Kanban ERP | What is the Overall Equipment Effectiveness (OEE) of your ERP?

Kanban ERP | What is the Overall Equipment Effectiveness (OEE) of your ERP?
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OEE (Overall Equipment Effectiveness) is the gold standard for measuring manufacturing productivity. An OEE score of 100% means you are manufacturing only Good Parts, as fast as possible, with no Stop Time. In the language of OEE that means 100% Quality (only Good Parts), 100% Performance (as fast as possible), and 100% Availability (no Stop Time).

To calculate OEE, we must multiply 3 distinct performance indicators:

             Availability Rate (Availability takes into account Unplanned and Planned Stops. An Availability score of 100% means the process is always running during Planned Production Time)

X

             Performance Rate (Performance takes into account Slow Cycles and Small Stops. A Performance score of 100% means when the process is running it is running as fast as possible)

X

             Quality Rate (Quality takes into account Defects (including parts that need Rework). A Quality score of 100% means there are no Defects (only Good Parts are being produced).

=            Overall Equipment Effectiveness Rate (OEE takes into account all losses. An OEE score of 100% means you are manufacturing only Good Parts, as fast as possible, with no Stop Time)

The Overall Equipment Effectiveness of an ERP System

The concept of analysing the return on assets also applies to our information systems. To measure the performance of an ERP using the OEE framework, we can calculate the following:

             Usage Rate / Availability of Functions

X

             Quality Rate of Transactional Data

X

             Quality Rate of Master Data

=            OEE of an ERP

How to Calculate the OEE of an ERP?

 

Usage Rate / Availability of Functions

Many ERP users have limited knowledge of the functionalities available to them.  Consequently, this creates underutilisation of the system and results in them completing low value activities. Measuring the system usage rate allows us to determine if any changes are needed to the system configuration or if an update to training is needed in order to improve the user’s efficiency.

In some cases, the required functionality is simply not present in the ERP system. If too many important features are missing, it might be a great idea to re-evaluate your current ERP system. Experience shows us that more advanced systems generally have the necessary functionalities needed, and there is little need for custom workarounds.

As an example, imagine a company that is currently using and disposing of 180 out of 200 available features that are important to their business.  Their ERP usage rate would be 90%.

Quality Rate of Transactional Data

Once you’ve assessed the use of your ERP system functionalities, you must ensure that the data on which its functions are based are accurate. Quantities of stock, production orders and delivery orders are examples of supply chain inputs which must be accurate for the ERP system to work correctly.

For example, if 48 out of 60 items of transactional data are accurate, then their input data quality level would be of 80%.

 

Quality Rate of Master Data

Like we said before, the functionalities of an ERP take their foundation from Master data. It’s imperative that this data remains accurate and updated throughout time. The determination of the values of Master Data is certainly a key element, but the frequency on which we update this information is essential.

For example, if a company can confirm that 4,250 records of a total of 5,000 records contain accurate values that are revised on a fixed calendar, then at their Master Data quality rate would be of 85%.

In this example, the OEE of our ERP is calculated by:

             Usage Rate / Availability of Functions

             90%

X

             Quality Rate of Transactional Data

             80%

X

             Quality Rate of Master Data

             85%

Operational Equipment Effectiveness = 61.2 %

Too often, we see companies that don’t realise the full value that an ERP system can offer. The approach we’re proposing is first designed to measure their current usage and highlight the performance issues of the ERP.

Our methodology contains a step of diagnosis, where we analyse processes, functionalities, users’ skills and the data accuracy. Based on the gaps we identified between your current model and your business objectives, recommendations will be formulated in an ERP improvement plan. Contact us!

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