The Institute of Supply Management (ISM; Tempe, AZ) national report says that U.S. manufacturing expanded in January for the 20th consecutive month in a row. The January PMI® registered 53.5 percent – any reading above 50 percent indicates that the manufacturing economy is generally expanding. As part of this growth, machine monitoring and network automation throughout the shop floor is seeing an aggressive uptake in all sorts of hardware adapters, CNC memory upgrades and DNC software used by discrete manufacturers in the aerospace, machine tool, metal cutting, custom machining and food processing sectors.
But the area we’re seeing the most demand in by far lies in manufacturing execution system (MES) and machine-to-machine (M2M) communications, those real time platforms that can quickly and cost effectively isolate productivity issues so that everyone from the shop floor to the top floor is able to understand what must be done to maximize efficiency. This magic of technology solves the last meter connectivity challenge and includes both connection hardware, if required, and visualization software that allows manufacturers to really see exactly what transpires on their shop floors, in real time, by the second.
The possibilities for real time machine-to-machine conversations came into much wider view with all the buzz around the Internet Of Things (IoT) last year. IoT got top billing in countless business magazines and news programs watched by manufacturing executives. That megatrend helped drive home the fact that real time situational awareness and complete visibility of operations, or connected manufacturing, is an achievable, affordable goal with a meaningful return on investment.
International Data Corporation (IDC; Framingham, MA) predicts that by 2016, 30 percent of manufacturers will invest substantially in increasing visibility and analysis of information exchange and business processes. I personally believe that number is modest and will actually be closer to 50 percent – which is still too low! Even with affordable technology available to them, the vast majority of manufacturers today still do not measure the results of their shop floor operational efforts in real time. They know if you can measure it, then you can manage it, but up to now it has been cost prohibitive.
There are an estimated 16 million computer numerically controlled (CNC) machines worldwide, and three other machines for each CNC on the average factory floor. This 64-million-machine universe is sometimes referred to as the realm of “dark assets” due to the fact that by some estimates less than 5 percent of these machines are connected to the industrial internet. With a disconnected model, manufacturing companies have little or no real time data to drive excellence and profitability.
As with anything new that challenges the present status quo, adoption rates are contingent on manufacturers sharing their successes with others. Most manufacturers purchase and adopt new equipment and processes by identifying and benchmarking their performance against that of their peers. Yet, if these so-called dark assets started conversing with each other and reporting their data, they could add up to $15 trillion to global GDP by 2030, according to research conducted by General Electric. Think about that.
The key measurement many manufacturers focus on is OEE (overall equipment effectiveness), a distillation of the six sigma principles of waste that is the product of three ratios. The first ratio is Availability, which is defined as actual run time / total scheduled time (including downtime). The second ratio is Quality, which is defined as good parts produced / total parts produced (including rejects / scrap). The third ratio is Performance, which is defined as actual part-to-part runtime collected / theoretical part-to-part runtime.
Availability is where most shops see the largest and quickest improvement for the effort expended. An integrated MES can measure non-productive time into downtime categories per machine. This allows continuous improvement personnel to rapidly determine root causes of equipment downtime and eliminate them by understanding exactly where to look, and exactly what to change to gain additional manufacturing capacity.
Quality and performance are extremely helpful in improving a company’s overall OEE score. World class OEE is 85 percent, which is 95 percent in each of these categories multiplied by each other. It should be duly noted that the average manufacturer typically believes their OEE is approximately 65 percent, but their actual post-MES-implementation initial benchmark is usually closer to 30 percent to 40 percent. Once the shock of that typical OEE gap is fully understood, within a few months an MES manufacturer’s OEE improves dramatically. For example, we have witnessed shops start at a low of 40 percent and then attain World class OEE of 85 percent.
Manufacturers must understand that cost isn’t a barrier to this dramatic productivity boost. For new equipment that is capable of talking intelligently via Ethernet and utilizing an electronic protocol such as MTConnect or OPC, the cost to implementing an MES is $2,750-$3,500 per monitored asset installed. If the equipment is considered legacy and a hardware adapter is required, and the integration to their ERP system from “Shop Floor to Top Floor,” the cost is closer to $5,000-$5,500 per monitored asset installed. This translates to 1 percent of the overall cost of a machine – less than the cost of tooling for a new machine.
To make an informed cost decision, manufacturers need to understand the value created by effectively monitoring their shop floor assets. Many manufacturers typically experience IRR rates greater than 400 percent, which means that their average payback is measured in mere months, often in many hundreds of thousands of dollars to the bottom line.
The next frontier in OEE is what we call F.OEE, or Financial OEE, which leverages the power of real time shop floor data and accurate costing data trapped in most manufacturers’ ERP / MRP systems. With F.OEE, Income From Operations (IFO), asset by asset, hour by hour, can – for the first time – be calculated, visualized and truly understood. This allows manufacturers to manage their shop floor operations with a new management tool that helps them understand their equipment’s contribution to their monthly income statement in real time, not three weeks after month-end when it’s far too late to modify a manufacturing process.
Think of F.OEE as a universal metric that is well understood by all – money! In other words, F.OEE can be considered the next Holy Grail in manufacturing automation.
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