Overall Resource Effectiveness

Organisations continually strive to enhance their capabilities to create value for the stakeholders by improving the cost effectiveness of the operations. Understanding Overall Resource Effectiveness (ORE) is critical for the continuous reduction of waste and performance improvement.
(ORE) presents a structured process using indicators that promote the effective and efficient use of production resources in all business processes.

read next

Overall Resource Effectiveness (ORE): Key Objectives

ORE defines the level of effectiveness where companies use all the main resources
(equipment, labour, materials, contractors). It addresses various losses associated with production processes, which can be targeted for initiating improvements

OVERALL EQUIPMENT EFFECTIVENESS
  • Increase the volume of outputs produced using the same or fewer numbers of equipment, hence, reduce cost per unit produced
  • Produce the same outputs with fewer units of equipment thus, reduce the cost required to maintain and operate the equipment
OVERALL LABOUR EFFECTIVENESS
  • Reduce non-value adding activities that reduce FTEs required to deliver them
  • Reduce losses in outputs due to better labour availability for value-adding activities with improved skills
OVERALL MATERIAL EFFECTIVENESS
  • Identify the optimum economic life of material consumables. including cost vs price, quality and operational behaviour, using theoretical (OEM standards) and best-demonstrated and budgeted for comparison
  • Reduce demand for materials (including WIP) due to production rhythmicity and stability (no peaks), to excess ordering and purchasing mistakes
OVERALL CONTRACTOR EFFECTIVENESS
  • Reduce the cost of the contract due to better scoping and contract work scheduling and right first-time processes
  • Reduce the losses (delays, over-budgeting) due to better ontract execution and clear standards

Overall Material Effectiveness (OME): Key Principles

OME indicator exploits a structured approach to define the loss breakdown for any material. This breakdown greatly enhances the capability of OME to detect and address material losses and reduce cost per unit of outputs produced by the process

Understanding OME
Key Indicators Cost & Loss Drivers Input Processes Calculation, %
Availability
Availability
Cost & Loss Drivers
  • Purchased materials that have not been actually used and then lost because of errors ascribed to the forecasting process
  • Purchasing issues such as mistakes made in the ordering process (e.g. wrong items ordered);
  • Quality of materials (e.g. lack of fitness for use) that impact
  • Missed or delayed deliveries and Out-of-stock materials
  • Poor warehousing (e.g. inadequate storage; failure to use FIFO policy); Inaccurate handling.
Input Processes
  • Procurement / Supplier Development
  • Inventory management
  • Warehouse management
  • Logistics management
  • Technology Control (optimal consumption rates for materials)
  • Technology development (new materials)
Calculation, %

Cost of Incoming (purchased) materials
/
Cost of Received by Production from warehouse

Utilisation
Utilisation
Cost & Loss Drivers
  • Inefficient material use in each machine states (e.g. changeover, ramp-up, pre-production, production, post-production, failure) and during the different production cycle stages
  • Process variations and lack of production rhythmicity that requires higher WPI to maintain the outputs as planned
Input Processes
  • Production planning and control
  • Production rhythmicity
  • Production management WIP planning
Calculation, %

Cost of Received by Production from warehouse
/
Cost of Materials used in pro­duction (actual consumption rate)

Quality
Quality
Cost & Loss Drivers
  • Quality issues of the materials and their impact on finished products, parts and/or components
  • Price Vs costs purchase decisions may impact material quality and consumption rates
  • Unsold outputs / finished products
Input Processes
  • Quality control
  • Outbound logistics and warehousing
  • Sales and marketing
Calculation, %

% of process outputs that are out of standards due to a material used

Optimisation Algorithm
  • Prioritise and select critical materials
  • Identify the production / business processes that use these critical resources
  • Material Effectiveness Review Sequence:
    • Review the standard for the material (specifications, consumption rates per process, R&D for new materials with better quality / lesser cost)
    • Review the inventory management for the material (stock management, re-order levels, stock counts, cycle counts, etc.)
    • Review the purchasing process for the materials (supplier development, price reduction, etc.)
    • Review the inbound logistics for the material (delays, cost of logistics, etc.)
    • Review the warehousing of the material (storing standards, handling standards, material surplus, etc.)
    • Review the use of the material by production (handling standard, waste analysis, WIP calculation, min/max in production and impact of production rhythmicity, etc.)
    • Review the impact of the material on the quality of the process’s outputs

  • Evaluate Overall Material Effectiveness, losses and opportunities for improvement
  • Develop Cost Optimisation Plan for the critical materials

Overall Labour Effectiveness (OLE): Key Principles

OLE tools expose the impact of both direct and indirect labour so companies can take action to reduce costs and identify opportunities for increasing overall productivity and profitability

Understanding OLE
Key Indicators Cost & Loss Drivers Input Processes Calculation, %
Availability
Availability
Cost & Loss Drivers
  • High Absenteeism
  • High % of non-value adding activities
  • High dependence on individual skills
  • Lack of Work Standardisation and Full Time Equivalent (FTE) planning
  • Weak Bench coupled with High Turnover
  • Lack of availability of skilled personnel
Input Processes
  • Work Standardisation
  • Workforce Planning
  • Flexibility Matrix
  • Attendance Management
  • Inclusion Management
  • Continuous Improvement
Calculation, %

Standard FTEs
/
Actual FTEs

Performance
Performance
Cost & Loss Drivers
  • Over-time, overreliance on key individuals
  • Negative intention of the employee to comply with work standards
  • Lack of skills or knowledge to perform the tasks as required
  • Lack of quantity or quality tools and materials to perform the tasks
Input Processes
  • Over-time management
  • Production Planning & Control
  • Production System
  • Short Interval Control
  • Shift / Work Handover
Calculation, %

Standard Work Time
/
Actual Work Time

Quality
Quality
Cost & Loss Drivers
  • Time required to re-work the outputs of the process
  • Lost Time in the other processes due to re-work required in the process
Input Processes
  • Work Review (Full-time review, In-progress review, etc.)
Calculation, %

Standard Work Time
/
Re-work Time

Optimisation Algorithm
  • Prioritise and select critical processes with high FTEs
  • Review FTE for critical processes:
    • Standardised Work Instructions, FTE calculated, Competency Requirements, Flexibility matrix
    • Actual FTE, Actual Absenteeism and Turnover, Actual Match with Competency requirements, Training and its effectiveness
    • % of non-value adding activities, waste identification, continuous improvement and automation, etc.
  • Review Work Performance / FTE Utilisation for critical processes:
    • Time attendance management
    • Over-time management
    • Resource (tools and materials) availability and planning
    • Behaviour Compliance Analysis (including safety)
    • Production Rhythmicity
  • Review Work Quality:
    • % of re-work time
    • Impact of re-work time on other processes
    • % of outputs not to standard set
  • Evaluate Overall Labour Effectiveness, losses and opportunities for improvement
  • Develop Labour Optimisation Plan for the critical processes

Overall Contractor Effectiveness (OCE): Key Principles

Overall Contractor Effectiveness (OCE) is the tool to evaluate an impact that contractor management has on the value chain and its performance and it provides the basis to analyse losses and set up critical controls to prevent and mitigate such losses

Understanding OCE
Key Indicators Cost & Loss Drivers Input Processes Calculation, %
Availability
(Contractor Integration)
Availability
(Contractor Integration)
Cost & Loss Drivers
  • Ineffective scoping of inputs
  • Ineffective Integrated Planning between Contractee and Contractor at key intervals
  • Low Operational Capability of Contractee
  • Poor Control Assurance over Inputs to Contractor
  • Poor Coordination between Contractee and Contractor that results in ineffective mitigation of deviations of outputs
Input Processes
  • Contract Scoping & Ownership
  • Contractor Selection
  • Contractor Integration
  • Contract Work Scheduling
  • Contractor Readiness
Calculation, %

Agreed Standard of Inputs from Contractee to Contractor
/
Actual Inputs provided by Contractee to Contractor to the standard

Utilisation (Contractor Performance)
Utilisation (Contractor Performance)
Cost & Loss Drivers
  • Ineffective scoping of outputs
  • Low Operational Capability of Contractor
  • Poor Day-to-Day Management by Contractee
  • Poor Control Assurance over Outputs from Contractor
  • Poor Contingency Planning by Contractee
Input Processes
  • Contract Work Execution
  • Control Assurance
Calculation, %

Agreed Standard of Outputs from Contractor to Contractee
/
Actual Outputs provided by Contractor to the standard

Quality (Performance Validation)
Quality (Performance Validation)
Cost & Loss Drivers
  • Ineffective scoping of the validation performance – required parameters which the outputs produced by Contractor must achieve and maintain consistently
  • Poor Quality of Handover by Contractee – poor handover standard (inspections, etc.), lack of compliance to handover standard, etc.
Input Processes
  • Contract Handover
  • Contract Completion
  • Validation Performance
  • Lessons Learnt
Calculation, %

Agreed Outputs with performance validation required
/
Actual Outputs validated to optimal performance over
time

Optimisation Algorithm
  • Prioritise and select critical contracts with highest cost
  • Perform Contractor Readiness Assessment from Contractee and Contractor:
    • Contract Scoping (Quality of Contract Scoping and Ownership)
    • Selection Criteria and Gaps in Contractor Operational Capability
    • Contractor Integration and Integration Governance
    • Contract Execution Schedule and Integrated Planning
    • Control Assurance of the inputs and outputs
    • Contract Day-to-Day Management and Contract Deviation Management
    • Contract handover and Contract Completion with any lessons learnt
  • Identify factors that driving the cost and value loss factors at every stage of contractor management
  • Identify the gaps in contractor management that drive the cost up and increase the contract value lost
  • Evaluate Overall Contractor Effectiveness, losses and opportunities for improvement
  • Develop Contract Improvement and Optimisation Plan for the critical processes

Overall Equipment Effectiveness (OEE): Key Principles

One way to improve productivity is to utilise equipment as effectively as possible. Therefore, the accurate estimation of equipment effectiveness is very important so that it can be increased

Understanding (OEE)
Key Indicators Cost & Loss Drivers Input Processes Calculation, %
Availability
Availability
Cost & Loss Drivers
  • Non-scheduled time
  • Scheduled maintenance
  • Unscheduled maintenance,
  • Daily Checks
  • Minor stoppage
  • Setup and adjustment
Input Processes
  • Production planning and control
  • Standardised work
  • SMED (single minute exchange of Dies)
Calculation, %

Actual Available Time
/
Total Time

Utilisation
Utilisation
Cost & Loss Drivers
  • Idle time,
  • Clean and prepare for next cycle
  • Loading time
  • Waiting time,
  • Job condition loss,
  • Speed loss and yield losses
Input Processes
  • Production planning and control
  • Standardised work
  • Short interval Controls
  • Fleet standardisation
Calculation, %

Net Production Time
/
Actual Available Time

Quality
Quality
Cost & Loss Drivers
  • Load Factor,
  • Shovel Bucket load Capacity
  • Theoretical, production output per minute
  • Best demonstrated, production output per minute
Input Processes
  • Fleet standardisation
  • Standardised work
  • Short interval Controls
  • Production planning and control
Calculation, %

Valuable Production Time
/
Net Production Time

Key Actions
  • Understand the capacity of the fleet
    • Theoretical
    • Best Demonstrated
    • Used in daily Planning and Business Budgeting
  • Decide on the criteria for Availability, Utilisation and Quality Issues, (remember to include all levels and functions that will have an input or make use of the O.E.E data)
  • Develop forms to capture the data (spread sheets, formulas and calculations)
  • Agree the benchmark and Trial with critical unit operations / equipment (identify critical units)
  • Replicate and cascade through the designated mining equipment.
  • Management representatives from Mining, Maintenance, planning or technical services should meet regularly and review the data and develop actions to mitigate or remove constraints effecting Availability, Utilisation and Quality that impact on the O.E.E

Accountable Resource Management: Training

First Line Manager (Supervisors / Superintendents) that are accountable for business / production processes as cost centres play critical role in the cost management and have most valuable insights about opportunities for cost optimisation

Training Modules

First Line Managers (FLM) are trained for the development of the next year budget with the use of opportunities for resource management improvement and cost optimisation based on overall resource effectiveness:

  • Module 1Overall Resource Effectiveness – types of resources, overall resource effectiveness, Overall equipment effectiveness, Overall material effectiveness, Overall labour effectiveness, Overall contractor effectiveness, the analysis processes, etc.
  • Module 2Back to Basics / Understanding the Work – process maps (value stream, value chain, etc.), process standardisation, process management, process
    inputs / outputs,
  • Module 3Cost Effectiveness and Optimisation – critical processes and resources,
    loss and waste identification, value engineering tools, overall effectiveness analysis, control charts, root-cause analysis, etc.
  • Module 4Integration of Cost Optimisation with Budgeting – tools to analyse the budget, budget development, budget control tools, cost drivers, cost critical control management, etc.
Expected Outputs
  • Improved knowledge of FLMs in cost management and cost optimisation
  • Increased cost ownership by FLMs
  • Review of Cost Effectiveness by FLMs for the areas they are accountable and the continuous analysis of structured Overall Resource Effectiveness metrics
  • Cost Optimisation Plan / Resource Effectiveness Plans developed by FLMs for the areas they are accountable
  • 2021 area budgets linked with Cost Optimisation and Resource Effectiveness Plans with clear controls set
Key Actions
  • Develop the resource management training modules in line with the company’s cost and resource management procedures and stan­dards
  • Sequence the resource management training and cost optimisation with 2021 budget development
  • Module 1 – Overall Resource Effectiveness:
    • Deliver the training to FLMs
    • Pilot application of the Overall Resource Effectiveness tools for the areas they are accountable
  • Module 2 – Back to Basics:
    • Deliver the training to FLMs
    • Schedule the tasks for FLMS to understand the work within their areas
  • Module 3 – Cost Effectiveness and Optimisation:
    • Deliver the training to FLMs
    • Identify Cost Optimisation opportunities
    • Develop Cost Optimisation Plans
  • Module 4 – Cost Optimisation with Budgeting
    • Deliver the training to FLMs
    • Develop the area budget in line with Cost Optimisation Plan
    • Set critical budget controls for the area
What actions must be taken to deliver on the modern purpose of a corporation? contact us