Last month we talked briefly about some of the effects of using Average Quantity more effectively for prepackaged goods, so as to maintain legality but with minimal overfills and wastage. Materials Optimisation is one of the few opportunities that packers have to reduce materials wastage. It is interesting to see the number of manufacturers who have recently been criticized for reducing the size/weight of their products, whilst keeping the price the same. Chocolate bars are a classic example. It is hardly surprising to see this happening now since the fall in the value of the pound following the Brexit Referendum and the consequential increase in the price of many imported raw materials. It should, therefore, be obvious that, whatever the stated weight/volume on the product packaging, reducing overfills to the absolute minimum has also become increasingly important.
For precisely the same reason, improving efficiency, at every opportunity throughout the conversion process from good inwards to dispatch, has also become a major focus for many manufacturers.
Again, just like Average Quantity, you can run OEE well or sub-optimally. Because OEE is such a simple metric, calculated through multiplying the Availability % by the Performance % by the Quality %, it is within the remit of just about any software developer to create something to ‘do the basics’ and, because of this, it has attracted hundreds (thousands worldwide) of companies offering a low priced OEE system. Whilst almost any such systems would doubtless be better and quicker than paper and a pocket calculator, the cheaper options lack the granularity and drill down so essential for root cause analysis.
For the more switched on companies it obviously isn’t enough simply to know what the current OEE is, on a line by line or product by product basis, but they also need to be made instantly aware of the priorities to be tackled first (greatest improvement for least effort) and to have the granularity, within their drill down, to establish root cause of problems, bottlenecks and constraints generally, as quickly as possible, so as to take rapid improvement actions.
Using both the highly visible prioritization (e.g. through automated Short Interval Control and Top Loss graphs) together with the granularity to establish root cause, we have seen dramatic improvements in OEE of 30% or more.
Another reason why some companies fail to see the real improvements they hoped for is that they don’t begin with a clear objective. We invariably encourage our clients to ‘begin with the end in mind’. For example, if they improve OEE by, say, even a fairly modest 10%, what would they do with that improvement? Would they produce more quality products within the same timeframe or, if they could not gain more orders in the short term to fill the extra capacity created, would they simply produce the same quantity but within fewer hours?
Even the best systems can’t improve results on the bottom line unless the user is able to either increase output volume or reduce the production time-period. If it’s to be the latter, then one obvious step is to cut the hours for contract workers, currently easier than to do so for permanent payroll staff. However, there has been much talk recently of giving contract workers the same employment rights as permanently paid workers. If that happens, it is likely to cause further serious problems for the food and drink industry who, not only depend heavily upon contract labour but, also depend upon being able to turn off the contract labour tap when demand drops or efficiency improves.
This potential problem may resolve itself, of course, if the available migrant labour force is cut dramatically post Brexit….we shall just have to wait and see.
What FMCG manufacturers can’t wait for, is any improvement in trading conditions from the government or a recovery in the value of the pound. Playing such a waiting game would be too dangerous. The need to improve efficiency and thereby reduce unit production costs exists now and for many, there is no time to lose.
Waiting for better times is simply not a viable option for most. So many contract packers have already found that they have tried to encourage their supermarket customers to pay more, only to be pushed back with either a flat “No”, or “Show us what you have done to improve efficiency since your last price increase.” Many will struggle with such a request, especially those dependent upon paper recording or who bought low price OEE systems with great expectations (more than 70% find that their investment in performance improvement systems and IT projects generally, fail to achieve expectations).
We also find, as with Average Quantity Law, that there is a lack of understanding of OEE. Some companies have said to us “We want to run OEE but are not interested in the Quality aspect as that’s the responsibility of the QA department”. Whatever the logic in this thinking, the outcome will not be OEE, it might be PE or something similar, but not OEE. Also, without Quality included, how do these company’s cope with rework, rejects and batch rejections which may well need to be accounted for after the production run has finished? The biggest danger if they call this OEE is that they will be kidding themselves that the true OEE is better than it actually is. Secondly, they could be missing out on one of the biggest benefits of true OEE in getting all departments including; procurement, logistics, planning, production, engineering, and quality, working and communicating more closely together towards common objectives.