Efficiency...Why bother?

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Efficiency...Why bother?

by Mike on Wednesday, October 10, 2007 10:00 PM

If you only measure efficiency in your production area you are missing two other very critical areas. Efficiency as a measurement only measures how well you perform against a standard. In many cases how the standard is established is given very little thought. For example, when was the last time you actually saw an Industrial Engineer doing a time and motion study? I thought so. What I have seen in most business is the standard is set based on past performance, the maximum machine speed or what is required to meet profit objectives. Neither of these approaches should be acceptable. The efficiency performance measurement is then calculated based on the actual output versus the standard. I was in one business where the average efficiency across four plants was 130% and the company was loosing money in two of them. So what is the value of just this measure, in this situation? A much better measure of performance is OEE. OEE is Overall Equipment Effectiveness. This measure looks at Performance (efficiency, actual good output versus the standard), it looks at Availability (utilization, the actual time the line runs at rate versus total time planned) and it also looks at Quality (good product versus all product produced). As you can see this measurement will give you a much better handle on your operation and where improvements are necessary. If you want more information on this measurement email me, I have a handout that explains it in detail. By the way, this measurement can be applied in a heavy direct labor environment as well.

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Mike

(“The Professional Provoker”) is the Founder and President of Empowered Performance, LLC a worldwide management education and consulting firm. Michael has extensive international experience working with companies of varied sizes and industries helping them implement strategies to attain World-Class levels of performance. Michael has developed expertise in “Enterprise Excellence”, Enterprise Resource Planning and Supply Chain Management (ERP/SCM), Lean (Toyota Production System), Team Building and Problem Solving, Six Sigma and Reengineering Business Processes. He is considered an expert in helping companies develop and implement Strategic Business Units and fast response customer service production units.