Department of Production Engineering and Metallurgy

Handling Events

CAD/CAM
Senior

By
Abass M. Jabber El-Enzy

2018
Cost of Equipment Usage
• To deal with this difficulty, it is appropriate to divide the cost of a worker
running a machine into two components: (1) direct labor and (2) machine.
Associated with each is an applicable overhead rate.
• These costs apply not to the entire factory operations, but to individual
work centers.
• A work center is a production cell consisting of

(1) one worker and one machine

(2) one worker and several machines
(3) several workers operating one machine
(4) several workers and machines

• In any of these cases, it is useful to separate the labor expense from the
machine expense in estimating total production costs.
Cost of Equipment Usage
EXAMPLE 2.9 Hourly Cost of II Work Center

The following data are given: direct labor rate e

$10.00/hr; applicable factory overhead rate on
labor = 60%; capital investment in machine ""
$100,000; service life of the machine = 8 yr; rate of
return = 20%; salvage value in 8 yr = 0; and
applicable factory overhead rate on machine = 50%.
The work center will be operated one 8-hr shift,
250 day/yr. Determine the appropriate hourly rate
for the work center.
Cost of Equipment Usage
Labor cost per hour = CL (1+ FOHRL) = $10.00(1 + 0.60) = $16.00/hr

The investment cost of the machine must be annualized, using an 8-yr service life and a rate of return = 20%. First we
compute the capital recovery factor:

(A/P,20%,8)=0.20(1+0.20)^8/(1+0.20)^8
=0.20(4.2998)/(4.2998)-1 = 0.2606

Now the uniform annual cost for the $100,000 initial cost can be determined:

UAC = $100,OOO(A/P, 20%,8)=100,000(0.2606)=$26,060.00/yr

The number of hours per year = (8 hr/day)(250 day/yr) = 2000 hr/yr.

Dividing this into UAC gives 26,060/2000 = 13.03/hr.

Then applying the factory overhead rate, we have

Cm(1 + FOHRm) = $13.03(1 + 0.50) = $19.55/hr

Total cost rate is

Co = 16.00 + 19.55 = $35.5S/hr
Introduction
• “In today’s economy the manufacturing industry is more competitive
now than ever. You have to get every advantage you can to keep up
with the competition. If you are already the leader amongst your
competition, you must continually improve to stay ahead of the pack.

• To Stay Ahead, You Need to Measure OEE.

• One critical area that every plant can improve on is efficiency,

and one of the best measures of efficiency is OEE (overall
equipment effectiveness). If you don’t know your OEE, then
you don’t truly know how efficient you are. More importantly,
you don’t know how efficient you could be.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
Introduction
• “OEE is calculated by multiplying each of these factors:

Availability x Performance x Quality

Availability Downtime
Performance Slow cycles
Quality Minimum requirements

• There is a lot that goes on at a manufacturing plant every day.

 Employees come in and out and work on the plant floor, machines need
to be maintained
 production quotas need to be met

• With so much happening all the time, it can be hard to see how things are
all working together.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
Introduction
• “More specifically, it can be very difficult to
determine if everything is working together
efficiently, and what can be improved to increase the
plant’s overall productivity.

• OEE is a measure of the efficiency and effectiveness

of the manufacturing processes (i.e. machines, cells,
assembly lines, processes, etc.). OEE is a simple and
powerful metric for tracking and improving a plant’s
efficiency.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
Fix Your Equipment Availability Factor
by Addressing Downtime
• “Determining your plant’s availability is a huge part of calculating your
OEE, and the biggest factor that affects availability is downtime. There are
two types of downtime that affect OEE: planned downtime, and
unplanned downtime.

• Planned Downtime – Calculating OEE starts with determining your plant

operating time. Plant operating time is the total amount of time that the
plant is available for operation. Planned downtime is operating time lost
due to planned events. These are events where you have no intention of
keeping the plant operational, such as breaks, scheduled maintenance,
and holidays.

• Unplanned Downtime – This measures the loss of planned production

time due to unplanned events that cause downtime. These events can
occur for a variety of reasons – operator error, mechanical problems, and
lack of oversight are some of the biggest causes.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
Learn what 5 questions you should
be asking
and how to get the answers to
critical issues

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
1. How are you currently tracking
your OEE and downtime?
• “Most production plants have some kind of
method for tracking production data and
downtime events. The larger the plant, the
more essential tracking OEE and downtime
becomes. The two main ways that OEE and
downtime are tracked is:
 Manually
Through MES (manufacturing execution
executive system) software.[1]”
[1] How to Reduce Downtime & Raise OEE
https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
2. Which plant employees have the
greatest effect on your downtime?
• “There are a lot of employees on a plant floor at any
given time, and many of them are doing very different
jobs. Understanding which employees are having the
greatest impact on your downtime is one of the key
factors in running more efficiently.

• Three Employees That Affect Downtime:

 Line Operators
 Maintenance Technicians
 Production Supervisor.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
3. Do you know how much downtime
is happening that isn’t being reported?
• “This seems like a trick question. Of course if
you knew what downtime wasn’t being
reported then it wouldn’t be unknown any
more, and that’s the point. If you are unaware
of a downtime issue, you won’t know how
much it’s costing you.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
4. How are you currently analyzing
your downtime data?
“These are all comparison questions, and these
are the kind of questions that reveal factors that
could be leading to increased efficiencies.

Comparing Machines
Comparing People
Comparing Materials.[1]”

[1] How to Reduce Downtime & Raise OEE

https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf
5. How confident are you when making
decisions about increasing efficiency?
“When making the decision on which issues to
focus your resources on, you’ll want to be
confident in your choice. If you lack confidence
in your decision, then you are most likely
missing one of three things:

Information
Priorities
A plan of action.[1]”
[1] How to Reduce Downtime & Raise OEE
https://www.automation.com/pdf_articles/Whitepa
per-Reduce-Downtime-Raise-OEE.pdf