I have heard the argument for years, that connecting an EBIT improvement with overall equipment effectiveness (OEE) improvement is impossible. The argument always starts around OEE being a reflection historically of results and a model to indicate future capacity based upon reliability and product mix. But much like having insurance as you reduce your risk, improving OEE creates a higher probability to realize success in the future. I have often referenced this “profit protection,” which is holistic decision-making to realize the optimal profits today and in the future. Notice that there is zero mention of savings or cost in this definition. This is intentional.
Consider an organization or one that resides in a constant state of chaos or reactive. This organization may want the reliability but struggles to correlate the value of having a delay as planned downtime versus idled downtime. The leader may see stopping production lines to conduct needed preventive and corrective activities on their assets as evidence that time is given to maintain 100% reliability. However, this leader struggles to connect time and how to calculate the value of its return on investment. This leader may be focused solely on cost savings and momentary delivery performance of the product and displays a decision-making methodology that saving money is the sole way to create profitability. But as the saying goes, you cannot save your way to profitability. They are failing to lead by investing the optimum amount of resources that secure the protection of future profits. The use of the word optimum is intentional.
Now consider an organization that has made strides in improving its OEE. This group is collectively focused on the availability losses and the organization is all-in at moving their delays from costly categorization to the likes of an idle downtime. Their motivation exists because their mission is aligned to motivate scheduling of products and reliability decisions to be returned as a reciprocated value in the future. This team’s leadership understands the impact of a delay occurring as idle downtime versus availability loss. This team is protecting their ability to produce effectively tomorrow by not sacrificing everything for today’s sole gratifications. Protecting, used intentionally here.
An archived Harvard Business Review touches on the value of planning in the modern world. It frames that successful leaders and their teams are those that can describe and invest in the reliability and align momentary decisions that secure future profit. Successful organizations are those that can articulate this message into strategy, ensuring to spend the optimum amount to return the anticipated future profits.
First, replacing the traditional obsessions with hard data and playing the numbers game with a more balanced co-existence of hard and soft data where judgment also plays an important role. Second, introducing new mechanisms and routines to ensure alignment between the hundreds of self-organizing autonomous local teams and the overarching goals and directions of the company. - Alessandro Di Fiore - Harvard Business Review
Organizations can be quickly interpreted as solely focused on not exceeding a budget for the month or making a decision only focused on quarterly profits. These organizations hover on the edge of being interpreted to make decisions on profits above safety, environmental stewardship, or reliability. When this persona settles in, it is a bad tattoo and could take years to recover from it. This is where the mindset of profit protection helps the organization succeed.
We all want our organizations, our teams, and our wallets to be in the black versus the red. However, we cannot lead our organizations and mentor our successors to sacrifice tomorrow’s capability in exchange for a momentary high. The high is strictly a high and will fade. We have to align our decision, guidance, and strategies to realize the maximum accumulated value over the life of our assets.