Benchmarking your Operational Efficiency

August 16, 2023
/ SKUBlog
/ By Susan Sipos

SKUFood has been focused on bringing you insights into industry terms over the last year. We have been working behind the scenes on bringing a new feature to the newsletter with guest contributors from people we are proud to work with in the industry. They have new perspectives for you and we are excited to share some in the upcoming weeks.

One of the great things about the food and beverage industry is there are many different perspectives. I always appreciate the perspective Norm Purdy brings to the situation. Norm has great experience with large consumer packaged goods companies like McCain, Irving and Crosby’s. He understands the importance of trade spend required to deliver the sales. He is also driven by making the items profitable. His focus on the relationship between efficiencies in production and the amount required to sell the product is great learning for me every time. We appreciate Norm’s contribution this week.

Benchmarking your Operational Efficiency

If you are a small processor or packer in the food and beverage industry in Canada, you already know how tough it is to complete with the big CPG companies on price. They use their cost advantages to push you to the niches where volumes are lower and long runs on your production lines are the stuff of dreams.

But there is a way to compete. By embracing lean manufacturing you can keep your runs small and drive cost out of your operation. One of the first things to do if contemplating embracing lean is to conduct a current-state loss analysis. Sounds complicated but it’s pretty simple really. And almost all successful manufacturers know these numbers for their operations.

The first big loss is AVAILABILITY. This is a simple measure of the number of hours that your equipment was running compared to the planned production hours. Losses in availability are generally due to unplanned downtime (equipment breakdowns) and longer than anticipated set up /changeover times. Availability = actual operating time/planned production time

The second big loss is PERFORMANCE. This is a measure of line speed or cycle time (e.g. X units/minute). Losses of this type are generally due to small causes like misfeeds or jams that are easily fixed but stop the line for a few seconds or minutes. But the performance loss I see most often is a result of running the equipment below its rated speed. This happens when operators do not trust the equipment or aren’t properly trained. Imagine running a 60 bottle per minute line at 75% of its rated speed for 8 hours. Not only do you lose 7000 units of production, you have to pay your staff the same for the lower production. PERFORMANCE = ((Total Units Produced/Operating Time) / (Ideal # Units Produced/Operating Time))

The third loss is QUALITY. This is defined as the ratio of first time pass units to total units produced during the shift. Defects during start up and during production are subtracted from the total units produced. Sometimes defects can be corrected manually by doing things like reapplying a crooked label or wiping off a smudged ink jet code and re coding the item. These should be counted as defects however, to reflect the actual capability of the process as is. QUALITY = Good Units / Total Units

Once you have determined all three Big Loss Ratios you are able to calculate your OEE Score. OEE means Overall Equipment Effectiveness and is benchmarking measure of your operation’s efficiency. OEE = Availability X Performance x Quality

World-class manufacturers routinely score in the mid 80’s. Average OEE scores are in the mid-sixties. If your score is below 50 you have work to do right away. A score in the 50 – 70 range places you in the middle of the pack with opportunity to improve. Your OEE score will help you identify where to focus efforts to improve but it won’t help you with how to make improvements. To do that you’ll need to take a deeper dive into lean and perhaps six sigma (like the big players have done already). The good news? There are plenty of resources, training programs and funding available to help you embrace operational efficiency and food automation. Knowing your OEE score is your first step is setting the gap.

- Norm

Norm Purdy holds a BSc. and an MBA in marketing, is a certified change management practitioner and a lean sigma black belt. With over 25 years’ experience with some of Canada’s best known food companies and brands, Norm brings a fresh approach to thinking about sales and marketing as processes to add value for customers and consumers. his process thinking enables managers and owners make better decisions about how they improve their organizations’ capabilities.

PCX Advisors helps clients identify the processes they must excel at to execute their strategies, then put in place metrics as a foundation for regular accountability reviews.

Norm has delivered courses in lean six sigma and commercial excellence. His engaging and challenging style helps participants learn and to apply the continuous improvement concepts in their day to day jobs.

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