MCPD & Industry 4.0: 10 Transformation Directions

 27/09/2019
By Dr. Alin Posteucă

Overall Equipment Effectiveness (OEE) and Overall Line Effectiveness (OLE)

MCPD & Industry 4.0: 10 Transformation Directions

As it is already known, the key to daily scheduling of activities through Takt Time requires aligning all processes accordingly and especially the bottleneck process to ensure the targets of effectiveness and efficiency.

The timely fulfilment of the entire volume of planned production in order to try meeting the planned costs requires a planning and control of the OEE and/ or OLE to reduce and/ or eliminate the level of losses and waste and associated costs of losses and waste – CLW (according to the MCPD paradigm). Lately, the problem of capacity utilization is becoming more and more pressing.

a) MCPD: OEE and OLE Scenarios and Cost Impact

Often there are three situations in companies or certain segments of machines and facilities in companies:

  1. companies that “woke up overnight” with an overcapacity that causes unacceptable unit cost trend;
  2. companies that need new capacities to meet the demands of the clients and have indirect costs that are increasingly difficult to control; and
  3. companies that have declining sales, an increasing lack of available real capacity and have high and uncontrollable unit costs.

Therefore, the companies need a scientific approach to cost improvement regardless of the decrease or increase of sales – MCPD does this.

b) OEE and OLE: Short Approach

Measuring the current state of the effectiveness of machines and facilities with the help of OEE in order to scientifically plan the improvements and to subsequently carry out projects to improve the effective and efficient equipment in full synchronization to the real time cycle with maximum takt time is the route chosen by many companies to address both internal and external problems, but especially the target profit level.

Some companies need to increase the effectiveness of OLE in order to achieve the synchronization between the equipment of the assembly line. To be able to determine OLE, the takt time for the selected processes must be the same. The OLE calculation can be done as a multiplication or as an average of the OEE indicators from the selected processes. It is important that the calculation method be kept in order to have data comparability over time.

c) The Challenges of OEE and OLE

The OEE challenges are:

  • the standard and real time cycles may differ from one product to another on an equipment;
  • integrating one process with another is important in order to maximize overall effectiveness of the total product line than concentrating on an equipment;
  • the control of a single equipment may be insufficient, since it is not alone in the factory.

The OLE challenges are:

  • a factory may have several production lines that have to respond to different market needs;
  • one or more products can be made on a line in a given period and the Takt Time may vary;
  • the standard and real time cycles may be different from one product to another for different processes of the line;
  • the product moves sequentially through several workstations (processes), starting with the supply of raw material (process 1) and ending with the finished product to be sent to the customer (possibly packaged) – it becomes difficult to locate exactly the non-effectiveness.

d) MCPD and OEE & OLE

To meet these challenges, the improvements need to be very carefully chosen and implemented fully and on time. For this, many companies already use the MCPD system to continuously and scientifically direct cost improvement by setting targets and means for Critical Cost of Losses and Waste (CCLW). MCPD uses 14 main types of Cost of Losses and Waste (CLW).

e) MCPD & Industry 4.0: 10 Transformation Directions

As it is known, Industry 4.0 is driven by:

  • digitization and integration of vertical and horizontal value chains (main expectation: supply chain lead time reduction);
  • digitization of product and service offerings (main expectation: production lead time reduction);
  • digital business models and customer access (main expectation: delivery lead time reduction).

The approach of OEE and OLE through Industry 4.0 with the help of MCPD mainly aims to synchronize supply chain lead time with production lead time and further synchronize with delivery lead time. The goal is to have maximum productivity, respectively a minimum Total Lead Time.

Therefore, the 10 transformation directions proposed in this article are:

  1. the synchronization of material handling lead time (eg train route) with production takt time, implicitly with the standard time cycle of the equipment/ line, using mobile devices, location detection technologies, advanced human-machine interfaces, smart sensors, advanced algorithms; all based on the continuous determination of Cost of Internal Logistic Losses, Cost of Equipment Losses, Cost of New Equipment Losses, Cost of New Product Development Losses, Cost of Human Work Losses and the choice of the most effective and efficient Kaizen and Kaikaku projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  2. the continuous connection between the WIP level and the production mix to minimize WIP value so that between processes there is only one product, to properly plan the set-up, to respect the minimum and maximum level of the stocks, etc; using location detection technologies, advanced human-machine interfaces, smart sensors, etc; all based on the continuous determination of Cost of Material/ Auxiliary Material Losses, Cost of Equipment Losses, Cost of Human Work Losses and the choice of the most effective and efficient Kaizen and Kaikaku projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  3. the continuous connection between the WIP level and the cycle time of the bottleneck process and the maximum Takt Time to take into account the production constraints; to know the necessary WIP at any time, for ergonomics, for reducing man * hour, etc; using location detection technologies, advanced human-machine interfaces, smart sensors, Internet of Things (IoT) platforms, advanced algorithms; all based on the continuous determination of Cost of Internal Logistic Losses, Cost of Waste – WIP from Set-up; Cost of Waste – WIP from Transfer, Cost of Waste – Raw Material Inventory; Cost of Waste – Finished Products Inventory, Cost of Energy Losses, Cost of Waste – Components Inventory and Cost of Waste – Packaging Inventory and the choice of the most effective and efficient Kaizen projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  4. for strengthening feedforward, concurrent and feedback control for the minimum and maximum level of standard stocks near the line/ equipment to decrease the value of inventories and to reduce the effects of changes in production planning; using cloud computing, mobile devices, location detection technologies, smart sensors, advanced algorithms; all based on the continuous determination of Cost of Waste – WIP from near the line/ equipment, Cost of Equipment Losses, Cost of Human Work Losses, Cost of Material/ Auxiliary Material Losses, Cost of Internal Logistic Losses, Cost of Energy Losses and the choice of the most effective and efficient Kaizen, Kaikaku and Methods Design Concept (MDC) projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  5. reducing the number of operations required in processes for the feasible sizing of the number of people and for framing the operations in takt time and to minimize non-value operations and minimize/ eliminate them; using cloud computing, mobile devices, location detection technologies, advanced human-machine interfaces, smart sensors, advanced algorithms; all based on the continuous determination of Cost of Human Work Losses and Waste, Cost of Equipment Losses, Cost of Energy Losses and the choice of the most effective and efficient Kaizen and Kaikaku projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  6. innovative and creative redesign of the working method of the equipment/ robots in order to increase the performance and utilization without significant investments; using advanced human-machine interfaces, smart sensors , all based on the continuous determination of Cost of Equipment Losses, Cost of Human Work Losses, Cost of Energy Losses and the choice of the most effective and efficient Kaizen, Kaikaku and especially Methods Design Concept (MDC) projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  7. synchronizing equipment and/ or lines at takt time by balancing equipment/ line to perform operations balancing between them, for balancing processes between them, to balance takt time of equipment/ line with supply lead time of equipment/ line; for balancing the takt time of the equipment/ line with the request of the next client; using mobile devices, location detection technologies, advanced human-machine interfaces, smart sensors, advanced algorithms, cloud computing, Internet of Things (IoT) platforms; all based on the continuous determination of Cost of Equipment Losses; Cost of New Equipment Losses, Cost of New Product Development Losses, Cost of Human Work Losses, Cost of Internal Logistic Losses and the choice of the most effective and efficient Kaizen projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  8. managing bottleneck process for quality control in order to reduce and/ or eliminate quality assurance constraints; using mobile devices, location detection technologies, advanced human-machine interfaces, smart sensors, advanced algorithms; all based on the continuous determination of Cost of Equipment Losses, Cost of New Equipment Losses, Cost of New Product Development Losses, Cost of Human Work Losses, Cost of Material/ Auxiliary Material Losses, Cost of Maintenance Material Losses, Cost of Energy Losses, and the choice of the most effective and efficient Kaizen projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  9. achieving and sustaining the One Piece Flow and Continuous Flow status to eliminate parallel operations, to eliminate operations without value between operations, for ergonomics; using mobile devices, location detection technologies, Internet of Things (IoT) platforms, advanced human-machine interfaces, smart sensors, advanced algorithms; all based on the continuous determination of Cost of Equipment Losses; Cost of New Equipment Losses; Cost of New Product Development Losses; Cost of Human Work Losses; Cost of Material/ Auxiliary Material Losses; Cost of Maintenance Material Losses; Cost of Energy Losses; Cost of Internal Logistic Losses (assimilated to Equipment Losses); Cost of Waste—WIP from Set-up (WIP S); Cost of Waste—WIP from Transfer (WIP T); Cost of Waste—Raw Material Inventory; Cost of Waste—Finished Products Inventory; Cost of Waste—Components Inventory and Cost of Waste – Packaging Inventory and the choice of the most effective and efficient Kaizen projects to achieve Manufacturing Cost Improvement (MCI) targets and annual and multiannual Goal;
  10. developing the system of continuous capture of losses and waste in order to have the continuous measurement of non-productivity; using mobile devices, location detection technologies, Internet of Things (IoT) platforms, advanced human-machine interfaces, smart sensors, advanced algorithms, etc.

Therefore, the purpose of OEE and OLE is to be understood correctly and continuously and to be continuously improved, (1) first through improvement projects that do not involve investments or by creating productivity/ internal productivity (with the help of Methods Design Concept – MDC and Kaizen) and (2) then through improvement projects involving investments or by buying productivity/ external productivity (Kaizen and Kaikaku, including for Industry 4.0) with the basic purpose of achieving Manufacturing Cost Improvement (MCI) targets and implicitly to achieve Annual and Multiannual Target Profit.

Thank you very much for reading my article. Any comment is very welcome. And, remember, if you need to increase profitability through productivity and implicitly by reducing costs do not hesitate to contact me.

Dr. Alin Posteucă is the founder and CEO of Exegens®, a global consulting firm specialized in cost competitiveness improvement and operational excellence. It helps customers create and implement profitable strategies and cost improvement programs that ensure a unit cost improvement of at least 6% per year for each of the next 5 years by maximizing the efficiency and effectiveness of operations.

He is the author of Manufacturing Cost Policy Deployment (MCPD) concept, published in three books at Productivity Press – Routledge/ CRC, New York (USA). The latest, ”Manufacturing Cost Policy Deployment (MCPD) Profitability Scenarios: Systematic and Systemic Improvement of Manufacturing Costs” (October 2018) is based on its main belief that the annual and multiannual target profit can be achieved irrespective of the sales volumes, increasing or decreasing. He is also the co-author of the book ”Manufacturing Cost Policy Deployment (MCPD) and Methods Design Concept (MDC): The Path to Competitiveness”, published at Productivity Press New York (USA), 2017, as well as the author of the book ”Manufacturing Cost Policy Deployment (MCPD) Transformation: Uncovering Hidden Reserves of Profitability”, published at Productivity Press din New York (USA), February 2018.

Alin Posteucă has more than 20 years of experience in Cost Improvement consulting and training. He has a PhD degree in Industrial Engineering and a PhD degree in Economics.

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