To ensure the best possible ROI, it’s important to ensure that fixed assets are used productively as much as possible. High utilization is especially important for asset-intensive industries, though companies should never try to achieve high asset utilization by generating unnecessary inventory.
What is Asset Utilization?
Asset utilization is a measure of the actual use of an asset divided by the number of assets available to use. For example, if a machine runs three shifts, its theoretical available use is 24 hours. The actual use will almost always be less than the potential use due to operator breaks and rest periods, setups, adjustments, maintenance, downtime and many other everyday occurrences.
Four key metrics measure asset utilization:
- Production Yield: The number of usable units from a process calculated as the number of units finished divided by the number of units started.
- Overall Equipment Effectiveness (OEE): A compound metric that provides a view of current efficiency for a machine, line or cell. This metric considers the work center’s availability, its output and the quality of output. It is calculated as:
(Availability x Performance x Quality)
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- Availability = (operating time divided by planned production time) x 100
- Performance = ({total pieces divided by operating time} / ideal run rate) x 100
- Quality = (good pieces divided by total pieces produced) x 100
- Unplanned Downtime: Any time an asset is scheduled for production but is not operating. Reasons might include emergency or unplanned maintenance, setup, repair, parts shortages or stockouts. It is calculated as:
({All Downtime – Planned Downtime} divided by Total Time Available)
- Maintenance Spend: The ratio of the total cost of maintenance (labor and materials) divided by the total cost of goods sold.
Production Yield
Monitoring yield is critical to ensuring schedule accuracy and that there will be sufficient units available to meet customer demand. For example, if a product has an 80 percent yield and a customer orders 100, planners know to schedule 125 units to ensure that 100 good units will finish the process. That ensures that adequate material will be available to account for the units that will fail to meet spec and that adequate time is scheduled to complete the entire batch of units.
If yield is unknown, planners might schedule the required 100, and the customer order would be short shipped, leading to an unhappy customer. MRP calculations also would neglect to buy adequate raw materials to complete the units, leading to unplanned downtime.
Best practices for managing yield include regular preventative maintenance to ensure equipment operates properly, managing tooling to ensure that the right tools are ready and available and master data accuracy to ensure that yields are up-to-date.
Overall Equipment Effectiveness
Overall Equipment Effectiveness (OEE) can provide a complete picture of operational effectiveness, but it makes sense to drill down into the component calculations used to calculate OEE to find the source of any worsening trends.
OEE can point to poor maintenance programs, poor performance or inadequate maintenance, repair and overhaul (MRO) management so that required maintenance components are unavailable when needed. It can also help to track mean time between failures to improve the preventative maintenance (PM) scheduling process. Integrating the PM schedule with the production schedule helps to ensure that PMs are completed on time, which will improve equipment performance and longevity.
Third-party enterprise asset management (EAM) solutions are usually unable to integrate directly with an ERP solution’s production scheduling, so they require cumbersome and expensive workarounds.
Unplanned Downtime
Monitoring unplanned downtime helps clarify the efficacy of a company’s preventive maintenance program. When the program is ineffective or not rigorously adhered to, unplanned downtime will increase because equipment will frequently fail unexpectedly.
Unplanned downtime can also point out concerns about tooling maintenance, inventory management processes and the skills or availability of the setup crew.
QAD QMS includes training management to help ensure that the setup team has it right the first time. Inventory management, including MRO planning in QAD EAM, can ensure that maintenance parts are available as needed.
Maintenance Spend
Monitoring this metric can help show when it may be time to retire older assets and replace them with newer, more efficient equipment. As the ratio of maintenance spend to cost of goods sold (COGS) gets higher, the equipment begins contributing disproportionately to the product cost.
Additional Possible Metrics
Some companies like to track two additional metrics: Planned Downtime and Maintenance Cost to Asset Value.
Planned Downtime can show the company if the PM program is taking up a lot of time or not. Comparing the planned downtime and the mean time between failure (MTBF) for equipment can help to pinpoint whether the PM program is better than it needs to be.
Maintenance Cost to Asset Value can shed light on a similar problem. When the cost of a machine’s annual maintenance exceeds a specified threshold of its remaining book value, it may be time to retire the asset in favor of a newer, more efficient piece of equipment. It is also possible that this metric identifies a rigorous preventative maintenance program, so it should be used in conjunction with other metrics like unplanned downtime, OEE and MTBF before making the decision to replace equipment.
In QAD’s Cloud ERP, these metrics can be tracked and managed using the Action Centers: Operations Action Center, Maintenance Manager Action Center or using QAD EAM. Legacy QAD solutions for tracking metrics include: QAD Business Intelligence and QAD Operational Metrics.
Best Practices for Equipment Utilization
- Use a Corrective and Preventive Action (CAPA) solution to systematically investigate failures
- Integrate electronic communication networks (ECNs) into production in a way that meets customer safety and usability needs without undue production disruption
- Use integrated preventive maintenance scheduling to ensure that PMs are considered in promise dates and scheduling
- Calculate yields and use them in planning and scheduling
- Track MTBF to ensure that equipment is operating at its peak and not being over-serviced
- Implement effective MRO and spares management
- Develop and adhere to a reasonable preventive maintenance program that supports the manufacturer’s recommendations
- Train set up crews in rapid changeover techniques
- Implement a tooling management and maintenance program
Choosing Metrics
When operations run smoothly, planners can minimize excess inventory and ensure that customer deliveries happen on time. Much of scheduling success depends on ensuring that machinery and equipment function efficiently and operate on a reliable schedule. This requires an effective preventive maintenance program and careful monitoring of the trend for asset utilization.
What challenges are you finding most significant when it comes to asset utilization? Let us know in the comments section below.
