• OEE is not just one KPI but four+ KPI’s. I say this because OEE is the result of an arithmetical calculation that takes into account three further KPI’s.
• OEE leverages off easily attainable metrics (measure wise) yet provides big results from productivity, financial and operational points of view.

OEE works by looking at your losses. To be more specific OEE looks at the losses that are commonly acknowledged to be the six big loss categories and matches them to one of three OEE loss categories – they are:

• Breakdowns –> Down Time Loss
• Setup and Adjustments –> Down Time Loss
• Small Stops –> Speed Loss
• Reduced Speed –> Speed Loss
• Startup Rejects –> Quality Loss
• Production Rejects –> Quality Loss

The OEE loss categories are then taken into account to calculate what are called the OEE factors – they are:

• Performance. The Performance factor takes into account speed losses and is calculated as:

  Performance = (Total Pieces / Operating Time) / Ideal Run Rate

• Availability. The Availability factor takes into account Down Time Losses and is calculated as:

  Availability = Operating Time / Planned Production Time

• Quality. The Quality factor takes into account Quality Lossese and is calculated as:

  Quality = Good Pieces / Total Pieces

Each one of these is measured in percent (%) and are multiplied with one another to give you OEE.

OEE = Availability x Performance x Quality

An example of this calculation is shown below.

Availability x Performance x Quality = OEE 73% x 82% x 97% = 58 %

World class OEE is accepted to be 85%. As you can see the OEE calculation method is one that delivers the truth without any gloves – it is going to hurt – i.e a low value can very quickly deteriorate your OEE. The upside of this, is that you have room to improve!

If you would like to know more about OEE and how we can help you implement it, then do not hesitate to contact me here or via PLAUT.

Align your strategies

Just as stars need to align for amazing astronomical events to occur, a company needs to align its strategies in order to be able to orchestrate, monitor and execute them in a manner that will maximise the potential to increase revenue, reduce costs and sharpen its competitive edge. When we talk about alignment of strategies here, we of course mean the alignment of the following strategies:

• The corporate Strategy* – this is the overarching direction that the whole company wants to take. Everyone in the organisation should be working and contributing to achieve the goals set out by it.
• The competitive Strategy – this is the Strategy that dictates how you will compete in a given market (category, geography, etc..). It may be that depending on product complexities or targeted customer segments a company has multiple competitive strategies. The competitive Strategy is if you like the customer of the Supply Chain Strategy.
• The Supply Chain Strategy – this is the translation of the above strategies into operational steps, actions and decision levers. The Supply Chain Strategy is not a one size fits all. To this effect a company may have multiple Supply Chain strategies; each one serving a different competitive Strategy (is the aim to compete on price or on responsiveness for example?).

*Some companies also refer to the combination of corporate and competitive strategies as business Strategy.

Developing a Supply Chain Strategy

Successfully developing a Supply Chain Strategy, I believe rests on five pillars.

• Understanding of the strategies. This may be a given to some, but the number of employees that do not know what their company’s Supply Chain Strategy is and indeed how it fits within the corporate Strategy is significant. People must be educated and made aware of the goals the company is trying to achieve – and importantly how they contribute to it.
• Supply Chain process design. The Supply Chain processes and procedures must be defined and formalised in compliance with your Strategy.
• Supply Chain Network design. This is where you assess and identify the assets (special tooling, warehouses, production facilities, transportation lanes, etc..) that your Supply Chain will require (what is their capacity) , where you will require them (geography), when you will require them (timing)…
• Information systems. What systems are you going to use to communicate data across your Supply Chain? What systems are you going to have at your disposal to ‘virtually’ walk along your Supply Chain? What information are you going to share with your partners and what data are they going to share with you? Importantly also, what are your reporting systems requirements going to be? What data are you going to need to make real time decisions and what is the data for which a time lag is permissible?
• Human resources and organisational structure. This is THE key element. It is of paramount importance that you have the right (informed and motivated) people doing the right job. Get this element wrong and your Supply Chain is sure to fail.

In the words of John Taras, “your Supply Chain is only as strong as its weakest link”. Having clarity of your Supply Chain strategy has never been more important, especially so as we see a real shift in the market where it’s no longer companies competing against companies but entire Supply Chains competing against Supply Chains. A well defined and executed Supply Chain Strategy can prove to be the key to not only your success but also that of your partners and customers.

The elements I covered were:

• Reporting and Analytics – context
• Defining Supply Chain KPIS’s Pre-requisites
• Defining Supply Chain KPIS’s
• A word on the importance of dater qwality
• Identifying your KPI’s
• Understanding your KPI’s
• Set Goals, monitor and improve or correct

If you would like further information on this or would like to talk about your Supply Chain issues with us, then contact me using the ‘get in touch’ page.

Some photos of the event:

It is without much noise that the company I work for (PLAUT) relaunched its new web site this week. As I am sure you will agree the design is much more fluid than what it was and is much better oriented towards our customers. When you go and visit the site, don’t forget to check out the area for which I am responsible – Supply Chain Management and witness for yourself that our offering is one of the most comprehensives ones available in the Australian market.

I will be talking about ‘Enabling Reporting and Analytics for your Supply Chain’. I will be delivering this presentation with Geoff Armstrong – National Service Line Lead Business Intelligence, Plaut IT Australia Pty Ltd.

All together there will be 34 presentations and the highlights include:

• Most up to date SAP product releases available in the market
• Access More Supply Chain Data with SAP BusinessObjects to Extend Your Reporting Capabilities
• Take Control of Master Data by Centralising Control, Addressing Change Management Issues and Training Staff
• Rethink Services Procurement in Mining: Lessons for Other Spend Categories and Industries
• Get Past “We’re Different” and Standardise BI Reports Across Your Enterprise
• How Coca-Cola Manages Direct Store Deliveries Using Strategic Route Optimisation and Vehicle Space Optimisation Solutions
• The Future Direction of Sales and Operations Planning in SAP
• Make Warehouses and Logistics More Efficient Through Voice Picking
• Integrate APO to Drive the S&OP Process
• Automate Employee-Facing Transactions in the Supply Chain
• Get Your Inventory Basics Right with WMS
• Use SAP Solutions for Enterprise Contract Management
• Use Outline Agreements for Service Contracts
• Initiate Cultural Change in Supplier and Operations Relationships with Invoice Automation
• Sell the Proposition of Procurement Beyond Just Reducing Costs – Into Delivering Higher Value and Generating Revenue
• Analyse Supplier Enablement Solutions in Conjunction with Your SAP Solution and How to Determine ROI for Such an Implementation

Register today to be part of this great event.