Why Improving OEE Reduces Your Production Costs

For years, the ongoing globalization of markets has subjected companies to intensifying competition. Among other things, this has placed pressure on them to keep their local costs down. And since 2020, the Covid-19 pandemic has considerably intensified these pressures at many manufacturing companies.

 

In this article, we show you how improving OEE can lower your production costs and ultimately also boost your company’s overall competitiveness. It’s very probable that there are major opportunities for you to improve your manufacturing operation, potentially generating cost savings on the order of several millions of dollars or euros.

 

The OEE metric is a tool that enterprises can wield to measure the efficiency of production and identify and fix weaknesses. The three most important levers for achieving cost savings are, in line with the principle of OEE:

 

In all of these cases, it’s basically about eliminating the causes of wasteful use of valuable resources: expensive materials, machine hours and manpower.

In the following, we show you why improving OEE will automatically slash your production costs.

 

The first step is to obtain objective, trustworthy OEE scores – at the very least, for your bottleneck machines. These OEE scores let you perform an initial assessment of the production situation at your company.

 

Companies with an OEE score above 85% or more are models for others to emulate. Is your company in this range? If so, you have one of the world’s most efficient manufacturing operations! Enterprises in the range between 65% and 85% already have considerable potential for additionally reducing their production costs. And manufacturers with an OEE count below 65% are in dire need of improvement.

 

Here are a few examples of how improving individual OEE factors can directly impact production costs.

 

At many companies, a production line consists of sequentially arranged machines, each of which can only work on a component until the preceding one has completed its task. This means that if one machine grinds to a halt, so do all downstream ones.

 

If a holdup lasts for very long, it also negatively affects preceding machines, which must also stop working due to limited storage space for partially completed components.

 

To offset this problem, small buffers are often inserted between machines. This way, if one machine stops it won’t immediately impact all of the other machines in the production line. The larger the storage capacity is, the longer production can continue in the event that one machine goes offline.

 

The biggest drawback to this approach is that capital is tied up in partially finished products and valuable space is reserved for temporary storage but only used part of the time. This state of affairs is also inacceptable when the goal is lean production, just-in-time (JIT) delivery, or multiple product versions.

 

The repercussions of impaired production increase with a smaller lot sizes and are greatest with a lot size of one (one-off production). Ultimately, this runs the risk of no longer being able to supply products on time! If a penalty for this case has been agreed on with the customer, the consequences can be very expensive. In extreme cases, a company can even run the risk of bankruptcy.

 

Availability is the first important OEE factor. Ideally, a machine should be available 100% of the time. This means that a machine never goes offline when it’s supposed to be producing. In the real world, however, stops are unavoidable. Even with regular maintenance, unforeseen problems can crop up and cause unwanted interruptions of production. However, the following can be achieved by properly capturing stops in real time with the aid of a system of metrics:

 

Improving the OEE factor of “availability” reduces throughput times, which positively affects the following cost factor.

 

The OEE factor of performance places the actually produced parts in relationship to the maximum quantity that can be achieved when a machine is consistently producing at the planned rate. However, minor problems or an incorrectly programmed or adjusted machine can often prevent this. By detecting and fixing weaknesses in the production products process, production teams can reduce the discrepancy between the actual and desired situations.

 

Improved performance means that it takes less time to produce a given quantity of parts. If the achieved time saving is large enough, entire shifts can even be eliminated, since it takes fewer of them to produce the planned number of units.

 

In turn, reducing production shifts lowers both personnel costs and energy consumption, since machines are operated less of the time.

 

The OEE factor of quality addresses a third aspect involved in reducing production costs. This is the percentage of all produced parts that are defective. Defects can take the form of visual flaws such as bubbles, inclusions, or scratches, or they can be more serious ones that pose safety hazards.

 

Depending on the kind of defect involved, affected parts can be corrected by reworking them. They can then be processed further. Parts that can’t be reworked at all or only at disproportionate cost are rejects and must be disposed of.

 

If it’s possible to raise the level of quality, you’ll have fewer rejects and less rework. Fewer parts then need to be produced to complete the required number of fault-free components. Improving quality therefore delivers the same benefits as improving performance as discussed above: lower personnel and energy costs. In addition, cutting down on rejects also leads to:

 

OEE - Further information

Discover our selected articles on OEE and how it can revolutionize your production processes below:

• Calculating OEE - Discover how you should go about calculating Overall Equipment Effectiveness and master the first steps to optimization.
  
  
• Six Big Losses - The most important causes of OEE losses - A detailed explanation of the 'Six Big Losses' that can occur in production and their impact on the OEE factors.
  
  
• The Benefits of automated OEE measurement - Automated OEE measurement assures you of high accuracy, consistent data, reliable real-time monitoring and much more.
  
  
• How to improve the OEE in your production - Learn how to increase the OEE value with your production team using an exemplary improvement process.
  
  
• The 6 most common OEE mistakes and how to avoid them - The most common mistakes in OEE measurement and how to avoid them to effectively reach your productivity target.
  
  
• Why OEE is one of the most important production metrics! - If your goal is to achieve more profitable production, then you should definitely know to what extent the OEE key figure can help you achieve this.
  
  
• What characterizes a good OEE score? - The determined OEE value can be a warning signal, an indication of average levels or an award.

OEE is a decisive factor for Lean Production, Continuous Improvement (CIP), Kaizen, Six Sigma and Shopfloor Management. It plays a central role in the identification and utilization of improvement potentials in production. OEE solutions enable efficient communication and coordination at the production level, which is essential for the rapid identification and elimination of problems.

Get started with OEE today

SYMESTIC is one of the world's leading providers of OEE-based system solutions. Take the opportunity for a no-obligation 4-week evaluation and see for yourself the simplicity, efficiency and cost savings that our OEE Software-as-a-Service offers. Experience how OEE and other important key figures can be automatically recorded, calculated and analyzed. Benefit from objective, trustworthy metrics, dashboards, reports and notifications that support all departments of your company close to production.

Discover the power of the most advanced manufacturing software and make your production more efficient tomorrow!