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senior management point of view, they want one number that identifies how much
opportunity there is to release under utilised capacity in the supply chain. They have
the ability to rationalise manufacturing capacity and change shift patterns such that
the assets are more highly utilised. They are not bothered about whether it is poor
quality or poor uptime that is the root cause, they just know they have an opportunity.
In this instance, a more appropriate measure may be Total Effectiveness Equipment
Performance (TEEP)1
Conversely, a production supervisor has no ability to impact on the loading of the
plant (they must meet demand at the pull of the customer) but they very much want to
know what is hammering their OEE; is it poor quality or poor up time? So as usual it
isnt a case of one size fits all. Measures should be fit for purpose. Unfortunately
this may result in a disconnect between plant and supply chain measures.
It should be noted that the calculation is however the same, all that differs is the figure
used for available time.
What about office environments?
Let us now think about a typical office environment and, more specifically, an office
process.
For the sake of comparison, consider an office responsible for some transactional
process such as invoice processing. One can search the office environment for
equipment that is used for this process and apply the OEE principles. e.g. the Fax
machine, the photocopier, the computer, the calculator or the stapler. Very soon
however one will realise that the rate limiting step, the highest cost element and the
biggest threat to quality is not the equipment, but the staff carrying out the processing.
So what can be learnt from the OEE approach? A simple comparison of what is
driving effectiveness in the two scenarios highlights the similarities and differences.
Table 1
Equipment
Employees
Availability
Run time
Scheduled run time
Hours at workstation
Planned hours at workstation
Performance rate
Quality rate
It is evident that the approach adapted to Overall Employee Effectiveness has the
same merits as with equipment effectiveness. If one can optimise the time the
1
employee is working, the rate they work at, and the first time quality, this will drive
effectiveness and hence profitability.
Whats new?
I suspect that some readers are considering moving on now, the above factors have
long been considered by employers as key drivers of profitability and they have
measures in place. If this is the case, let me ask some questions:
Why, when you call a call centre do you get treated brusquely? (or worse still have the
phone picked up and then immediately put down again?)
Why do legal documents take so long to be drawn up and at such expense?
Why is temporary labour used so much in transaction centres?
I believe the answer lies in the independent way in which employers use a variety of
measures to drive performance in these environments. If a composite measure were
used, incorporating the factors shown above, it would be easier to optimise business
performance.
In the examples above it is clear that some call centres focus on the number of calls
processed at the expense of quality. Similarly, most legal practices I have come across
focus very heavily on quality (after all they will be liable for contract errors) but pay
little attention to standard procedures or indeed hours of business! Transaction
centres accept a high degree of absenteeism due to their focus on output and
correctness of transactions.
Measurement systems
How can one measure these different elements?
At first glance it might seem that absentee figures should give the first number.
However the fact that they have clocked in does not necessarily mean they are on
station. Typical absenteeism figures in the UK are about 3.5%. (Present at work
96.5%) However, making allowance for paid breaks, coffee and comfort breaks, a
good figure for being present at workstation in clerical roles is probably nearer 80%.
(Verification of this number for your business will require a method of sampling or
recording.)
Output to standard should be easier, but only when demand is saturated, constant or
levelled. Office processes (particularly service processes) are usually driven by
customer demand with little scope to build inventory at the end of the process. But
how do you set the standard? With a machine it is typical to use either the name-plate
capacity or the best sustained output rate. In an office environment it may be
necessary to calculate an average over several employees and over some time.
Quality measures are also different in an office environment. The reason for this is
that usually you are dealing with quality parameters that should be measurable by the
employee. (Accuracy of numbers, spelling mistakes, correct addresses etc.) so
typically there is no independent check step. In manufacturing environments the
parameters often need specialist equipment or skills to determine them so there is
Employee A
Employee B
Employee C
Employee D
Department X
% time at work
station
80%
75%
78%
75%
80%
Output to
standard
90%
95%
95%
89%
99%
OEE
99%
97%
93%
90%
99%
71%
69%
69%
60%
78%
Looking at the different measures in this way leads one to some observations. The
composite measures for each employee (A to C) are very similar, but what are the
impacts on the business.
Employee A has good attendance at work station level of 80%, a poor output to
standard of 90% but an excellent (relative) quality performance of 99%. This lack of
productivity may lead to additional overtime costs, but will not cause large amounts
of rework or the need for temporary staff to compensate for excess absence.
Employee B has a poorer presence level at 75%, achieves 95% of standard output rate
but a poor quality rate at only 97%. This type of employee is likely to need support
from temporaries due to absence, and is also likely to lead to re-work due to poor
quality.
Employee C has very poor quality performance leading to large amounts of rework
and probably lack of customer satisfaction.
Employee D is a temporary employee. The poor output and quality performance are
products of the system, not the individual. Inexperienced staff either need to go up a
learning curve to protect quality, probably meaning some sort of buddy system
which impacts productivity, or are thrown in the deep end which has an impact on
quality.
It should be noted that this learning curve is true of any new employee and is part of
the life cycle curve for an employee, just as one would expect lower efficiencies
from a new piece of equipment.
The measure can also be used at the departmental level. Achieving a departmental
level of nearly 80% would be considered very good. (Department X.)
Conclusion
As lean moves into the non-production areas questions will continue to arise about
how applicable the tools are. This article suggests that the principles of OEE can be
applied equally to transactional processes as production processes, with some caveats
around collection and interpretation of data.
The principle benefits of this approach are the use of OEE as a balanced score card
enabling team leaders and managers to understand where the biggest improvements
are to be made, be it through reducing workplace absenteeism, improving output or
reducing quality defects.
As with all efforts to improve productivity, it is the soft stuff which is really hard.
One should not under estimate the amount of time and effort that should be put into
explaining the business drivers that require the productivity focus, and the potential
benefits to both the employees and the business.
Non of the concepts are new. Many companies provide incentives to reduce
absenteeism, increase output and, in some cases, reduce quality defects. However, an
incentive linked to OEE may be the one that best aligns with business goals.