Burlington, Canada (PressExposure) July 21, 2011 -- RONA, Return On Net Assets; ROCE, Return On Capital Employed; EVA, Economic Value Added are all excellent corporate metrics, and in the manufacturing world they are always derived from operational OEE - Overall Equipment Effectiveness, is derived from Availability, Performance and Quality of the manufacturing process.
According to John Rattray of Memex Automation (www.memex.ca), "The next level of corporate efficiency, maximizing profitability, requires that metrics are used to benchmark performance. Metrics are essential within the Physical Asset Management and Manufacturing process. Beginning with benchmarking, they help management and plant personnel understand the business and mission requirements identify opportunities to increase effectiveness, and measure performance to objectives."
Physical Asset Management and Manufacturing links metrics so that improvements in equipment and work effectiveness are connected to the resulting contribution to business and operating objectives. Physical Asset Management and Manufacturing metrics begin with business measures such as RONA and ROCE. They include industry benchmarks such as cost per Unit and Replacement Asset Value. Effectiveness metrics cascade through Overall, Availability, Yield or Performance, Quality and cost measures of performance. Equipment effectiveness, including inventory tracking through RFID, and work productivity measures are included in this range.
Metrics are an objective means of measuring performance and effectiveness. Getting OEE metrics directly and automatically from a machine and inventory tracking directly through RFID can be the most accurate form of performance measurement.
A 10% improvement in Operational OEE can generate a 60+% improvement to EBIT, profitability - Financial OEE; representing $Millions to the bottom line profit to a company! An example business case created $5.6 million to profit for a manufacturer producing and selling $100 million per year by a 10% improvement in OEE (from the book: "Overall Equipment Effectiveness: A Powerful Production/Maintenance Tool for Increased Profits", Robert C. Hansen, Pgs 47-56). The base business case of operating at a 60% OEE is compared to the same company operating at a 66% OEE. Firstly, comparing the reduction of direct labor's impact to operating income - a 21% improvement in EBIT. Secondly, comparing the impact of increased sales to operating income - a 62% improvement to EBIT.
About Memex Automation Inc.
Memex Automation Inc., http://www.memex.ca, a unit of Astrix Networks Inc., was created to leverage the research and development of Memex Electronics, which was founded in 1992. Memex continues its tradition of serving the discrete manufacturing sector, supplying component hardware, memory upgrades, and visionary shop floor communication technology. Memex products allow a manufacturer to realize the impact of OEE Profitability.