Calculating Utilization % and On Time Delivery

[Yeong]

I need some good explanation on the 2 followings meaning & its way of calculation. Will appreciate someone can attach an excel file example.
In one of my factory tour, they explain the 2 KPI which I quite abit confused.
Due to tour time factor, I was unable to ask them how they go about it.
Hope someone can share with me. In the presentation, they mentioned the way they track OTD & Utilization is by calculating :-

1) On Time Delivery :-
a) Actual shipment vs First Committed Date (This is to measure Mfg)
b) First Committed Date vs Requested Date (This is to measure Marketing)

2) Machine Utilization
a) Based on available hours
b) Based on Installed hours

Can anyone share how this is being done & its meaning.
Thanks

[wmarhel]

Originally Posted by Yeong

1) On Time Delivery :-
a) Actual shipment vs First Committed Date (This is to measure Mfg)
b) First Committed Date vs Requested Date (This is to measure Marketing)

2) Machine Utilization
a) Based on available hours
b) Based on Installed hours

First, Machine utilization the way you wrote would be a horrible metric IMHO. It would instill bad behaviors which would be detrimental in the long term (over-production, running the machine instead of making the necessary fix, etc.)

You would also want to include some measurement of the performance of the machine as well: quality of parts, the run rate, etc. My advise would be to look at measuring OEE. Do a search on this forum as I know there are postings addressing this very topic.

For the operations overall: # of orders shipped on time / total # of orders

I wouldn't break anything down as manufacturing can only produce if they have parts, and sales/marketing "SHOULD" understand the capabilities of their company or the company they are representing.

If you want two metrics:
1) measure your on-time-delivery against "your" promise date
2) measure your on-time-delivery against the "customer's" requested date


One thing to keep in mind is that while your numbers could show an on-time-delivery rate of 100%, your customers number could be much lower. Part of the reason for this could be that your customer allows for two days early and zero days late. If the product arrives on the customer's dock before the allowed two days, you are likely to be penalized. It brings a level of complexity to the party, but customer satisfaction is what keeps the orders coming.

Also, I wouldn't allow a re-negotiated due date because I couldn't make the original due date to be used as an "on-time-delivery".

Wayne

[preetham]

Originally Posted by Yeong

I need some good explanation on the 2 followings meaning & its way of calculation. Will appreciate someone can attach an excel file example.
In one of my factory tour, they explain the 2 KPI which I quite abit confused.
Due to tour time factor, I was unable to ask them how they go about it.
Hope someone can share with me. In the presentation, they mentioned the way they track OTD & Utilization is by calculating :-

1) On Time Delivery :-
a) Actual shipment vs First Committed Date (This is to measure Mfg)
b) First Committed Date vs Requested Date (This is to measure Marketing)

2) Machine Utilization
a) Based on available hours
b) Based on Installed hours

Can anyone share how this is being done & its meaning.
Thanks

To find the utilization of man & machine thre is one term called the OEE(overall equipment efficiency).

1)calculate the % of total available machine time & the utilization time of that machine for perticular period. let it be A

2)Calculate the total % of availble time of man power for that machine & The Idle time .consider this as B

3) calculate the % of total product produced v/s the rejection from that machine at the defined period let it be C

then the OEE of that equipment is

OEE=%(A*B*C)

[rwdmike]

OEE is a good metric for understanding the area condition.
The formula for calculating OEE is:
Actual number of good pieces produced/ divided by ideal number of pieces produced in net operating time.

Or

OEE= AvailabilityXPerformance EfficiencyXQuality

[asutherland]

If we're going to talk about OEE . . . might as well do it all.

[Yeong]

Hi all

Thanks for all the valuable answers - it certainly open my awareness.
But I am still a bit of confused about the On time Delivery calculation.
As I mentioned in my original mail from my customer visit, it is accurate to have 2 type of metrics to calculate the OTD i.e
a) Actual shipment vs first committed date (to measure Mfg performane)
b) First committed date vs requested date (to measure marketing measurement)

Is this what most Company use to measure OTD ?
I hope someone can highlight more in-dept feedback

Thanks alot

[pldey42]

Originally Posted by Yeong

Hi all

Thanks for all the valuable answers - it certainly open my awareness.
But I am still a bit of confused about the On time Delivery calculation.
As I mentioned in my original mail from my customer visit, it is accurate to have 2 type of metrics to calculate the OTD i.e
a) Actual shipment vs first committed date (to measure Mfg performane)
b) First committed date vs requested date (to measure marketing measurement)

Is this what most Company use to measure OTD ?
I hope someone can highlight more in-dept feedback

Thanks alot

I think the best measure of on-time delivery compares the date the customer accepts the product with the request date, and this is the measure that the telecom industry is standardising upon using TL 9000.

It's not ship date, but acceptance date, because shipping is usually part of the supplier's service. Customers don't care when it shipped, they want it to arrive on time. Also, they want it to work and not, for example, be broken during shipping. So date of customer acceptance (either by incoming test or inspection) measures the true customer experience.

The measures you propose have several problems:

1. If marketing are measured by the difference between commit and request dates, they're motivated to commit dates that are the same as the request dates, regardless of manufacturing's true capabilities. That's no use to customers, who want the commit date to be realistic even if it's not what they requested.

2. If manufacturing are measured by commit dates, nothing motivates them to achieve request dates. Indeed, to make their measurements look good they will argue for the longest possible commit dates, regardless of what customers are requesting.

3. If ship date is measured, there's no motivation to use a reliable shipper that delivers product on time and does not damage it in transit.

4. By fragmenting the measure amongst marketing and manufacturing nobody in the company is responsible for achieving customer request dates; marketing and manufacturing are set up as adverseries each trying to optimise their own performance at the expense of the other.

Thus, the company needs to measure itself by comparing date of delivery of product that works to the customer's premises, with the customer's request date.

Breaking this measure into departmental targets is not easy. People will do what it takes to make their measurements look good, and departmental targets can make departments work against each other instead of together, in alignment towards the customer. Their targets need to be in terms of the things they can control (e.g. marketing cannot control commit date).

Perhaps, marketing's measure should be in terms of the percentage of available manufacturing capacity sold, and manufacturing's should be the percentage of sold goods delivered on time and working. They should be measured together on the difference between commit and request dates in order to drive that difference down.

Hope this helps,
Patrick