What would Harrington Emerson think?

Today many industrial companies utilize Overall Equipment Effectiveness (OEE) as a key performance indicator (KPI) in conjunction with lean manufacturing efforts to provide an indicator of success. The question is, is it relevant today?
OEE is a hierarchy of metrics developed in the 1960s to evaluate how effectively a manufacturing operation’s assets are utilized. It is based on the Harrington Emerson (was a pioneer in industrial engineering and management promoting the ideas of scientific management and efficiency) way of thinking regarding labor efficiency. The results are stated in a generic form which allows comparison between manufacturing units in differing industries. It is not however an absolute measure and is best used to identify scope for process performance improvement. The hierarchy consists of two top-level measures (OEE and TEEP; the difference being OEE measures effectiveness based on scheduled hours whereas TEEP measures effectiveness against calendar hours) and four underlying measures that provide understanding as to why and where the OEE and TEEP gaps exist. These measures are:

• Loading: a determinant of the TEEP Metric that represents the percentage of total calendar time that is actually scheduled for operation.
• Availability: a determinant of the OEE Metric that represents the percentage of scheduled time that the operation is available to operate.
• Performance: a determinant of the OEE Metric that represents the speed at which the Work Center runs as a percentage of its designed speed. And
• Quality: a determinant of the OEE Metric that represents the Good Units produced (Yield) as a percentage of the Total Units started. OEE does not factor in operational costs, and certainly not those related to energy efficiency. But should it?

In the early 1960s, when OEE was established, electricity was less than 1 cent per kWh, therefore not a significant cost component. Also worth noting was that this time frame was prior to Dr. Charles Keeling (recognized for his early work on measurement of atmospheric carbon dioxide) publishing his findings illustrating the continuing build-up of CO2 over time and the scientific community correlating the CO2 buildup and climate change. So quite frankly there was simply not a socio-economic reason to consider energy as a manufacturing perfromance factor. But today that Is not the case. Energy prices are 10X if not greater than they were in 1960, comprising over 50% of a companies O&M costs and in some cases exceeding 90%. And the scientific community has quit debating if climate change is real. The discussion is now on how to curb CO2 buildup. And when viewed through an energy lens, the leading contributor to CO2, over 60% of every kWh generated is wasted.
In 1909 Harrington Emerson stated: "The twentieth century dawns with as yet unaccomplished task of conservation, of eliminating wastes-wanton and wicked wastes of all kinds, wastes that make our civic governments a by-word, our destruction of natural resources a world scandal, our complacent industrial efficiency a peculiarly national disgrace, of all nations, we Americans ought to know better."
So what would Mr. Emerson think of the industrial efficiency today, 100 years later?
Should OEE be the default manufacturing indicator of performance?

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About the Author

Rod Ellsworth has over 30 years of related energy and enterprise asset management experience. Prior to founding Asset Sustainability @ Work Rod lead the convergence of the energy and asset management markets, “Global Asset Sustainability”, through the first commercially available energy and asset management offering. Rod founded Asset Sustainability @ Work to develop certified Best Practice software tools to enable Customer business transformation with organizations having a focus on promoting energy conservation and sustainability by delivering the financial and physical controls for an enterprise to be in full control of their sustainability, energy consumption, and the asset and operating infrastructure that underpins them. Asset Sustainability @ Work’s initial offering is Motors @ Wok, a SaaS solution based on certified best practices for managing commercial and industrial motor-driven equipment for peak energy efficiency.