessary to satisfy a customer’s request, i.e. from the receipt of an order to its delivery: the lower this time, the faster and more flexible the company is. Given that it is necessary to have an order planning system, this KPI combined with delay monitoring allows you to evaluate and reschedule the production of orders.
