Motivating others to squeeze more from the capital equipment in your company’s plants is not easy,  especially if you’re not always there to do it. But that doesn’t stop Stephen Sefton, the manager of enabling technologies in the United States for Rexam PLC, a London-based producer of beverage cans. Like a growing number of executives in his situation, he has found that using measures such as overall equipment effectiveness (OEE) can give him the tools that he needs to drive continuous improvement—and greater profits—at his company’s U.S. facilities.

“That is changing, though,” notes Darren Riley, Manufacturing Execution Systems (MES) business development manager for the electronics industry for Milwaukee-based Rockwell Automation Inc. “There has been too much lag between the operations and administrative sides of the business.” Besides being slow, the financials also lack the detail and accuracy often found in the data used to calculate OEE. Consequently, many executives are turning to OEE to extract the current data that they need from their automated equipment to accommodate rapidly changing business conditions.

Such is the case at Rexam. The software supplied by Acumence extracts details about the operation from the controllers overseeing the can manufacturer’s machinery, calculates the efficiency metric, and reports it to management over the company’s intranet. “[Rexam manager] Sefton can look at how well the lines are doing on his screen in real time,” says Brochu. “If that number starts to look bad, you know you’re going to get a phone call.” Knowing that corporate management takes these numbers seriously motivates plant management not only to keep them high but also to nudge them ever higher.

A Controversial Number

Although few dispute that OEE is a great benchmark for measuring the progress of a process, just how much one can use the metric to compare operations across several plants is a matter of controversy. OEE has some profound limitations, and managers must know what they are in order to keep the numbers in perspective.

To illustrate the point, Brochu explains how differences in product mix can skew the numbers. Consider a plant dedicated solely to making cans for Coke Classic, for example. It will be much more efficient than one that makes cans for several Coke products, such as Diet Coke and Diet Coke with Lime, because it will have less downtime for changeovers than the multi-line plant. Consequently, if the dedicated plant’s efficiency were 90 percent, it would appear to outperform the other plant running at, say, 80 percent. But the lack of changeovers would mean that the plant is capable of running at a higher OEE, perhaps 95 percent; whereas the plant with more changeovers might be capable of only 82 percent. In this case, the plant running at 80 percent would actually be more efficient, as it was running closer to its maximum availability.

It’s also important to recognize that efficiency is not the same thing as profitability. “OEE is a proxy for profitability, but not a perfect one,” says Brochu. If a highly profitable product has a measure of complexity that requires a lengthy setup and frequent adjustments to the machinery, then the process for producing it will have a lower OEE than a less profitable product that is much easier to make. So Brochu thinks that executives should really consider each plant’s profit contribution to overall business performance when making investment decisions. ...