In today's competitive global markets, companies are continually challenged to reduce costs while enhancing efficiency. The COVID-19 pandemic has further accentuated these pressures, particularly in the manufacturing sector. This article underscores the significance of improving Overall Equipment Effectiveness (OEE) to drive down production costs and elevate a company's competitive edge. By leveraging the OEE metric, businesses can gauge their production efficiency, pinpoint areas of improvement, and rectify operational weaknesses. Three key levers central to cost reduction through OEE optimization include enhancing availability, performance, and quality. By focusing on minimizing downtime, maximizing machine performance, and ensuring top-notch product quality, companies can effectively curtail waste of valuable resources like materials, time, and labor. Investing in OEE improvement not only streamlines operations but also opens doors to substantial cost savings, potentially amounting to millions of dollars or euros.

What insights can be gained about cost reduction potential from my OEE score?

To improve production efficiency, the first step is to obtain accurate OEE scores, especially for bottleneck machines. Companies with OEE scores above 85% are considered efficient, while those between 65% and 85% have potential for cost reduction. Manufacturers with OEE scores below 65% need urgent improvement. Improving individual OEE factors can directly impact production costs, making it important to focus on areas that can be optimized for enhanced efficiency.

Less capital lockup

In many companies, a production line is composed of machines arranged in a sequential order, where each machine can only operate on a component once the previous machine has finished its task. A halt in one machine's operation can cause a stoppage in all downstream machines. If the halt persists, it can also negatively impact preceding machines, as they are forced to stop working due to limited storage space for partially completed components.
To address this issue, small buffers are often placed between machines. This allows for a buffer in case one machine stops, preventing an immediate impact on all other machines in the production line. The larger the storage capacity of these buffers, the longer production can continue if one machine goes offline. However, this approach has its drawbacks. Capital is tied up in unfinished products and valuable space is used for temporary storage, which is only utilized part of the time. This contradicts lean production principles and the goal of just-in-time (JIT) manufacturing.

Preventing incurring contractual penalties

The impact of decreased production efficiency becomes more pronounced as lot sizes decrease, especially with one-off production. This poses a potential risk of inability to deliver products on time. If there is a pre-established penalty for such delays with the customer, the financial implications can be significant. In serious cases, there is even a possibility of bankruptcy for the company. Availability is a crucial factor in achieving a high OEE. While machines ideally should be available 100% of the time, stops are inevitable due to unforeseen issues. However, by using a system of metrics to capture stops in real time, stops can be detected and addressed immediately. This allows for the analysis of stop causes to prevent them from occurring again. Improving availability not only reduces throughput times but also positively impacts cost factors.

Lower personnel and energy costs

The OEE factor of performance measures the relationship between actual parts produced and the maximum achievable quantity when a machine operates at its planned rate. Issues like minor problems or incorrect machine programming can hinder reaching maximum potential. Detecting and addressing weaknesses in the production process can help reduce the gap between actual and desired outcomes. Enhanced efficiency results in a reduction in the time needed to manufacture a specific number of parts. Significant time savings can potentially lead to the elimination of entire shifts, as fewer shifts are required to meet production targets. This decrease in production shifts not only decreases personnel expenses but also reduces energy usage by decreasing machine operational hours. 

Reduced material expenses

The OEE factor of quality plays a crucial role in reducing production costs by addressing the percentage of defective parts produced. Defects, ranging from visual imperfections like bubbles or scratches to serious safety hazards, can significantly impact production efficiency and costs. By focusing on improving quality, businesses can minimize rejects and rework, leading to decreased material expenses, elimination of rework costs, avoidance of expensive recalls, and enhanced reputation through fewer customer complaints. Elevating the level of quality not only results in a more efficient production process but also yields various cost-saving benefits, reinforcing the importance of quality control in manufacturing operations.

Begin your journey with OEE through the innovative Nirmalya Enterprise Platform

Nirmalya Enterprise Platform suite is meticulously designed for manufacturing, integrated with AI and Business Intelligence to amplify enterprise operations. OEE is a crucial factor for various production improvement strategies like Lean Production, Continuous Improvement, Kaizen, Six Sigma, and Shopfloor Management. It helps in identifying and utilizing opportunities for improvement in production processes. OEE solutions facilitate effective communication and coordination at the production level, allowing for the quick detection and resolution of issues.

Renowned for its OEE-based system solutions, Nirmalya MES stands out as a leading platform in the industry. By utilizing this platform, witness the seamless automation of key figures like OEE alongside insightful analysis. Gain access to unbiased metrics, real-time dashboards, detailed reports, and timely notifications that facilitate all facets of your company close to production. Unleash the potential of cutting-edge manufacturing software to optimize your production processes significantly. Reach out to us today to delve deeper into how Nirmalya's advanced solutions can revolutionize your manufacturing capabilities.