Improving OLE (Overall Labor Effectiveness) in the Post COVID-19 World
Factories around the world are experiencing one of two emergencies during the COVID-19 pandemic. They are either experiencing demand surge (e.g., personal protection equipment – PPE, hand sanitizers, essential pharmaceuticals) or demand loss (e.g., automotive, oil & gas products, non-essential consumer goods). In either case, factories need to respond fast & effectively to the change in demand/supply balance by increasing their capacities to meet the demand or decreasing their costs to stay profitable. In the new & more volatile post-pandemic economy, the factories would need to be more agile to scale up or down their capacities and costs, as needed, to simply maintain competitiveness and stay in the business.
Overall Equipment Effectiveness (OEE) has been an important measure for production efficiency across all industries. With OEE, it is possible to monitor the production lines (e.g., equipment, assets) working hours (uptime vs. downtime), and calculate time, speed and quality losses during production. Thus, OEE provides valuable insights so that one can start improving effectiveness of the machines and decreasing unit production cost. [See Improving Manufacturing & Packaging OEE with Digital Technologies a free webinar on how Supply Chain Wizard helps manufacturers improve OEE using digital technologies.]
However, equipment or machine cost constitutes only one of the main costs (or capacity) factors at the shop floor. The other high impact component for capacity AND cost of goods sold (COGS) in production typically is the labor. Labor, unlike the machines, show much greater variability in “availability” (e.g., absenteeism), “performance” (e.g., experience) and “quality” (e.g., training), deserving a much closer look by site heads or site financial controllers. Manufacturers typically know the amount of time their operational workforce spend inside the facility by capturing the entry & exit times to the facility at large. On the other hand, the real labor hours spent at the individual production lines and labor distributions during production are typically not measured or measured on paper at best.
This level of granular labor data is far more insightful than simple entry & exit times to the facility. Add to this the new reality of “social distancing” and “worker health” considerations, calculating the true “Overall Labor Effectiveness” with digital systems is starting to become a crucial part of manufacturing best practices.
Exhibit 1 – Illustration of Labor Tracker technology & its integration to OEE Tracker
Supply Chain Wizard’s “Digital Factory” vision aspires to achieve ‘real-time and end-to-end operational and strategic visibility’ at the factory, to equip manufacturing leaders with data-driven decision-making tools. Therefore, the idea of monitoring labor hour distribution has been on radar for quite some time. After many months of design & development and field testing with our co-innovation partners & manufacturing clients, Labor Tracker solution is now available as part of our Digital Factory Platform. During the design cycle, novel IoT-enabled RFID readers are designed, that are plug and play and connected to the cloud (specifically Microsoft Azure IoT Hub, for maximum scalability & security). These devices can be placed at each production line or suite in just a few minutes. With the help of the IoT readers, the production staff can easily check themselves into the line using their available RFID cards – that majority of the manufacturing site personnel already use as an identification – and their valuable efforts are consolidated under the batch, work order and the product they are working on. This way, the company can monitor the true labor effort that goes into their products and visualize the use of their human capital across the shop floor. Labor Tracker also reveals maintenance hours and the correlation of these to the lines, products and shifts.
Exhibit 2 – Labor Tracker reader is compatible with majority of RFID cards used in manufacturing sites around the world – resulting minimal to no change management
The initial findings can be really surprising for organizations once they start using Labor Tracker. Variations during production due to labor effectiveness changes typically significantly impact the true unit production costs. With Labor Tracker, we used the power of IoT technologies and advanced analytics to track these variations at the shop floor and to get valuable insights revealing the true impact of labor costs, as well as capacity.
Few example use cases our clients have implemented, or in the process of implementation, include:
1) Reducing Overtime Labor Cost
2) Digitizing Paper-based Timesheets
3) Improving employee engagement via gamification
4) Implementing “social distancing” between subsequent shifts
What other use cases do you think is possible with this powerful, easy to deploy solution? Reach out to us to discuss your use case and join our growing network of digital-minded manufacturers to win in the digital age.
Aytac Atac, Ph.D.
Vice President, EMEA and APAC