A medium-sized Bavarian company develops, produces and sells geared motors worldwide, particularly for crane and lifting technology. The company has a production plant in Germany and an assembly plant in Poland. Sales offices around the world advise and support customers locally.
The company achieved double-digit sales growth for several years in a row. During this time, production reached its capacity limits and was no longer able to meet the enormous customer demand on time. The interim manager was hired as a senior consultant to set up a KPI-based production controlling system with the aim of significantly increasing productivity.
Lack of personnel and space limit possible expansion of production
When analyzing the production processes, the interim manager identified several reasons for the insufficient production capacity. One of the factors: the available resources of employees and machines were a limiting factor.
German production is located in a structurally weak region. It is virtually impossible to recruit suitable workers there - despite paying above-average salaries. In addition, the space available in the production hall was limited, meaning that expansion of the machinery was only possible to a very limited extent. This meant that expanding production would only have been possible with very high investments.
Overall Equipment Effectiveness (OEE) introduced as a new KPI for production
The most important reason for the lack of efficiency, however, was that the company had previously managed production solely on the basis of costs. Factors such as throughput times, backlog levels, reject rates and inventory levels were determined and reported on a monthly basis. However, production efficiency could not be increased on this basis. As a way out of this dilemma, the interim manager presented the development of a production controlling system based on key figures in order to identify capacity reserves and increase productivity by utilizing these reserves.
In consultation with all stakeholders, the interim manager introduced Overall Equipment Effectiveness (OEE) as a new KPI (performance indicator). The advantage of the OEE key figure is that it reveals wasted resources and can therefore be prevented in the future. Losses are differentiated in terms of time, quantity and quality and therefore ensure a high degree of transparency. On this basis, production is no longer controlled by costs, but by performance. This enables the company to make optimum use of the limited resources available and increase productivity.
OEE production dashboard created in Excel
As the client expected a quick implementation, it was not possible to use a software-based solution in the short term. The interim manager therefore used the figures from production data acquisition (PDA figures) to create a production dashboard in Excel. After the initial determination, the overall OEE of production amounted to 56 percent. This showed that there was still considerable potential in production.
New processes developed and implemented in store floor meetings
A detailed analysis of the key figures revealed that a number of causes were responsible for the low OEE value. These included above all:
- High machine maintenance times
- Long and frequent set-up of the systems
- Inefficient quality assurance approval process
- Delays in material supply
- Low production batch sizes
- Inappropriate machine operating concepts
The new findings were discussed with the production and group managers at regular store floor meetings. After ensuring that everyone involved had the same understanding of the realignment of production, the following measures were implemented to increase OEE.
- Introduction of shift work in maintenance
- Inventory-managed spare parts supply
- Optimization of request processes in maintenance
- Use of setup optimizers
- Lot size optimization for production orders
- Introduction of a frozen period for more planning reliability
- Period for more planning reliability
- Use of production assistants
- Change to the machine operating concept
Productivity increased by 25 percent through OEE control
By the end of the project, the OEE had increased by 25 percent to 70 percentage points. The tracking of measures and target achievement were regularly communicated during the course of the project. At the same time, software was implemented on the initiative of the interim manager to determine the OEE per resource on a daily basis.
One of the challenges of this mandate was that the new management philosophy based on performance instead of costs was unknown to everyone involved, as was the new OEE performance indicator. The interim manager therefore had to introduce managers and employees to the topic in training sessions.
