manufacturing conference workshop 2 - return on investment (roi)
DESCRIPTION
OEE,overall equipment effectiveness, ROI workshopTRANSCRIPT
John Roberts
Managing Director, Operations, Idhammar Systems
Calculating ROI for an OEE System
15th November 2012
©Copyright 2012 Idhammar Systems Limited
Pan-industrial Customers
KEEPING INDUSTRY MOVING AND IMPROVING...
KEEPING INDUSTRY MOVING AND IMPROVING...
Proven Track Record in the Food Industry
Workshop• What is OEE and why should we consider it?• Where are we now.... where do we want to be....
and when?• What improvements are possible?• How will an OEE system help?• What is the cost?• When will our investment start to pay back?• What about other investment opportunities?
KEEPING INDUSTRY MOVING AND IMPROVING...
What is OEE and why is it important?• A standard index of manufacturing efficiency• Based on...
• Utilisation• Line availability• Manufacturing performance• Product quality
• Why use it....• Compare performance within industrial sectors• Measure of continuous improvement on a line or within a site• Highlight inefficiencies
• Drive improvements in efficiency
KEEPING INDUSTRY MOVING AND IMPROVING...
Where are you now?• Tractor factory
• 120+ tractors per day
• Milk bottles• 1.3million bottles per
day
• Bread Bakery• 600,000 Loaves per day
• Canning plant• 1.5 million cans per day
• Spirit Bottler• 100,000 bottles per day
• Cake Baker• 400,000 packs per dayKEEPING INDUSTRY MOVING AND
IMPROVING...
• Problem areas?• Waste• Manpower costs• Equipment reliability• Materials supply• .......
What improvements are required and when?• SILT Same In Less Time• MIST More In Same Time• Management performance• Delivery deadlines• Energy savings• Waste reduction• Staff motivation and engagement• Manpower costs
KEEPING INDUSTRY MOVING AND IMPROVING...
How will an OEE system help?• OEE
• Availability• Performance• Waste
• Energy Monitoring• Utilisation• Productivity• Quality Monitoring
KEEPING INDUSTRY MOVING AND IMPROVING...
What is the cost?• Moderate OEE scores: 50% - 80%
• Low product value• Low tech environment• Manual data capture• Spare production capacity
• £2k - £5k per line
• High OEE scores: 80% - 95%• High product value• Automation and SCADA• Tight production schedules
• £5k - £12k per line
KEEPING INDUSTRY MOVING AND IMPROVING...
When will our new OEE system start to pay back?• Software systems are only facilitation tools • Fast gains from low OEE plants• More time required for better performing
plants• Time will be required to deliver a cultural
change• Management is the key
KEEPING INDUSTRY MOVING AND IMPROVING...
When will our new OEE system start to pay back?• Software systems are only facilitation tools • Fast gains from low OEE plants• More time required for better performing
plants• Time will be required to deliver a cultural
change• Management is the key
KEEPING INDUSTRY MOVING AND IMPROVING...
Higher OEE means Higher Unit Margin• Significant increases in Unit Product margin
can be delivered: • Low materials cost• Stable energy usage• People are available
KEEPING INDUSTRY MOVING AND IMPROVING...
600
700
800
900
1000
1100
1200
1300
-20%
-10%
0%
10%
20%
30%
Margin/Unit Produced Vs Throughput
ROI: Bakery
KEEPING INDUSTRY MOVING AND IMPROVING...
Costs
OEE system £ 4,000
Internal manpower allocation at start up
£ 1,000
Total £ 5,000
Potential Savings per Day Value now
1% improvement
Product sales value £ 40,000
£ 400
Daily throughput 80000
Sales revenue per unit £ 0.50
Margin % 10% £ 40
Cost of Waste £ 1,500
£ 15
Manpower £ 2,500
£ 25
Energy £ 2,500
£ 25
Quality management £ 100
£ 10
Total £ 115
Return on Investment 43Days
Return on Investment per production line High volume Moderate / high waste Low material cost Low product unit price Low profit margin High energy cost Significant quality monitoring Manual data capture
Some opportunities for manpower reduction
ROI: Tractor Factory
KEEPING INDUSTRY MOVING AND IMPROVING...
Costs
OEE system £ 100,000
Internal manpower allocation £ 20,000
Total £ 120,000
Potential Savings per Day Value now
1% improvement
Product sales value £ 13,000,000
£ 13,000
Daily throughput 130
Sales revenue per unit £ 100,000
Margin 8% £ 1,040
Cost of Waste £ -
£ -
Manpower £ -
£ -
Energy £ -
£ -
Quality management £ -
£ -
Total £ 1,040
Return on Investment 115Days
Return on Investment for the site Low volume Low waste High product unit price Steady energy usage Significant quality monitoring
Automated data capture with manual input
Few opportunities for manpower reduction
ROI: Spirit Bottler
KEEPING INDUSTRY MOVING AND IMPROVING...
Return on Investment per line High volume Low waste Moderate product unit price Steady energy usage Automated quality monitoring
Automated data capture with manual input
Some opportunities for manpower reduction
Costs
OEE system £ 15,000
Internal manpower allocation £ 1,500
Total £ 16,500
Potential Savings per Day Value now
1% improvement
Product sales value £ 28,000
£ 280
Daily throughput 7000
Sales revenue per unit £ 4.00
Margin 12% 33.6
Cost of Waste £ -
£ -
Manpower £ 800
£ 8
Energy £ 500
£ 5
Quality management £ -
£ -
Total £ 47
Return on Investment 354Days
What about other investment opportunities?• Where to spend capital?
• In the most inefficient areas
• Aunt Bessie’s• Identified low OEE scores in a packing area• The financial result of reducing this problem area was
assessed• An Improvement project was approved• New equipment was installed• OEE improved and the investment was recouped
• The OEE system was used to clearly identify the specific area that would most benefit from a capital improvement project
KEEPING INDUSTRY MOVING AND IMPROVING...
Summing Up• Know where you are now• Understand what areas are likely to provide
opportunities for improvements• Understand that this is not an IT project• Take the project seriously
• Publicity and internal marketing• Get a senior sponsor• Act on the data• Allocate responsibilities
KEEPING INDUSTRY MOVING AND IMPROVING...