Performance is critical in the manufacturing environment because it has a significant impact on company profitability. In today’s highly competitive environment, with shrinking margins and overseas competition, manufacturers are forced to strive for as high a degree of efficiency and productivity as possible. As such measuring that productivity and efficiency, no matter difficult it may seem, is a manufacturing must that requires specific measures applied across not only similar but a variety of manufacturing environments with comparable characteristics.
This article is the 4th in this multi-part series examining performance measures geared at the manufacturing and production environment. Article One looked at the concepts of performance measures, and defined the various metrics. Articles Two and 3 examined a total of seven (7) different measures, looking how to computation each, interpret the results of each of the measures, and also looking at a real world applicable to all 7 measures.
In this article we will look at measures related to actual efficiency. A variety of analytics are necessary to compile a combined efficiency metric.
Measures of Efficiency
Last time we looked briefly at Manufacturing Efficiency, and while that is one specific way to measure this analytic, efficiency is really measured in a variety of ways; but in order to view overall efficiency, it is necessary to combine all of the efficiency analytics into a single metric. So let’s begin by looking at each of the various measures, and then we will look at the ‘combined’ value.
EA = Availability Efficiency: This is a measure of how efficiency losses impact overall efficiency (efficiency losses including things like non-scheduled downtime, breakdowns, and other periods of non-production)
EA = Time Operational / Time Total
[Note: Time Operation means time up-n-running, as opposed to Time Total means total time being measured (a shift, a work day, a work week, etc.).
Looking back at our real world example, our Concrete Plant typically produces 120 cubic yards of concrete in an 8-hour day, but in order to do so the plant requires the efforts of 3 workers working the entire 8 hours to produce that number of cubic yards. But as we have previously seen, there are a lot of different factors that go into making concrete. Things like supply availability can significant impact productivity and efficiency; for example if our plant starts the day with a shortage of ‘Portland cement’ with which to make the concrete, and the workers must wait for an hour at some point during their day to get a delivery, before resuming production, an hour of production time has gone by with nothing produced. In this example, our Availability Efficiency would be measured:
EA = Time Operational (7 hours of Production) / Time Total (8 hours of Total Time)
EA = 7 / 8
EA = .875
EP = Performance Efficiency: This is a measure of how diminished performance time impacts overall efficiency (diminished performance can result from lengthened production cycles due to training, reduced speed of performance, or idleness impacting performance in progress.)
Ep = EA X Capacity Utilization
You will remember from Part 2 of this series that, Capacity Utilization = Capacity utilized or gross production / Optimum capacity or production level
Based upon this newest formula and our example
Ep = EA X Capacity Utilization
Ep = .875 X 88.88
Ep = 77.77% (.7777)
EQ = Quality Efficiency: This is a measure of how quality inefficiencies impact performance (quality inefficiencies include defects, re-work, design change, etc.)
EQ = Acceptable Production Quantity / Actual (Total) Production Quantity
[Note: Acceptable Production Quantity is the quantity of product produced in a specified period of time being used for other measures, as opposed to the total quantity of product produced during the same time frame.]
In our example, we will make the assumption that all 120 cubic yards of concrete produced were acceptable. So the EQ = 100% in our example.
So one measure of efficiency is Overall Efficiency (EO) where the definition is:
EO = EA X EP X EQ
As a result our example case study would have the following measures applied to the EO formula:
EO = .875 X .7777 X 1.0 (100% = 1.0)
EO = .6875
So the Overall Efficiency of our Concrete Plant based upon the limited example of the single day that was measured was .6875, or 68.75%. They simply must do a better job at keeping the supply chain timely so as to maximize both worker and plant efficiencies.