Operators of Food Packaging Equipment Should Be Using OEE to Maximize Profitability
Packaging equipment operators are increasingly monitoring OEE to gain better insight from their operations, make the right decisions, and therefore improve performance and profit. This metric is not only considered a manufacturing KPI, but it’s strong tie to profitability makes OEE a financial metric as well, as Mark Leroux explains in his article OEE as a financial KPI.
More importantly, the OEE of packaging equipment can provide us great insights into the efficiency of the production line or factory as a whole. This is established in a must-read study for packaging equipment operators and managers titled ‘Use of packing equipment efficiency as an estimate of the overall plant effectiveness and as a tool to improve financial results of a food-processing unit’.
We will expand on that study later on, but first, let’s review what OEE means and how packaging equipment operators can use it.
OEE is a standard for measuring the overall efficiency of a production line’s equipment and is a metric for identifying key problems and potential improvements that can be made to improve the operational output of a piece of equipment, a production line or a plant. It is traditionally considered a manufacturing KPI that tells us how well our equipment is performing by combining three different performance indicators: Availability, Performance and Quality.
OEE provides us with a direct and clear percentage that reflects how efficiently each of our critical pieces of machinery are operating as well as collections of equipment, and furthermore the plant as a whole, performing. However, as stated before, OEE also has a direct impact on profits and should be considered a financial KPI when going over the finances of operations and future investments.
To calculate the OEE of a specific equipment, including packaging equipment, the Availability, Performance and Quality metrics have to be calculated individually in percentages. Here we explain how to do it. But, once those metrics are calculated, OEE is derived by performing the following calculation:
OEE = Availability * Performance * Quality
The higher OEE percentage, the more efficient your line and packaging equipment are performing. Read here to understand how OEE scores stand among worldwide manufacturers.
In packaging lines, OEE is (and should be) widely used. Niels Andersen, vice president of Manufacturing Business Consulting for Invensys Operations Management says, “OEE seems to be the most commonly used non-financial performance measurement on packaging lines today.”. Many reasons fall into why OEE is such an important metric for packaging line operators.
The competitive nature of the packaging industry increases the importance of getting the most out of owned packaging equipment, which can be done by assessing their OEE. In today’s industry, process optimization solutions are essential to compete, hence the rise of continuous improvement practitioners. Another factor is OEE’s simplicity and ease of use. As seen previously, OEE’s calculation is not a complex formula composed of confusing metrics. OEE’s calculation is a simple multiplication of matrices that are integrated into production floor on a daily basis.
Using the right data collection tools such as Worximity Smart Factory Analytics, OEE can be understood and discussed in a quick and easy way. The most important factor, discussed in the study noted above, is the fact that packaging lines are considered to be the ‘choke’ points of production, especially in the food industry.
Therefore, monitoring packaging equipment’s OEE is the ideal place to start.
Because all roads in food production lead to the packaging line, by monitoring it, we establish the health of the entire production process. Additionally, through mathematics and correlation, you can begin by measuring the packaging line OEE, and extrapolate what you see to what is causing lower than desired OEE at the packaging line to what is happening both upstream and downstream.
What makes this study even more powerful is that, in addition, it shows a correlation between OEE and earnings. Following their methodology and mathematical models, they in essence found that
“Losses accounted for upstream will eventually result in losses downstream. These disturbances will be noticed and recorded while calculating the OEE of the nth equipment.”
Typically, packaging is the last step in a plant before the finished product is shipped to customers. Therefore it is highly recommended to calculate the overall plant effectiveness of a food processing plant by measuring the OEE of the packing line!
This direct correlation from OEE to earnings makes it more than a manufacturing KPI, but a financial one. A C-level point of view into OEE as a financial KPI can be thought of by reading here. It makes sense, though, that measuring OEE in packaging equipment is used to increase profitability. An increase in OEE means more efficient production, which means inefficiencies go down, which minimizes costs and maximizes efficiency and profits.
OEE allows plant managers to detect and correct problems and wastes that would be unnoticeable instead, such as accumulated downtime from micro-stops, costs due to products wasted from low quality and from labor and maintenance downtime. For example. Patrick Williams, a general manager of Premier Foods says: “Our biggest cost is labor, when equipment goes down we have 90 people standing around doing nothing”.
Besides the reduction of waste and costs, monitoring OEE allows you to understand better the factors in your production and packaging process. Understanding your equipment better and tracking down those which are slowing the entire process will increase predictability in the future. This is a major difference for profitability! For example, predicting material usage and future maintenance will allow us to plan accordingly to avoid excess inventory and downtime costs respectively. Obviously, higher quality levels mean higher consumer satisfaction, higher retention, and therefore higher number of future sells which translate into larger profits.
Finally, it is important to emphasize that calculating OEE without the use of the right tools is a challenging task to do. Top manufacturers are increasingly integrating SaaS solutions into their processes to accurately display OEE metrics, collect data, and make the right decisions based on these.
This is especially important when talking about packaging equipment and packaging processes, as packaging is typically responsible for a large percentage of the manufacturing cost, and any hiccups in packaging can quickly impact customers. Packaging is critical to the overall performance of a food manufacturing business, so counting on the right technology designed to track performance metrics such as OEE is very important.
Industry leaders agree with this last statement. Mark Davidson, principal analyst at LNS Research, says that the best OEE monitoring tools are those that “measure and display OEE in real time to operators, along with supporting information that enables operations staff to understand root causes of OEE availability, line performance or quality issues”.
Implementing an OEE software package offers a significant amount of information on the causes of availability, line performance or quality variations in real time.
Software solutions, integrated with IIoT to enable direct measurement of machine data allow workers and packaging managers to make informed decisions. They make OEE metrics visible and easy to understand by showing them in the form of dashboards, graphs and historical trends. Properly using this type of technology allows managers to have a higher control over their production and packaging processes and react proactively rather than reactively. However, it is crucial that packaging equipment operators, and workers throughout the plant, believe in the numbers and trust the data.
Integrating new solutions may be a challenging task at first, but building a culture of workers that own this type of technology and use it to continuously improve processes is what will allow for good results in the long run and a high ROI.
If you're interested in maximizing packaging line OEE, and as a result the OEE of your food production facility, start a free trial today!