New Methodology for measuring Equipment Performance and Managerial Effect in TPM By Ohwoon Kwon May...

- 1 -

New Methodology for measuring Equipment Performance and Managerial Effect in TPM

Graduate School, Korea University Department of Ind. Systems & Information Engineering

By Ohwoon Kwon

May 27, 2005

- 2 -

■ Introduction

■ Reviews on TPM & Effect Measurement

■ A Model and Case Study on Equipment Performance Indices

■ A Model and Case Study on Contributive Managerial Effect

■ Conclusions

Contents

- 3 -

Introduction

■ Background of Research • Increase of TPM-introduced companies for strengthening the manufacturing competitiveness since 1971• Especially, TPM is called as “money-earning PM activities” and oriented for “Total Profitable Maintenance” or “Total Productive Management”• Insufficiency of well-known TPM effect indices for appraising “money-earning PM activities”• In view of Top’s interest on TPM effect indices, the contributive profit is more important rather than the other tangible effects• Presentation of new effect measuring indices suitable for appraisal of TPM results• Presentation of new measuring methodology of managerial effects corresponding directly to the accounting system of a company

- 4 -

Introduction

■ Insufficient Points of Previous Research • Only OEE or OPE as overall efficiency indices of equipment• Insufficient study of TPM effect appraisal indices to meet the requirements of diversified manufacturing business types• Lack of study on effective & practical methodologies capable of measuring TPM managerial effect quantitatively

■ Purpose and content of Research • To present a first model for measuring the equipment performance indices such as productivity, reliability, efficiency and maintainability all together based on a new time loss structure • To present a second model for estimating the quantitative contributive managerial effects composed of additive contribution profit and saved manufacturing cost

- 5 -

Introduction

■ Method and Importance of Research

• Literature reviews on TPM and TPM effect indices• New two models and case studies on the equipment performance indices and contributive managerial effect of TPM• New, effective & practical methodologies on TPM managerial effect

■ Contributions of Research

• Presentation of TPM effect appraisal indices capable of meeting the requirements of diversified manufacturing business types

• Presentation of more effective barometers to remove the various equipment losses and to facilitate the production control

• Presentation of effective & practical methodologies capable of measuring the TPM managerial effect quantitatively

- 6 -

Reviews on TPM & Effect Measurement

■ Plant Innovation by TPM

Formation of atmosphere for TPM introduction Desirable change in employee’s innovation mind Participation of all members in TPM activities

environment for innovation• Motivation for positive action of employees• Improvement in corporate culture by TPM ☆ Innovation of equipment productivity & efficiency

☆ More profitable output of manufacturing company

☆ High efficiency & performance of production

- 7 -


■ Correlation of TPM and Related Activities

Plant Innovation for

Managerial Goal

Profit Management Profit Management • Productivity-up (Output)

• Cost-down (Input)

• Profit-producing activities

MBOMBO TPMTPM

• Setting of TPM goal

• Departmental goal

• Control & appraisal

• Removal of various plant losses

• Optimization of plant & equipment

• Improvement of production system

- 8 -


■ Direction for Production Innovation

Features for Modern Plant

• High dependence on the equipment

• Necessity for the high productivity, low cost and profit management

• Equipment condition are important to product quality

As-Is in TPM

• Lack of productive maintenance skill

• Operator’s indifference to the equipment

• Insufficient study on operating equipment

• Lack of systematic approach to equipment

TPMTPM

Breakthrough of limit

Equipment productivityQuality defect ratio

Manufacturing cost ratio

Drastic improvement

Change of equipmentChange of personnel

Increase of productivity Reduction of cost

Challenge to loss zero

To-Be

- 9 -


■ Purpose of TPM Activities

Equipment changed, and then Personnel changed ! Equipment changed, and then Personnel changed ! And finally Company culture improved ! And finally Company culture improved !

Change ofEquipment

Change ofPersonnel

Change ofCompany

• Restoration of mal-function or deterioration• Improvement of weak points• Reduction of losses by improvement action

• Mind-up by the verification of result

• Self-confidence on improving activities

• Challenge mind, positive action • Profit-producing management

• Adaptation to the change

- 10 -


■ Strategic Overview of TPM

Most CompetitiveManufacturing Company

Vision

Management

Goals

Productive

Activities

Total● Participation of all members● Top-down & Bottom-up● Necessity for production loss zero

Base

Features of TPM activities

Prevention

Participation Site activities

Equip-ment

Mem-bers

Economy

Attainment of skilled-up and strong members

High productivity and efficiency, low cost

Viewpoints ofimprovement for TPM

Individual Improvement

Autonomous M

Skill-up EduMP & Others

Failure, Defect & Disaster “0”Profitable & Strong Company

Improvement of Prod. & Equip. Sys

Planned M

- 11 -

■ Constitution of TPM Activities

MP Design & Initial Control Organi-

zational& DivActivityAutonomous M

Individual ImpQuality MPlanned M

Safety &Environment

R&D TPM

Office TPMPlanning

Operating

Supporting

Maintaining

Skill-up Training5S Activities

Mind Set-up on Innovation & Change

SmallCircles& TFTActivity

Physical improvementof equipment, members & company

Failure, defect & disaster “0”, OEE “up”

Attainment of Managerial Goals


- 12 -


■ Direction of TPM Activities

• Orientation for strong and competitive company

• Orientation for profit-producing result

• Set-up of autonomous and planned maintenance

• Restoration of deterioration and removal of losses

• Increase of efficiency, productivity, reliability and maintainability

• Mind improvement by TPM education & training• Periodical diagnosis and evaluation by staff• Various motivation and incentive

Company Innovation

Equipment Innovation

MindInnovation

- 13 -


■ TPM Improvement Direction for Increasing Profit

Shutdown & overhaul period

Material retrieval ratioAux. material cost

Indirect labor costSubcontract cost

F-cost, repair cost

Attaining managerial

goal

Operation rate

Material cost

Labor cost

Expenses

Productivity up

Cost down

O E E

Equipment failure timeTool exchange & set-upMinor stoppage & idling

Reduced speedStart-up, defects & rework

- 14 -


■ General Tangible Effect Indices in TPM

Profit

- OEE, OPE- Productivity per hour- Failure intensity ratio

- Defect Ratio- Yield- Claim

(P) Productivity (Q) Quality

- Maint Cost- Energy Cost- Material Cost

(C) Cost

- Disaster ratio- Disaster Frequency

(S) Safety

- Air Pollution- Mater Pollution

(D) Environment

- Lead Time

(M) Delivery

Manufacturing

Cost

- 15 -


■ Equipment Loss Structure in Processing Type Equipment

Calendar time

Loading time Shutdownloss

Operating timeDown-timeloss

Net operatingtime

Perform-anceloss

Valuedoperatingtime

Defectqualityloss

Time loss structurein the processing type

ⓐ Planned shutdown loss

ⓑ Prod. adjustment shutdown loss

① Euipment failure loss

② Set-up & adjustment loss

③ Cutting blade & jig change loss

④ Yield (start-up) loss

⑤ Minor stoppage & idling loss

⑥ Reduced speed loss

⑦ Quality defects & rework loss

9 major lossesin the processing type

- 16 -

■ OEE based on Equipment Loss Structure

OEE (Overall equipment efficiency)

= Time availability×Performance efficiency×Good quality rate

Operating timeLoading time

Theoretical C / T Processed productsOperating time

Good productsProcessed products

Theoretical C / T Good products

Loading time

Performance efficiency Processed products actual C / TOperating time

Theoretical C / TActual C / T

↓ ↓Net operating rate Speed operating rate

where,

Theoretical C / T Processed products

Operating time


- 17 -

■ Plant Loss Structure in Plant Type Equipment

Calendar time

Duty time(Loadingtime)

Shutdownloss

Operating timeDown-timeloss

Net operatingtime

Perform-anceloss

Valuedoperatingtime

Defectqualityloss

Time loss structurein the plant type equipment

① Planned shutdown loss

② Production adjustment shutdown loss

③ Equipment failure shutdown loss

④ Process failure shutdown loss

⑤ Regular production loss

⑥ Irregular production loss

⑦Quality defects loss

⑧ Reprocessed loss

8 major lossesin the plant type equipment


- 18 -

OPE (Overall plant efficiency)

= Operation rate×Overall equipment efficiency

= Operation rate×Time availability×Performance efficiency

×Good quality rate

Duty time

Calendar timeOperating time

Duty time

Theoretical C / T Processed products

Operating timeGood products

Processed products

Theoretical C / T Good products

Calendar time

■ OPE based on Plant Loss Structure


- 19 -

■ New Viewpoints in the TPM Effect Measurement

• TPM activities are called as the “money-earning or profit-producing PM activities”

• Necessity for apprehending how much TPM activities contributed to the managerial effect of a manufacturing company

• Therefore, this dissertation presents a new effective methodology capable of measuring the quantitative contributive managerial profit based on OEE

• OEE has been used representatively as equipment efficiency index, but a new methodology capable of grasping the equipment efficiency, productivity, reliability & maintainability all together is desirable


- 20 -

A Model on Equipment Performance Indices

■ New Universal Equipment Loss Structure

Calendar time

Loading timeShut-downloss

Net loading timeSet-up &adjustmentloss

Operating timeFail -ureloss

Netoperatingtime

Perfor-manceloss

Valuedoperatingtime

Defectqualityloss

Time loss structure hinderingthe equipment performance

① Planned shutdown loss

② Production adjustmentshutdown loss

③ Preparation, replacement &adjustment loss

④ Equipment failure loss

⑤ Minor stoppage & idling loss

⑥ Reduced speed loss

⑦ Quality defects &rework loss

7 major losses hinderingthe equipment performance

- 21 -

Equipment utilization rate = Calendar time -Shutdown lossCalendar time

= Loading timeCalendar time

Planned availability Loading time -Set - up & adjustment lossLoading time

Net loading time

Loading time

Time availability = Net loading time - Failure lossNet loading time

Operating time

Net loading time

■ Major Equipment performance indices based on new Structure


- 22 -

where, Performance loss ( )☆ = (Theoretical processed products – Actual processed products) ×Theoretical C/T = (Theoretical processed products – Actual processed products) ÷Theoretical processed products

Performance efficiency Operating time - Performance lossOperating time

Net operating time

Operating time

Good quality rate Net operating time Defect quality lossNet operating time

Valued operating time

Net operating timewhere, Defect quality loss = Defect quality products÷Theoretical capacity


- 23 -

Equipment operation rate

= Planned availability×Time availability

Net equipment efficiency (NEE)

= Time availability×Performance efficiency×Good quality rate

Net loading time

Loading timeOperating time

Net loading time Operating timeLoading time

Operating time

Net loading timeNet operating time

Operating time Valued operating time

Net operating time


Net loading time


- 24 -


Overall equipment efficiency (OEE) = Equipment operation rate×Performance efficiency×Good quality rate

Net operating time

Operating timeValued operating time

Net operating time


Loading time

Loading timeCalendar time

Operating timeLoading time

Net operating time

Operating timeValued operating time

Net operating time


Calendar time

Total effective equipment productivity (TEEP) = Equipment utilization rate×Equipment operation rate ×Performance efficiency×Good quality rate

timeloadingNet timeOperating

timeLoading timeloadingNet

- 25 -

Descriptions Universal type

equipment EfficiencyPlant type equipment

efficiency Processing type

equipment efficiency

Operation rate(Equipment utilization rate)

Loading time÷Calendar time Duty time÷Calendar time (Not applicable)

Planned availability

Net loading time÷Loading time (Not applicable) (Not applicable)

Time availability

Operating time÷Net loading time Operating time÷Duty time Operating time÷Load-

ing time

Performance efficiency

Net operating time÷Operating time

(Theoretical C/T×Processed products)÷Operating time (Theoretical C/T×

Processed products) ÷ Operating time

Actual average processed products÷Theoretical pro-cessed products

Good quality rate

Valued operating time÷Net operating time

Good products÷Processed products

Good products÷Pro-cessed products

Equipment operation rate

Planned availability×Time availability (Not applicable) (Not applicable) Operating time÷Loading time

■ Comparison on each type of equipment efficiency indices


- 26 -

(Continued)Descript

-ions Universal type

equipment EfficiencyPlant type equipment

efficiency Processing type

equipment efficiency

N E E Valued operating time÷Net loading time (Not applicable) (Not applicable)

O E E

Equipment operation rate×Performance efficiency×Good quality rate

Time availability×Perform-ance efficiency×Good qual-ity rate

Time availability×Performance efficiency× Good quality rate

Valued operating time÷Loading time

(Theoretical C/T×Good pro-ducts)÷Duty time

(Theoretical C/T×Good products)÷Loading time

T E E P(O P E)

Equipment utilization rate×Equipment operation rate×Performance efficiency×Good quality rate

Operation rate× Time avail-ability×Performance efficiency×Good quality rate (Not applicable)

Valued operating time÷Calendar time

(Theoretical C/T×Good products)÷Calendar time

The suggested model is more systematic and informative and can help the systematic eradication activities on the equipment losses


- 27 -

■ The collected data for equipment performance indices from OSRK’s fluorescent lamp manufacturing history

Product Unit P1 P2 P3 P4 P5 Total

Loading time Hr 120 72 120 96 120 528

Theoretical capacity EA/Min 0.5 0.4 0.6 0.3 0.5 0.47a

Theoretical processed products EA 3,600 1,728 4,320 1,728 3,600 14,976

Actual processedproducts EA 3,470 1,630 4,115 1,650 3,440 14,305

Defect quality products EA 105 84 110 51 112 462

Good quality products EA 3,365 1,546 4,005 1,599 3,328 13,853

Loading time Min 7,200 4,320 7,200 5,760 7,200 31,680

Set-up & adjustmentloss Min 30 40 25 30 40 165

Equipment downtime Min 0 0 20 10 40 70

a The value 0.47 as the theoretical capacity is obtained based on the weighted value. (120×0.5+72×0.4+120×0.6+96×0.3+120×0.5)÷(120+72+120+96+120) = 0.47

Case Study on Equipment Performance Indices

- 28 -


Calendar time = 44,640 Min (31×24×60) Loading time = Calendar time–Shutdown loss = 31,680 Min

where, Shutdown loss = 12,960 Min (9×24×60) Net loading time=Loading time–Set-up & adjustment loss= 31,515 Min

where, Set-up & adjustment loss = 165 Min Operating time = Net loading time–Failure loss = 31,445 Min

where, Failure loss = 70 Min Net operating time = Operating time–Performance loss = 30,017 Min

where, Performance loss = (Theoretical processed products – Actual processed

products)÷Theoretical processed products =1,428 Min Valued operating time = Net operating time – Defect quality loss = 29,034 Min

where, Defect quality loss=Defects quality products÷Theoretical capacity=983Min

■ Based on the above data, the prerequisites for calculating the equipment performance indices need to be calculated as follows

- 29 -

The equipment performance indices such as productivity(P), reliability (R), efficiency(E) and maintainability(M) can be calculated in sequence

P: Equipment utilization rate = Loading time÷Calendar time = 0.710

P: Planned availability = Net loading time÷Loading time = 0.995

P: Time availability = Operating time÷Net loading time = 0.998

R: MTBF = Operating time÷Failure times = 10,482 Min

M: MTTR = Failure loss time÷Failure times = 23.3 Min

R: Failure intensity rate = Failure loss time÷Net loading time = 2.2×10-3

R: Failure frequency rate=Failure times÷Net loading time=9.5×10-5 Times/Min

E: Performance efficiency = Net operating time÷Operating time = 0.955


- 30 -

E: Good quality rate = Valued operating time÷Net operating time = 0.967

P: Equipment operation rate = Planned availability×Time availability = 0.993 = Operating time÷Loading time = 0.993

E: Net equipment efficiency (NEE)

= Time availability×Performance efficiency×Good quality rate= 0.9216 = Valued operating time÷Net loading time = 0.921 E: Overall equipment efficiency (OEE)

= Equip operation rate×Performance efficiency×Good quality rate= 0.917

= Valued operating time÷Loading time = 0.9165 P: Total effective equipment productivity (TEEP)

= Equipment utilization rate×Equipment operation rate×Performance Efficiency×Good quality rate = 0.651

= Valued operating time÷Calendar time = 0.6504


- 31 -

A Model on Contributive Managerial Effect

■ Transformation of OEE for the contributive managerial effect

OEE Theoretical C / T Good productsLoading time

OEE Good productsLoading time Theoretical products per hour

▼

■ Calculation of good product increment from OEE OEE (during a given period of bench mark year)

OEE (during the same period with the 1% upraised condition)

Good products ( )

Loading time Theoretical products per hourx

Good products ( )

Loading time Theoretical products per houry

y-x, as the good product increment corresponding to the extent of OEE increment at the 1% upraised condition can be acquired

y - x = (0.01)×Loading time×Theoretical products per hour

- 32 -

■ Contributive managerial effect acquired by 1% upraised OEE

Additive contribution profit acquired by keeping the OEE at the 0.01 (1%) upraised condition = Good product increment being sold ×Contribution profit per unit

Contributive managerial effect acquired by 1% upraised OEE

= Additive Contribution Profit + Saved Manufacturing Cost

where,

Additive contribution profit (based on direct costing)

= Additive sales×Contribution profit per unit

Saved manufacturing cost (as opportunity cost)

= Saved labor cost+Saved utility cost+Saved maintenance cost + Saved depreciation cost

A Model on Contributive Managerial Effect

- 33 -

Case Study on Contributive Managerial Effect

▶ Data collection for the OEE

* Product : Coke bottle

* OEE (During one bench mark year) : 82.1% (0.821)

* Processed products (During one bench mark year) : 4,484,000 Cases/Year

* Theoretical products per hour (based on a filler as bottleneck equipment); ⓐ : 2,500 Cases/Hr

* (During one bench mark year) Calendar time (Duty days×24Hr) : 7,176 Hrs

* (During one bench mark year) Loading time; ⓑ : 2,183 Hrs

* (During one bench mark year) Operating time : 1,866 Hrs

■ The collected data for contributive managerial effect from DSB’s Coke manufacturing history

- 34 -

▶ Data collection for the saved manufacturing cost

▷ Labor cost data * Labor wage rate; : 2,500 Won/Hr * Line working person; : 24 Personsⓒ ⓓ ▷ Utility cost data * Electricity cost per hour; : 75,000 Won/Hrⓔ * Fuel cost per hour; : 41,100 Won/Hr * Water cost per hour; : 33,000 ⓕ ⓖWon/Hr ▷ Maintenance cost data * Annual maintenance cost (Material + Subcontractor); : 452,456,000 Wonⓗ * Maintenance cost per case : 101 Won/caseⓘ ▷ Depreciation cost data * Purchase cost : 8,756,643,000 Won * Period of depreciation : 10 Years * Depreciation method : Fixed method * Annual depr’n cost; : 842,115,000 Wonⓙ

▶ Data collection for the contribution profit per case * Sales per case; ⓚ : 8,496 Won/Case * Variable manufacturing cost per case; ⓛ : 2,318 Won/Case


- 35 -


① Good products (During one year) from OEE

= Overall equipment efficiency×Loading time×Theoretical products per hour (ⓐ) = 4,480,608 Cases

② Additive good products acquired by the 1% upraised condition of OEE

= (0.01)×Loading time (ⓑ)×Theoretical products per hour (ⓐ)

= 54,575 Cases

③ Converted loading time corresponding to the additive good products

= Additive good products acquired by the 1% upraised condition of OEE

(②)÷Theoretical products per hour (ⓐ) = 21.83 Hrs

■ The contributive managerial effect per 1% of OEE can be calculated in sequence.

- 36 -

④ Sub total of labor cost

= Converted loading time corresponding to the additive good products (③)

× Labor wage rate (ⓒ)× Line working person (ⓓ) = 1,309,800 Won⑤ Saved electricity cost


× Electricity cost per hour (ⓔ) = 1,392,000 Won⑥ Saved fuel cost


× Fuel cost per hour (ⓕ) = 767,000 Won⑦ Saved water cost


× Water cost per hour (ⓖ) = 616,000 Won


- 37 -

⑧ Sub total of utility cost = Saved electricity cost (⑤) + Saved fuel cost (⑥) + Saved water cost (⑦) = 2,775,000 Won

⑨ Saved maintenance cost = Additive products acquired by the 0.01(1%) upraised condition of OEE (②) × Maintenance cost per case (ⓘ) = 5,512,075 Won

⑩ Estimated depreciation cost

= Annual depreciation cost (ⓙ)×Additive good products acquired by the

1% upraised condition of OEE (②)÷Good products during one year

(①) = 10,257,185 Won

⑪ Saved manufacturing cost corresponding to the additive good products

= Sub total of labor cost (④)+ Sub total of utility cost (⑧)+Saved mainte-

nance cost (⑨) + Estimated depreciation cost (⑩) = 19,854,060 Won


- 38 -

⑫ Sub total of contribution profit per case = Sales per case (ⓚ)-Variable manufacturing cost per case (ⓛ) = 6,178 Won

⑬ Annual additional contribution profit

= Additive good products acquired by the 1% upraised OEE

(②)×Sub total of contribution profit per case (⑫) = 337,164,350 Won

★ Contributive managerial effect acquired by 1% upraised OEE

= Saved manufacturing cost corresponding to the additive good products

(⑪) + Annual additive contribution profit (⑬)

= 357,018,410 Won

In case of DSB Company, total contributive managerial effect of 16%

increasedOEE could be given as 5,712,294,560 Won


- 39 -

Conclusions

Firstly, according to new equipment loss structure, the equipment per-formance indices can be given all together as the following.

Secondly, according to the increased value of OEE, the contributivemanagerial effect can be calculated.

Equipment productivity : Equipment utilization rate, Planned availability, Equipment operation rate, Total effective equipment productivity (TEEP) Equipment reliability : Time availability, Mean time between failure Failure intensity rate, Failure frequency rate Equipment efficiency : Performance efficiency, Good quality rate, Overall equipment efficiency (OEE), Net equipment efficiency (NEE) Equipment maintainability : Mean time to repair

Contributive managerial effect acquired by 1% upraised OEE

= Saved manufacturing cost corresponding to the additive good products (⑪) + Annual additive contribution profit

- 40 -

Q & A

Q & A

New Methodology for measuring Equipment Performance and Managerial Effect in TPM By Ohwoon Kwon May...

Documents

Transcript of New Methodology for measuring Equipment Performance and Managerial Effect in TPM By Ohwoon Kwon May...