As Peter Drucker famously wrote, “what gets measured, gets managed”. Furthermore, to manage and begin improving manufacturing performance, you need a baseline and an OEE target. Without these tools, it may not be entirely clear when, where, and why improvements occur. Moreover, you may not fully understand the relative difficulty of your goals or the work required to reach them.
Getting Started with Baselines, Benchmarks and OEE Targets
Establishing baselines, OEE performance goals, and benchmarking are all essential aspects of deploying OEE successfully. It’s about coming up with clear, well-defined, and attainable goals that are driven by data and aligned with strategic objectives. But where should you start, and what are the steps you need to follow? To maximize the value of an OEE implementation, your company should seek to understand the methods for setting OEE targets.
Paying close attention to the process is essential because poor goals are problematic. When the target is too difficult, it can demoralize teams responsible for meeting these unrealistic goals. Or, if the target is too easy, it makes the attainment of the goal meaningless. Here at Evocon, we believe that the best performance targets are clear, challenging, and attainable.
When goals have these characteristics, they enjoy widespread support, are easy to comprehend, and garner more participation by your workforce. Further, they tend to lead to higher levels of achievement, and the rate at which improvements occur is far faster.
Collect and analyze current state performance data.
You should allow approximately 4 to 6 weeks of production monitoring and data gathering to define your baseline performance.
However, it is essential to realize that this is only a rule of thumb. You will need to use your best judgment for your unique situation.
Evocon’s 30-day free trial is a helpful tool for this. Because it enables you to understand your baseline without making any financial commitments. Get started here.
The time required can vary depending on an organization’s exposure to OEE, among other things. For example, those new to OEE should expect the implementation learning curve to temporarily lower OEE scores. In that case, you might consider spending more time on this step. This allows you to ensure the data is free from gaps in reporting and significant performance outliers.
The data you are collecting requires stability and accuracy to form a meaningful OEE baseline. Develop your baseline by analyzing the current state data you collected on availability, performance, and quality. These are, as you may recall, the 3 major building blocks of the OEE score.
If you would like to learn more on components of OEE or need a refresh, check out our article What is OEE and how does it work?
Focusing on the three main components of OEE.
By analyzing each element of your organization’s OEE score, you can begin to determine the reasons behind the losses in each category. This knowledge will give you some indication of the improvement opportunity that exists and what is realistic to achieve. Moreover, you will begin to understand the interplay between the three components:
This graph is interactive! (drag the dashed --- lines)
As an example, even if availability, performance, and quality perform at 90%, the OEE score would still be 73%. This indicates that 27% of the scheduled work time is non-productive due to different losses.
When you set an OEE target, the goal should not be to focus only on the OEE percentage. Instead, you need to take the three components into consideration individually. This will pave the way to precise and relevant targets overall.
For instance, acceptance of poor-quality levels can increase availability. But would this be wise? As it turns out, no, it wouldn’t. Defects lower quality and poor quality increases the cost. Thus, earnings will not improve.
Find out more about how to improve production quality.
Baseline data is the starting point you will use to measure and compare future performance. So, it is worth your time to ensure it is as accurate as possible. Considering the interlinkage between these three components, what methods can be utilized to set the right OEE target?
Methods for Setting OEE Targets
As is the case with most performance measurement goals, there are many methods for setting your target for OEE. But there is no silver bullet that is best to use in all cases. In fact, if you roll a dice to set a goal, and the target motivates you to improve gains, it would be difficult to say the method was wrong. Be that as it may, we will briefly discuss two common methods popular among Evocon clients.
1. Set your daily OEE target to equal the best OEE score recorded in your baseline data.
This method is straightforward to put into practice. Let’s refer to it as “the collective best” (TCB) method. TCB only requires you to simply review your baseline data and identify the highest OEE score. This number now becomes your OEE target as the example below demonstrates.
If we use the chart above as our baseline data, then we can quickly identify the best OEE score reported as approximately 68%. Thus, your OEE target is set to 68%.
Machine operators and managers are accountable for improving the average daily performance to this point. When you reach this milestone, rewards may be in order before you begin the process to set the next target.
The idea here is as simple as it is powerful: a relentless journey to continually improve by cycling from setting a new target, working to reach it, and then, repeating the process. In theory, at least, this cycle could continue without end. Indeed, this is the mantra of continuous improvement – the goal is to take the journey, not to reach a destination.
Note: A popular alternative of TCB is to set your target equal to the average OEE score. While this certainly is an option, we prefer the more challenging TCB. Particularly if you are new to OEE, as there is likely to be a considerable amount of low hanging fruit to harvest.
2. Set your daily OEE target to allow a small number of daily “misses”.
This method is about setting a target that the plant can “pass” on most days. Or put another way, to make sure that you cannot hit the target all the time.
Though counter-intuitive, your target with this method will allow a small number of daily OEE “misses” each month. Let’s call this method “aiming for small misses” (AFSM).
It may help to think of AFSM as the opposite of the TCB. With TCB, you are setting a target that will require performance improvement before the plant will be able to reach the goal each day. With AFSM, you are setting a target that the plant will be able to achieve on most days, but not every day.
The point of this method is about turning your attention to times that your performance is lowest. To further illustrate, let’s compare the performance gap that each method will focus on.
Combining an OEE target with 5 why analysis.
To get the most benefit from AFSM, pair it with a process to give operators a pass/fail at the end of the shift. To “fail” in this context means to have missed the daily OEE performance target. Operators should then investigate all misses with a 5 why analysis.
For example, let’s use the chart below as our baseline data and set a target using AFSM. As you can see above, we have selected a target of 55%. This results in 6 days where OEE performance is below target. Further, let’s assume we are providing operator feedback and that all misses trigger a 5 why analysis.
Choosing an OEE target with just enough misses.
Why select 55% as the target? This is subjective to your specific situation and preference. But, it should come down to how many times per month that you would like operators performing a 5 why analysis.
The combination of AFSM, pass/fail, and 5 whys can be a particularly powerful strategy for improvement. But the benefits do not stop there. It will also develop a keen sense in operators for root cause analysis. Moreover, it puts those that spend the most time with the equipment in the position to utilize what they learn. This should foster an environment where operators truly have a voice in the improvement process.
When we give operators a voice in the process and ownership of the results, human nature drives emotional investment in success. This increased investment in roles has many benefits and makes the task of engaging production operators easier.
How to utilize Evocon for shift end pass/fail feedback.
A great way to provide the pass/fail feedback to operators is by using Mr. Evocon in our Shift View feature. As the graphic below demonstrates.
As we can see, Mr. Evocon changes states based on OEE performance compared to the targets you set. This provides direct emotional triggers that keep operators engaged in meeting your daily goals. With this immediate feedback comes the responsibility to keep your goals attainable. Otherwise, too much negative emotional feedback can be counterproductive.
Tips on Making OEE Targets Work
Encourage team ownership of establishing objectives.
Regardless of the method you take to establish your OEE goals, there are several other points to keep in mind. First among them is that OEE targets should begin and end with your team. The aim is for them to take ownership for establishing the performance target as this will ensure the goal is achievable.
Discussing the current situation with the team, analyzing the pros and cons, and exchanging ideas on performance targets creates a sense of ownership and pride in the results. During this evaluation process, even opposition can lead to the team gaining different perspectives and improving communication. We encourage this healthy debate as it furthers engagement and improves the overall quality of targets.
Keep your goals realistic and attainable when you set an OEE target.
The OEE target should be challenging and involve the whole team. At the same time, it needs to be achievable, realistic, and clear.
Targets should only cover aspects that the operators can affect. The more you educate your operators about the importance of setting goals and how they benefit from it, the more likely they are to collaborate in this process and embrace the goals.
Take action to shape the internal culture.
Once you clearly define your production goals, you need to take steps to shape the internal culture within your organization. You need everyone in the company, from the line operator to the CEO, to understand the targets, and to monitor the progress. Success comes to teams that easily collaborate cross-functionally and then work together towards the shared goal they defined.
OEE alone is insufficient to make a complete analysis that supports all production decisions. However, it can be useful to motivate teams by incorporating it into your performance management processes. The measure is objective and is well suited to serve the basis for bonus decisions.
Toftan, one of Estonia’s most successful sawmills, has used Evocon since 2017. They have introduced the bonus system to their teams with great success. The main takeaway from their experience is that it is best to reward team performance where possible. When you use OEE in this way, it reinforces collaboration and enhances motivation.
Make your OEE goals SMART.
Goal setting is a continuous process that requires updates according to the results. The same applies to the OEE target setting process. Therefore, it is crucial to have specific criteria, strategies, and principles as a framework when establishing useful targets. This not only makes the process smoother but also provides the production team with the motivation they need.
In general, the well-known acronym for goal setting, S.M.A.R.T, will benefit OEE goals. That is to say, your OEE targets should be specific, measurable, attainable, realistic, and time-bound.
Continually raise the bar.
How should you update your next OEE target? Is team engagement where it needs to be? Are there enough operators and machine capacity to satisfy demand?
These are the questions you need to ask when evaluating your results to make adjustments to OEE targets. Every time a manager analyzes previous goals and outcomes, they need to raise the bar continually and at the same time, keep their teams engaged.
How to set OEE targets on a larger scale.
What about setting OEE targets for large multinational companies like we find in the Fortune 500? Do the larger scale and increased complexity change the way we set OEE targets? The short answer is no, but there are other considerations to keep in mind.
As the scale and complexity of operations increase, so do opportunities to benefit from the synergies of utilizing one system across the enterprise. For this reason, we recommend that management plan OEE deployment across all operations and avoid each plant developing a custom solution.
One solution for all locations allows for data standardization. Data standardization can undoubtedly be beneficial in any organization; but for large, multi-plant operators, it is essential. Standardized OEE systems, methods, processes, and data all come together to enhance internal communication and the sharing of best practices and benchmarking.
Right Targets, Right Results
Achieving significant results requires that we begin with the end result in mind. What do we aim to achieve? How do we define success, and what can we realistically accomplish?
We answer these questions by first gathering accurate performance data and analyzing it in detail to form our baseline. Then, this baseline and the knowledge of your unique situation is used to select the appropriate method for setting your OEE targets. This will be followed by cycles of improvement to reach the goal and incremental raising of the bar for your target.
So, as you begin on your productivity improvement journey, keep these key steps in mind to ensure you define a path to success in the long run.