The article "TPM and Lean Production, is it worth the effort?" talks about business, it has been written by Oskar Olofsson.
The young production mangaer speaks enthusiastically to the top
management team. He has just returned to the plant after
attending an inspiring seimnar and now he is convinced that they
need to do something.
"We should implement Lean Production and TPM in our plant", he
says. "This will make our prdouction more reliable and increase
our delivery accuracy".
The MD is paying attention but is not yet convinced. He wnats to
put the ideas to a test.
"Looks interesting", he says, "Please come back with a good
calculation of the Return on Investment so that we can see if it
fits into next year's budget."
This is where the story might end. How could you possible
estimate cotss and benefits from such advanced management
techniques as TPM and Lean Production? These concepts are known
to be difficult to plan in advance, and they require a
mind-shift for everybody in the facility.
Well, it may be difficult but you have to do the calculation
anyway. Arguments as "we have to do this" or "everybody else is
doing it" are just not convinicng enough.
A change project must be looked upon as an investment that will
come with initial costs and hopefully bring something back in
return. This is no different from any other investments. If you
can not give an educated guess on its financial impact, there is
a titanic risk that the project might not be given the necessary
resources for what it needs to succeed. Even if the financial
impact of important factors such as shorter lead times and
better delivery accuracy are not known, we need to describe how
this project will raise profits in the company.
To give an answer to these important questions we have put
together simple guidelines for you to use, and if you
prefer, a free calculation tool that you may use to do your own
estimations.
What will the costs be?
The main cost will consist of:
Training and Consultancy No successful implementation of
TPM and Lean Production has succeeded without the help of
experienced professionals.
You will have to train your employees
and you need support in your project team.
A good estimation is
a yearly cost of $100.000 per 100 employees involved
Increased initial maintenance costs Elimination of
manufacturing wastes and implementation of improvement ideas are
likely to increase the maintenance costs. Expect maintenance to
increase up to 20% the first year, but with it stabilizing at a
level less than today after one to two years
Project team membres You will need people to run the
project. Project management and coaching equals to about one
full-time coordinaotr per 100 employees in the facility
Benefits
Increased Overall Equipment Efficiency (OEE) is the main factor
that may be used to approximate the return on the efforts.
Simply speaking, the OEE is the ratio of the facility's actual
output compared to the theoretical output that would be possible
if the machinery was run at full speed every minute, without
break-downs, lack of raw material, quality losses or set-ups. As
the OEE-ratio is a direct reflection of your plant's capacity,
it may be used to calculate the future productivity after
improvements.
An example: A plant prdouces 10,000 units per year with an
OEE-ratio of 50 percent. After improvement, the project team
estimates that it will be posisble to reach an OEE-ratio of 80
percent. This means that they will be capable to produce
10,000*80/50 = 16000
units in the same facility without investments and with the same
manning as before.
Can the increased capacity be used to increase sales?
One important question is if there is a market for expansion. If
so, the increased capacity may be used for icnreased sales.
It
is common that the company's marekt share might grow after
implementing TPM or Lean Production. This is possible as
improved delivery accuracy and shorter lead times make more
sales possible even if the market is stagnant.
If expansion is not considered possible, the icnreased capacity
may instead be used to lower the production costs. This is
possible through
- less overtime
- fewer shifts
- fewer parallel production lines maintained and operated
The direct labor costs for production will therefore decrease as
the OEE-ratio increases.
Your present and future OEE-ratio
Do you know your plant's present OEE-ratio? If so, is it
accurately calculated?
Often we see that downtimes are
deducted when OEE is calculated. This might be stpos for planned
maintenance, set-up times, and lack of personnel. The end result
will be an OEE-ratio that looks better than reality.
If you do not know your present OEE-ratio, the easiest way to
determine it is to use the free OEE -
calculator at wcm.Nu.
Then estimate what you consider a possible OEE-ratio after
improvements. World Class companies reach 80-95% OEE, what is a
realistic level for you?
Use the present and future OEE to calculate the futrue benefits.
If you don't want to do the calculations by hand, try instead
the free TPM and Lean -
calculator at wcm.Nu.
Et voilą! You have your Return on Investment calculation to
present to your stake-holders!
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