This white paper is intended to serve as a guide forprofessionals in the pharmaceutical, medical device, life

sciences and other regulated manufacturing industries whowant to understand what Overall Equipment Effectiveness

(OEE) can deliver for their business.

A Managers Guide to OEE

UNDER CURRENT ECONOMIC

CONDITIONS, SEVERE GLOBALC O M P E T I T I O N A N D

P O S T P O N E M E N T O F N E W

EQUIPMENT PURCHASES ARE

CAUSING BUSINESS EXECUTIVESTO BE SENSITIVE ABOUT ALL

ASPECTS OF MANUFACTURING

OPERATIONAL COSTS. IN THIS

ENVIRONMENT, IT PAYS TOCONSIDER BOTH CREATIVE AND

P R O V E N M E T H O D S T H A T

MANUFACTURERS CAN USE TOBRING THEIR PRODUCT TOMARKET ATMINIMUM COST.

" O V E R A L L E Q U I P M E N T

EFFECTIVENESS" (OEE) IS AMETHOD THAT MEETS THISOBJECTIVE.

BENEFITS

An OEE so l u t i on can enab l e

manufacturers to achieve world-class

status. More specifically, it can provide

benefits in three key areas:

Reduced equipment

downtime and maintenance costs,

and better management of the

equipment life cycle.

Labour efficiencies and

increased productivity by improving

visibility into operations and

empowering operators.

Increased productivity by

identifying bottlenecks.

Increased rate of qualityand reduced scrap.

1. Equipment:

2. Personnel:

3. Process:

4. Quality:

SCOPE

The need for OEE is indicated by the

Industry Week 2001 census of Key

Performance Metrics for manufacturing.The survey shows that the top 4% of

world-class manufacturers benefit from

a low 2% (median value) of unscheduled

machine downtime . This means thatthe remaining 96% have an opportunity

to improve performance by reducing

unscheduled downtime. Downtime

reductions can be readily achieved byusing OEE to gain visibility into machinestatus and to perform root-cause

analysis of problems.

Fundamentally, OEE is a performancemetric compiled from data on MachineAvailability, Performance Efficiency and

Rate of Quality that is collected eithermanually or automatically. These threedata points are calculated as follows:

OEE is calculated from these factors:

OEE also captures reasons for downtime

(due to machine conditions, materialstatus or quality issues) and can

encompass the individual machine level,

a line or cell level, or the entire plant. At

the plant level, OEE metrics can becorrelated with other plant metrics to

provide Key Performance Indicators

(KPI ’s) . With enterpr ise level

technologies managers can monitor OEEplant metrics and drill down to find root

causes of problems, getting minute-by-minute updates to enable real-time

process improvement.

1

1. Availability

2. Performance

3. Quality

=Total operating time

=

Potential output in T

=Time for total output

(Toperating - T down)

Total output in

Time for good output

Top

op

OEE = Availability * Performance * Quality

.

.

.

“With Enterprise-level

technologies Managers

can monitor OEE plant

metrics and drill down

to find the root causes

of problems, getting

minute-by-minute

updates to enable real-

time process

improvement”

Page 2

A GUIDE TO OEE(OVERALL EQUIPMENT EFFECTIVENESS)

HISTORY

VALUE PROPOSITION

1. REDUCED DOWNTIME COSTS

The first application of OEE can be traced

to the late 1960’s when it was used bySeiichi Nakajima at Nippon Denso as a

key metric in TPM (Total ProductiveMaintenance). According to Nakajima,

"TPM is a plant improvement

methodology, which enables continuous

and rapid improvement of themanufacturing process through the useof employee involvement, employee

empowerment and c losed- loop

measurement of results.”

In the mid 1990’s, coordinated bySEMATECH, the semiconductor wafer

fabrication industry adopted OEE to

improve the productivity of their fabs.Since then, manufacturers in other

industries throughout the world have

embraced OEE methodology to improve

their asset utilisation.

Implementing an adequate OEE systembrings immediate financial benefits tomanufacturing operations. Some of

these benefits are listed below.

When a critical machine is inoperable, itbrings downstream operations to astandstill. This can negatively affect

delivery commitments to the customer,

which in turn impacts cash flow and

revenue. For example, in a typicalsemiconductor fab (based on year 2000data), it is estimated that each hour of

downtime for a critical unit of process

equ ipment can t rans la te in toEUR100 ,000 o f l os t revenue .

2

1. Reduced downtime costs.

2. Reduced repair costs.

3. Increased labour efficiencies.

4. Reduced quality costs.

5. Increased personnel productivity.

6. Increased production capability

Conversely, reducing downtime by 1%on the 50 most critical tools in a typical

fab can provide revenue opportunities

a n d c o s t s a v i n g s n e a r i n g

EUR100,000,000 annually.

OEE enables predictive maintenancethat can dramatically reduce repair

costs. As the historical database of

downt ime reasons grows, themaintenance department can discern

trends to predict an impending failure.

Also, by interfacing the OEE system to a

CMMS (Computerized MaintenanceManagement System) system, the

maintenance department can take

proactive steps to do predictive

maintenance. For example, themaintenance department can order thenecessary part in advance and get better

rates. It can allocate repair personnel

from an existing pool of resourcesinstead of hiring someone on an

emergency basis. This can result in huge

savings compared to repairing a

machine after the breakdown hashappened.

Due to current economic conditions,

most manufacturing companies havedownsized considerably. Consequently,

manufacturers are eager to optimise theproductivity of their existing workforce.

An OEE system helps, because it notonly captures downtime reasons, butalso shows capacity loss data and cycle

times. With this information,

management can better judge themost appropriate allocation of staff to

optimise the line balance and the

utilisation of resources.

3

2. REDUCED REPAIR COSTS

3. INCREASED LABOUREFFICIENCIES

Page 3

As indicated in the introductory section,

Rate of Quality is a percentage of goodparts produced versus the total parts

produced. Thus, an OEE system mustcapture the quantity of total parts

produced, the number of scraps and

defects and the reason for defects.

Because this information is captured at aspecific machine or line level, thiscapability actually captures quality in the

context of the part produced. By tracking

context-rich quality data using OEE,production managers can identify root

causes and eliminate further costs

associated with rework and scrap.

Improving the focus on quality at everystage of production also reduces

warranty costs. In the previously cited

Industry Week survey, world-class

manufacturers benefit from first passyields of 97% (median value), while

scrap and rework are 2% (median value)

and warranty cost is 1%.

An OEE system enables the shop floor to

go paperless. Typically, facility operators

and supervisors spend an enormous

amount of clerical time recording,analysing and reporting downtime

reasons and root causes on paper, then

further explaining these reports to

management. An OEE system capturesand reports downtime and efficiency

automatically. This saves time lost in

non-value added reporting activities andallows personnel to focus on morevaluable tasks. With OEE, everyone from

the plant floor to the boardroom is more

informed,more often, more easily.

4. REDUCED QUALITY COSTS

5. INCREASED PERSONNEL

PRODUCTIVITY

6. INCREASED PRODUCTIONCAPABILITY

INDUSTRY APPLICATIONS

AUTOMOTIVE MANUFACTURING

The net effect of reduced machinedowntime, higher productivity of

operators and reduced defects is theability to achieve higher production

levels with the same amount of

resources.

Three scenarios from different industriesi l l u s t r a t e w h e r e O E E h e l p s

manufacturers improve productivity and

get better visibility into their operations.

An automotive company was trying to

extract additional productivity out oftheir assembly lines by improvingequipment availability. They had already

reduced all known causes of downtime

through diligently applied processengineering steps. To further improvethe process, they implemented a

downtime detection and efficiency

calculation (OEE) system. Within twoweeks of implementing the OEE system

in the department that was identified as

the plant’s bottleneck area, they noticed

that overa l l p roduct iv i ty wassignificantly affected by hundreds of

brief line stoppages caused by a simple

mechanical misalignment that was not

recorded by operators. By observingthese downtimes on the OEE system, it

was determined that the cumulativeeffect of these brief unscheduled

downtimes was the primary cause ofdowntime in that department. Without

an OEE system automatically detecting

all events, these downtimes and their

effects on overall productivity wouldhave gone unnoticed. After process

engineers fixed the alignment problem,

eight more vehicles per day could be

produced by the plant without addingresources.

Page 4

“The net effect of

reduced machine

downtime, higher

productivity and

reduced defects is the

ability to achieve higher

production levels with

the same amount of

resources”

FOOD & BEVERAGEMANUFACTURING

MEDICAL DEVICE

MANUFACTURING

At a food manufacturing facility, an OEEsystem helped supervisors to detect that

operators of a particular production linewere deliberately and prematurely

slowing down the bottleneck machine.

This was done to keep the machine from

automatically slowing when a fault wastriggered by surge bins being filled

whenever downstream machines were

delayed. If proper settings had been

maintained, the bottleneck machinewould have operated at rated speed untilthe surge bin buffer zones filled with

stock which the downstream machines

would eventually consume, therebycatching up with the line-limiting

machine as designed. Tampering with

the machine speed changed this

process. With the OEE system,management was able to detect the

tampered settings, view the production

conditions and understand what was

happening to the process.

Recently a large Medical Device

manufacturer started a project to

improve the capacity of an artificial joint

production facility one specificallydesigned to create replacement hips and

knees. Although the process was fairly

well understood from a manufacturing

process standpoint, new machining-

Page 5

centres were required to keep up withnew product introductions as their

business expanded. Plant managers

knew that the existing machinery was

not operating at full capacity but had nodata to reference when seeking ways toimprove capacity to accommodate new

p r o d u c t i n t r o d u c t i o n s . A f t e r

implementing a data collection systemwith analysis software based around

OEE, however, the plant managers were

able to quantify the productivity of ten

work cells within six months ofimplementing the system. Each work

cell has an average of five machines

dedicated to producing a particular joint.

Using the new system, the manufacturerwas able to identify downtime-related

reasons in real-time, thereby indicating

the cause of bottlenecks and identifying

where improvements could be made tothe actual machining process to enhance

the yield of individual machines. In this

case, both production rate data and

quality information were being used toimprove the overall operation.

Based on the results from the past year,

the manufacturer has been able to avoid

the large capital expenditure associatedwith purchasing a new machining-centrewhile still being able to support the

introduction of three new products. In

addition to the improved productioncapacity, the plant has improved their

overall quality and reduced rework time.

OEE SYSTEM COST ESTIMATION

Since an OEE system is scalable, its cost

can also be scaled to yield an appealingROI. For example, manufacturers can

start by implementing a pilot system,encompassing a manufacturing cell or

even part of a line, wherever they think

an opportunity for improvement exists.

Depending on the size of the pilot,manufacturers can choose to buy off-the-shelf OEE products and implement a

system quickly through internal

engineering resources or hire theservices of outside integrators.

The following variables influence the

estimated cost of an OEE system:

- Number of machines to interface

- Number of manual data entryterminals and mechanism for data

entry

- Automatic vs. Manual data collection

- Integration with other plant data

applications (e.g. ERP,CMMS)

Page 6

“Since an OEE

system is scalable,

its cost can

also be scaled

to yield an

appealing ROI.”

1 David Drickhamer, "IW Census targets key manufacturing metrics", November

1, 2001, Industry Week Magazine.

2 Simon Bragg, "Implementing OEE", ARC Insights, Insight#2003-07E, February

12, 2003, ARC Advisory Group.

3 International Technology Roadmap for Semiconductors 2002 Update.

T h e O E E Model

OEE = Availability % x Performance % x Quality %

OEEsystems PerformOEETM

OEEsystems offers a powerful yet easy-

to-use application (PerformOEE™) thatenable manufacturers to achieve new

levels of operational excellence bymaking business sense out of plant data

in real time. Our OEE offering allows

plant managers and production

personnel to perform in-depth analysisto significantly improving plantoperations and overall business

profitability.

Scalable from a single production unit tom u l t i - p l a n t i m p l e m e n t a t i o n s ,OEEsystems’ software solution is highly

configurable and produces outstanding

results for companies in a variety ofindustries. Easy to install, administer

and maintain, our solution is designed to

work seamlessly with the hardware and

software solutions that are already inyour plant , adding powerful data

collection, visualization and analysis

capabilities.

OEEsystems’ OEE Solution

( P e r f o rmOEE™) p r o v i d e s t h e

mechanism to collect manual data, aswell as the machine interfaces to

automatically pull data from PLC's,CNC's and other industrial automation

devices. Our solution is also ideal for

industries that require electronic

records, electronic signature and audittrails for regulatory compliancepurposes.

Not only is OEEsystems a software

solution provider, but we’re also aleading provider of Lean Manufacturing,Operational Excellence and Business

Excel lence projects for g lobal

manufacturing companies in Ireland, UKand Europe. Through our committed

approach to delivering tangible and

measurable results, our dedication to

robust project implementation and ourtrack-record of delivering sustainable

competitive advantages for our

customers, we can also help your

business to achieve new levels ofoperational and business excellence.

Page 7

OEEsystemsGurtnafleur Business Park,Clonmel,Co. Tipperary,IRELAND

Tel. : +353-(0)52-70384Fax : +353-(0)52-81987

OEEsystemsStansted Centre,Parsonage Road,Takeley, Essex,CM22 6PU

Tel. : +44-(0)1279-874240Fax : +44-(0)1279-874347

www.oeesystems.com