manufacturing conference workshop 2 - return on investment (roi)

John Roberts

Managing Director, Operations, Idhammar Systems

Calculating ROI for an OEE System

15th November 2012

©Copyright 2012 Idhammar Systems Limited

Pan-industrial Customers

KEEPING INDUSTRY MOVING AND IMPROVING...


Proven Track Record in the Food Industry

Workshop• What is OEE and why should we consider it?• Where are we now.... where do we want to be....

and when?• What improvements are possible?• How will an OEE system help?• What is the cost?• When will our investment start to pay back?• What about other investment opportunities?


What is OEE and why is it important?• A standard index of manufacturing efficiency• Based on...

• Utilisation• Line availability• Manufacturing performance• Product quality

• Why use it....• Compare performance within industrial sectors• Measure of continuous improvement on a line or within a site• Highlight inefficiencies

• Drive improvements in efficiency


Where are you now?• Tractor factory

• 120+ tractors per day

• Milk bottles• 1.3million bottles per

day

• Bread Bakery• 600,000 Loaves per day

• Canning plant• 1.5 million cans per day

• Spirit Bottler• 100,000 bottles per day

• Cake Baker• 400,000 packs per dayKEEPING INDUSTRY MOVING AND

IMPROVING...

• Problem areas?• Waste• Manpower costs• Equipment reliability• Materials supply• .......

What improvements are required and when?• SILT Same In Less Time• MIST More In Same Time• Management performance• Delivery deadlines• Energy savings• Waste reduction• Staff motivation and engagement• Manpower costs


How will an OEE system help?• OEE

• Availability• Performance• Waste

• Energy Monitoring• Utilisation• Productivity• Quality Monitoring


What is the cost?• Moderate OEE scores: 50% - 80%

• Low product value• Low tech environment• Manual data capture• Spare production capacity

• £2k - £5k per line

• High OEE scores: 80% - 95%• High product value• Automation and SCADA• Tight production schedules

• £5k - £12k per line


When will our new OEE system start to pay back?• Software systems are only facilitation tools • Fast gains from low OEE plants• More time required for better performing

plants• Time will be required to deliver a cultural

change• Management is the key


Higher OEE means Higher Unit Margin• Significant increases in Unit Product margin

can be delivered: • Low materials cost• Stable energy usage• People are available


600

700

800

900

1000

1100

1200

1300

-20%

-10%

0%

10%

20%

30%

Margin/Unit Produced Vs Throughput

ROI: Bakery


Costs

OEE system £ 4,000

Internal manpower allocation at start up

£ 1,000

Total £ 5,000

Potential Savings per Day Value now

1% improvement

Product sales value £ 40,000

£ 400

Daily throughput 80000

Sales revenue per unit £ 0.50

Margin % 10% £ 40

Cost of Waste £ 1,500

£ 15

Manpower £ 2,500

£ 25

Energy £ 2,500

£ 25

Quality management £ 100

£ 10

Total £ 115

Return on Investment 43Days

Return on Investment per production line High volume Moderate / high waste Low material cost Low product unit price Low profit margin High energy cost Significant quality monitoring Manual data capture

Some opportunities for manpower reduction

ROI: Tractor Factory


Costs

OEE system £ 100,000

Internal manpower allocation £ 20,000

Total £ 120,000


1% improvement

Product sales value £ 13,000,000

£ 13,000


Sales revenue per unit £ 100,000

Margin 8% £ 1,040

Cost of Waste £ -

£ -

Manpower £ -

£ -

Energy £ -

£ -

Quality management £ -

£ -

Total £ 1,040


Return on Investment for the site Low volume Low waste High product unit price Steady energy usage Significant quality monitoring

Automated data capture with manual input

Few opportunities for manpower reduction

ROI: Spirit Bottler


Return on Investment per line High volume Low waste Moderate product unit price Steady energy usage Automated quality monitoring

Automated data capture with manual input

Some opportunities for manpower reduction

Costs

OEE system £ 15,000

Internal manpower allocation £ 1,500

Total £ 16,500


1% improvement

Product sales value £ 28,000

£ 280


Sales revenue per unit £ 4.00

Margin 12% 33.6

Cost of Waste £ -

£ -

Manpower £ 800

£ 8

Energy £ 500

£ 5

Quality management £ -

£ -

Total £ 47


What about other investment opportunities?• Where to spend capital?

• In the most inefficient areas

• Aunt Bessie’s• Identified low OEE scores in a packing area• The financial result of reducing this problem area was

assessed• An Improvement project was approved• New equipment was installed• OEE improved and the investment was recouped

• The OEE system was used to clearly identify the specific area that would most benefit from a capital improvement project


Summing Up• Know where you are now• Understand what areas are likely to provide

opportunities for improvements• Understand that this is not an IT project• Take the project seriously

• Publicity and internal marketing• Get a senior sponsor• Act on the data• Allocate responsibilities


manufacturing conference workshop 2 - return on investment (roi)

Technology

low oee scores

higher oee

keykeeping industry

oee system help

efficiencykeeping industry

foodindustrykeeping

daykeeping industry

linekeeping industry