Int. J. Industrial and Systems Engineering, Vol. 1, No.

4, 2006 461

A review of literature on manufacturing systems

productivity measurement and improvement

Kanthi M.N. Muthiah* and Samuel H. Huang

Intelligent Systems Laboratory,
Department of Mechanical, Industrial and Nuclear Engineering,
University of Cincinnati,
Cincinnati, OH 45221, USA
E-mail: muthiaki@email.uc.edu E-mail: shuang@gauss.mie.uc.edu
*Corresponding author

Abstract: Globalisation is posing several challenges to the manufacturing

sector. Design and operation of manufacturing systems are of great economic
importance. Factory performance remains unpredictable in spite of the
considerable literature on manufacturing productivity improvement, and the
long history of manufacturing as there is no widespread agreement on how best
be performed (Gershwin, 2000). Productivity measurement and improvement
goes hand in hand, because one cannot improve what one cannot measure. The
review of literature on manufacturing system productivity measurement and
improvement has been summarised under four categories; they are Operations
Research- (OR-) based methods, system analysis-based methods, continuous
improvement methods and performance metrics-based methods. A survey of
commercial tools available to measure manufacturing system performance is
also performed. The review indicates that quantitative metrics for measuring
factory level productivity and for performing factory level diagnostics
(bottleneck detection, hidden capacity identification) are lacking. To address
this gap, a factory level effectiveness metrics-based productivity measurement
and diagnostic methodology is proposed.

Keywords: manufacturing systems; productivity measurement; productivity

improvement; Operations Research (OR); systems analysis; continuous
improvement; performance metrics; factory diagnostics; bottleneck detection;
hidden capacity.

Reference to this paper should be made as follows: Muthiah, K.M.N. and

Huang, S.H. (2006) A review of literature on manufacturing systems
productivity measurement and improvement, Int. J. Industrial and Systems
Engineering, Vol. 1, No. 4, pp.461484.

Biographical notes: Kanthi M.N. Muthiah received a BE in Mechanical

Engineering in 2001 from Thiagarajar College of Engineering, Madurai, India
and an MS in Industrial Engineering from the University of Cincinnati in 2003.
He is now a PhD candidate in the Industrial Engineering Program at the
University of Cincinnati. As part of his PhD dissertation, he is currently
working on developing and validating factory level quantitative metrics for
performance monitoring and diagnostics to drive quantitative methods for
continuous productivity improvement.

Dr. Samuel H. Huang is currently an Associate Professor of Mechanical,

Industrial and Nuclear Engineering at the University of Cincinnati. He has
professional experience as an Assistant Professor at the University of Toledo,
Systems Engineer at EDS/Unigraphics (now UGS Corp.) and intern at NIST.

Copyright 2006 Inderscience Enterprises Ltd.

462 K.M.N. Muthiah and S.H. Huang

He was awarded 2005 Robert Daugherty Outstanding Young Manufacturing

Engineer by the Society of Manufacturing Engineers (SME) in recognition to
his contribution to manufacturing research and education. He received a BS in
Instrument Engineering from Zhejiang University in 1991, and an MS and a
PhD in Industrial Engineering from Texas Tech University in 1992 and 1995,
respectively.

1 Introduction

In this era of globalisation there are several challenges facing the manufacturing sector.
Complexity in taking decisions due to the immense availability of information,
randomness in the system which affects performance, heterogeneity in events occurring
all make modelling for performance prediction difficult (Gershwin, 1994, 2000).
Grnberg (2003) mentioned that, efforts to improve manufacturing productivity have
been on since the start of industrial era. The first known and well-documented
practitioners in the area of performance improvement were Adam Smith (1776) (Smith,
1999), Eli Whitney (1793) (Green, 1956), Charles Babbage (1833) (Dubbey, 1978),
Frederick Taylor (1903) (Taylor, 1967), Henry Gantt (1910) (Alford, 1934), Henry Fayol
(1916) (Storrs, 1949), Frank and Lillian Gilbreth (1917) (Gilbreth and Gilbreth, 1917)
and Henry Ford (1926) (Ford, 1988). Since the 1950s, competition between companies
has increased as markets have become increasingly global and there are no signs that this
competition will ease. This increased competition creates an even greater need for
first-rate improvement methods that can sustain competitiveness.
According to (Gershwin, 1994, 2000), a manufacturing system is a set of machines,
transportation elements, computers, storage buffers and other items that are used together
for manufacturing. People are also part of the system. Alternate terms are factory,
production system and fabrication facility. Subsets of manufacturing systems, which are
themselves systems, are sometimes called cells, work centres or work stations. Excess
inventories, long lead times and uncertain delivery dates are caused by randomness and
lack of synchronisation. There are only two possible solutions: reduce the randomness
(due to machine failures, engineering changes, customer orders and so on) and reasons
for the lack of synchronisation (costly set-up changes, large batch machines and others)
or respond to them in a way that limits their disruptive effects. Both responses are valid,
but they can be, in practice polar opposites.
Performance measurement is defined as the process of quantifying the efficiency and
effectiveness of action (Tangen, 2003). Slack (2001) mentioned five types of
performance objectives based on cost, flexibility, speed, dependability and quality.
Tangen (2002) mentioned that performance measure criteria must be driven by strategic
objectives and the measures must provide timely feedback. Goldratt and Cox (1986) and
Goldratt and Fox (1986) said that the goal of a factory is to make money, and there are
three important measures (which are defined in monetary rather than physical units):
throughput, inventory and operations expenses. The first should be maximised and the
last two should be minimised. Desrochers (1990) mentioned some of the objectives of a
factory which leads to a better performance:
minimised total time required to complete all the jobs (i.e. minimised make span)
minimised set-up costs
 Review of literature on manufacturing systems productivity measurement 463

meeting the due date

minimised mean time in the shop (mean flow time)
minimised machine idle time
minimised mean number of jobs in the system
minimised percentage of jobs lateness
minimised mean lateness of jobs
minimised mean queue time.
There is considerable amount of literature on manufacturing system productivity
measurement and improvement. In this paper, the extensive literature has been classified
under four categories. The rationale for the classification and the organisation of this
paper is as follows. Following the introduction, Section 2 presents methods based on
rigorous mathematical modelling. Operations Research- (OR-) based methods and
control-theoretical methods are discussed in this section. Section 3 presents methods
driven by information systems, that is, system analysis-based methods for productivity
improvement. In Section 4, continuous productivity improvement methods are discussed.
These are primarily empirical methods established by practice. A survey of performance
metrics-based methods and the motivation for a factory level approach for productivity
measurement and improvement comprises Section 5. This section also comprises a
survey of commercial tools available to measure manufacturing system performance.
Finally, Section 6 draws conclusion regarding the literature review performed.

2 OR-based methods

OR is a discipline based on applied mathematics for quantitative system analysis,

optimisation and decision-making (Leon, 2004). OR approach emphasises mathematical
modelling leading to the deepest understanding of the behaviour of systems.
An analytical or mathematical model can be solved quickly by a computer, and can be
embedded in an optimisation algorithm (Gershwin, 1994). Table 1 summarises the
methods reviewed and critiqued in this section.

Table 1 OR and control theory-based methods

Approach Methods
Operations research Program Evaluation and Review Technique/Critical Path
Method (PERT/CPM), linear programming, integer programming,
dynamic programming, simulation, network optimisation, graph
theory, game theory, queuing theory, inventory theory, Markovian
decision processes, reliability theory, non-linear programming,
stochastic programming
Control theory Petri nets, Ramadge-Wonham (R-W) automata theory

There are a number of OR-based methods that have been developed in the past to model
a manufacturing system for productivity improvement. Morgan (1989) reviewed many
surveys and mentioned that reviews provide evidence about PERT/CPM, linear
programming and simulation being among the most frequently used methods. In another
464 K.M.N. Muthiah and S.H. Huang

survey conducted by Ford et al. (1987), linear programming, simulation and network
models are among the most highly used methods. Law and Kelton (2000) and Kelton
et al. (2004) have a detailed account of simulation modelling and analysis. Johansson and
Grnberg (2001) mentioned simulation techniques may be used as direct improvement
methods but also often act as a support decision tool for the improvement of work. Graph
theory and network optimisation are fields of mathematics and OR that have wide
practical applications in manufacturing. It can be used to model many diverse
applications such as cellular manufacturing, facility layout, production planning,
production lot sizes and employee scheduling. There are models and optimisation
algorithms using graph theory and network optimisation for spanning tree problems,
shortest path problems, minimum-cost flows and arc routing problems (Evans, 1996).
Hillier and Lieberman (2001) and Taha (2003) had a complete treatment of OR methods
such as linear programming, network analysis, dynamic programming, game theory,
queuing theory, inventory theory, Markovian decision processes, reliability theory and
non-linear programming.
Surveys conducted by Forgionne (1983), Green et al. (1977), Shannon and Biles
(1970), Thomas and DaCosta (1979) and Turban (1972) report low utilisation of
some of the OR techniques such as queuing theory, integer programming, stochastic
programming, search techniques, non-linear programming, dynamic programming and
game theory. Vatter (1967), Gaither (1975) and Radnor and Neal (1973) mentioned that
size of the firms and extent of OR methods used are positively related. Other barriers to
usage of OR methods are listed as mathematical complexity, lack of training, knowledge
or education (Gaither, 1975; Green et al., 1977; Shrock and Ostrom, 1981; Thomas and
DaCosta, 1979; Watson and Marrett, 1979).
Approaches to improving manufacturing systems productivity originates from OR
and control theories. From a general perspective OR and control theories have some
common characteristics. Both are concerned with decision-making based on some
analytical model (Desrochers, 1990). Hence, some control-theoretic approaches are also
discussed in this section. Desrochers (1990) mentioned that control-theoretic models take
the form of differential equations. This mathematical form allows techniques from
modern control theory to be used in search of a feedback control law that looks at the
present inventory, machine status and product demand to determine the present
production rate. Some of the formal control theory methods used to model discrete-event
systems are Petri nets and R-W automata theory (Ramirez-Serrano et al., 2002).
Petri nets are a simple, powerful, logical tool which enables the engineer to model,
evaluate and control complex dynamic discrete-event system. A graphical representation
of a Petri net can be constructed in a building block type manner where each newly
revised net is developed by further detailing a previous version. After the graphical
model has been completed, a mathematical model can be written systematically. These
models can then be used to evaluate the properties and characteristics of system under
investigation. Unlike many other modelling techniques, Petri nets can be used from
design through evaluation to control (Zhou et al., 1994). Murata (1989) and Zhou and
DiCesare (1993) mentioned Petri nets are useful in modelling systems due to their ability
to model asynchronous operations, concurrence, deadlock, conflicting events and event
driven systems. Desrochers (1990) listed more control-theoretic methods mainly based
on dynamic programming, optimal control and stochastic control. Major drawback of the
control-theoretic approach is that these models represent the system behaviour with a
limited degree of accuracy and they depend heavily on the issues being studied.
 Review of literature on manufacturing systems productivity measurement 465

Gershwin (2000) mentioned that design and operation of manufacturing systems are
of great economic importance. In spite of the considerable literature on these topics, and
the long history of manufacturing, there is no widespread agreement on how they
can be done best. There are many academic approaches (queuing theory, dynamic
programming, combinatorial optimisation, etc.) and many approaches that are advocated
among practitioners and consultants, but factory performance remains unpredictable.
Gershwin (2000) proposed an approach that comprises design and operation in a unified
manner. The method will eventually include algorithms for selecting buffer sizes and
operational parameters. However, the approach is far from complete and much work
remains before it can be fully implemented.

3 System analysis-based methods

During the last two decades attempts have been made to analyse and model
manufacturing systems using a systems approach. Table 2 summarises system-based
techniques for manufacturing system analysis and design for productivity improvement.
Table 2 is followed by a brief account of these methods and a critique of these methods.

Table 2 System analysis-based methods

Method Literature surveyed

Graphs with Results and Actions
Interrelated (GRAI)
Integrated Compute-Aided Manufacturing
Definition (IDEF0)
Structured Analysis and Design Technique
(SADT)
Structured Systems Analysis and Design
Method (SSADM)
GRAI Integrated Methodology (GIM)
Strathclyde Integration Method (SIM)
GI-SIM
Doumeingts (1985), Doumeingts et al. (1995) and
Grislain and Pun (1979)
Bravoco and Yadav (1985) and Ross (1985)
Marca and McGowan (1988), Ross and Schoman
(1977), Ross (1985) and Santarek and Buseif
(1998)
Down et al. (1988) and Eva (1992)
Doumeingts et al. (1995)
Carrie and Macintosh (1997), Pandya et al. (1997)
and Carrie (1997)
Al-Ahmari and Ridgway (1999)

Al-Ahmari and Ridgway (1999) mentions that the GRAI is based on a conceptual
reference model, which uses two graphical tools and a structured approach. The reference
model is decomposed into three subsystems, namely physical, information and decisional
systems. The GRAI graphical tools consist of GRAI grids and GRAI net. The GRAI net
describes the structure of the various activities in each of the decision centres identified
in the GRAI grid and is constructed using a bottom-up analysis approach
(Al-Ahmari and Ridgway, 1999; Doumeingts, 1985; Doumeingts et al., 1995; Grislain
and Pun, 1979).
Al-Ahmari and Ridgway (1999) mentions that IDEF0 consists of a hierarchy of
diagrams, text and glossary. The diagram represents the main component of the IDEF0
model. It presents the system functions as boxes, and data or object interfaces as arrows.
The attachment point between arrows and boxes indicates the interface type (input,
466 K.M.N. Muthiah and S.H. Huang

control, output or mechanism). The generation of many levels of detail through the
model diagram structure is one of the most important features of IDEF0 as a modelling
technique (Al-Ahmari and Ridgway, 1999; Bravoco and Yadav, 1985; Ross, 1985).
SADT is a standard tool used in design of computer-integrated manufacturing
systems, including flexible manufacturing systems. Representation of a manufacturing
system consists of an ordered set of boxes representing activities performed by the
system. The activity may be a decision-making, information conversion or material
conversion activity. SADT models ensure consistency but they are static, that is, they
represent exclusively system activities and their interrelationships, but do not show
directly logical and time dependencies between them (Al-Ahmari and Ridgway, 1999;
Marca and McGowan, 1988; Ross, 1985; Ross and Schoman, 1977; Santarek and
Buseif, 1998).
Al-Ahmari and Ridgway (1999) describes SSADM provides interfaces between the
method procedure and technique. It breaks down the system into modules containing
activity steps. Each step has several tasks as inputs and outputs. SSADM contains a
number of techniques which includes Data Flow Diagram (DFD), Logical Data Structure
(LDS), Entity Life Histories (ELH) and Relational Data Analysis (RDA) to support its
modelling methodology (Al-Ahmari and Ridgway, 1999; Down et al., 1988; Eva, 1992).
Al-Ahmari and Ridgway (1999) points that GIM was developed to support systems
analysis and design. This method is based on a reference model, formalisms and
structured approach. GIM uses three modelling methods: GRAI (to model decision
systems), MERISE (to model information systems) and IDEF0 (to model physical
systems). Therefore, the GIM method integrates four different modelling domains:
functional, information, decisional and physical and present them in a GIM modelling
framework (Al-Ahmari and Ridgway, 1999; Doumeingts et al., 1995).
Al-Ahmari and Ridgway (1999) describes SIM composes two modelling methods
DFDs and GRAI grids. The application of IDEF0 was introduced in the method to
complement the use of DFDs. SIM is an effective method for modelling manufacturing
information systems but it does not consider dynamic aspects of physical subsystems in
the manufacturing environment (Al-Ahmari and Ridgway, 1999; Carrie and Macintosh,
1997; Pandya et al., 1997; Carrie, 1997).
Al-Ahmari and Ridgway (1999) proposes the GI-SIM modelling method has the
capability to analyse and design manufacturing systems. It presents a global view of the
organisation in its grid, and describes the different activity centres using the IDEF0
modelling technique. In this method, the lowest level of IDEF0 models can be translated
into simulation tools. When compared with other modelling methods used for system
analysis and design, GI-SIM has distinct advantages. GI-SIM is flexible and combines
three important modelling concepts (conceptual, functional and simulation) to describe
the manufacturing system form its global domain to its detailed specifications, and
includes the dynamic aspects of the system being modelled. The object linking method
has been used to enhance the consistency between the various GI-SIM components (the
GRAI grid, IDEF0 and SIMAN tools) (Al-Ahmari and Ridgway, 1999).
These modelling methods have been compared and evaluated by several researchers
(Colquhoun et al., 1993; Doumeingts et al., 1995; Pandya, 1995; Pandya et al., 1997;
Shorter, 1994). It is agreed that there is no single conceptual modelling method, which
can completely model a manufacturing system or describe most of its subsystems
(Al-Ahmari and Ridgway, 1999). In general, all these methods have advantages and
disadvantages in modelling manufacturing systems. They can identify major elements of
 Review of literature on manufacturing systems productivity measurement 467

the system and model it in a hierarchical structure by breaking down the whole system
into low-level units of a factory. Flow of material, control and information can also be
simulated. However, these modelling techniques are not designed to facilitate
productivity measurement and analysis. Rather they focus on the availability of the
unit/equipment, which is only one aspect of the system performance (Huang et al., 2002).

4 Continuous improvement methods

In the survey conducted by Industry Week (IW) and Manufacturing Performance

Institute (MPI), plants closest to world-class report higher capacity utilisation. The
survey included 100 questions and received 967 responses from manufacturers across the
USA. More than 95% of plants closest to world-class indicated that they have an
established improvement methodology in place. Table 3 gives the summary of IW/MPI
Census plants progress towards achieving world-class manufacturing status (Taninecz,
2004a).

Table 3 World-class progress

No. of Plants Plants (%)

No progress 236 25.9
Some progress 448 49.2
Significant progress 207 22.7
Fully achieved 19 2.1

Source: Taninecz (2004a).

More than 75% of plants with no progress towards world-class report no quality
certifications in place, while 72.9% of plants closest to world-class indicate at least one
quality certification in place. Nearly 40% of plants closest to world-class are registered
ISO 9001:2000 compared with 9.1% of no-progress plants (Taninecz, 2004a). Table 4
gives the primary improvement methodology in place in IW/MPI Census plants. The
most established methodologies among manufacturing plants are lean manufacturing,
Total Quality Management (TQM) and a hybrid approach of Lean and Six Sigma
(Taninecz, 2004b).

Table 4 Improvement methodologies

Primary methodology No. of plants in use Plants (%)

Agile manufacturing 41 4.6
Lean manufacturing 316 35.7
Six Sigma 29 3.3
Lean and Six Sigma 68 7.7
Theory of constraints (TOCs) 43 4.9
TQM 125 14.1
Toyota production system (TPS) 12 1.4
No methodology 186 21
Other 64 7.2
Total 884 100
Source: Taninecz (2004b).
468 K.M.N. Muthiah and S.H. Huang

One in five IW/MPI Census plants indicates that they have no improvement methodology
in place. It is mentioned in the survey that it indicates poor manufacturing performance.
The survey concludes by mentioning that a methodology will only be good as
those guiding and executing it. It is also mentioned that the survey should not be
used to crown any single methodology as manufacturing king, the findings do
support the argument that any methodology is better than no methodology at all
(Taninecz, 2004b). A review and a critique of principle continuous improvement
methodologies follow. Apart from the methods listed in Table 4 other methods
reviewed and critiqued in this section are Business Process Reengineering (BPR), Total
Productive Maintenance (TPM), world-class manufacturing and Quick Response
Manufacturing (QRM).
Monden (1993) mentioned that the primary consideration of the TPS is to reduce
costs by completely eliminating waste such as excessive production resources,
overproduction, excessive inventory and unnecessary capital investment. Two key
concepts to TPS are Just-In-Time (JIT) and Autonomation. These two concepts are the
pillars of the TPS. Two concepts also key to the TPS includes flexible work force
(Shojinka in Japanese), which means varying the number of workers to demand
changes, and creative thinking or inventive ideas (Soikufu), which means capitalising
on worker suggestions. To realise these four concepts, Toyota has established kanban
system to maintain the JIT production, production smoothing method to adapt to
demand changes, shortening of the set-up time for reducing the production lead time,
standardisation of operations to attain line balancing, machine layout and
multifunction workers for the flexible work force concept, improvement activities by
small groups and suggestion system to reduce the work force and increase worker
morale visual control system to achieve the Autonomation concept, functional
management system to promote company-wide quality control (Monden, 1993).
Lean manufacturing was popularised in Womack et al. (1990). It has become a
standard to emulate by firms throughout the world. Although a number of principles and
tools appear to be derived from TPS, cellular manufacturing and world-class
manufacturing, lean manufacturing has emerged relatively recently as an approach that
integrates different tools to focus on the elimination of waste and produce products that
meet customer expectations (Hines and Taylor, 2000; Ohno, 1988; Plonka, 1997;
Womack and Jones, 1996). James-Moore and Gibbons (1997) defined key areas of focus
within the lean manufacturing as flexibility, waste elimination, optimisation, process
control and people utilisation. A value stream is defined as all the value-added and
non-value-added actions required to bring a specific product, service or combination of
products and services, to a customer, including those in the overall supply chain as well
as those in internal operations. Value Stream Mapping is an enterprise improvement
technique to visualise an entire production process, representing information and material
flow, to improve the production process by identifying waste and its sources (Rother and
Shook, 1999; Womack and Jones, 1996). The standard seven tools defined as part of
detailed value stream mapping is described in detail in Hines and Taylor (2000), Hines
and Rich (1997) and Jones et al. (1997).
Agile manufacturing is defined as the integration of organisation, highly skilled and
knowledgeable people and advanced technologies, to achieve cooperation and innovation
in response to the need to supply customers with high-quality customised products. The
term agile manufacturing came into common usage with the publication of the report
21st Century Manufacturing Enterprise Strategy (Kidd, 1994; Iacocca Institute, 1991).
 Review of literature on manufacturing systems productivity measurement 469

Kidd (1994) listed the strategies for agile manufacturing should be focused on designing
an enterprise that will lead to:
faster response to highly variable customer demand patterns
improved productivity
opportunities for system wide innovation, learning and improvement
improved product quality
better utilisation of expensive capital and improved return on investment.
Dove (1993) underscored that the lean manufacturing refined the mass manufacturing by
eliminating waste and by responding to unanticipated change at the operational level.
Agility, however, is a strategic response to involve the customer more closely in the
specification of the product and, if need be, to deal more effectively with conditions that
are beyond the control of the enterprise (Plonka, 1997).
Crosby, Deming, Juran and Feigenbaum had considerable influence in the
development of TQM in organisations throughout the world (Dale, 1999). Crosby defines
quality as a conformance to requirements. His programme has 14 steps that
focus on how to change the organisation and tend to be a specific action plan
for implementation (Crosby, 1979). Deming also suggests a 14-point approach
summarising his management philosophy for improving the quality. Other contributions
of Deming include the Plan-Do-Check-Act (PDCA) or the Plan-Do-Study-Act (PDSA)
cycle of continuous improvement (Deming, 1982, 1986). Deming ignores the cost of
quality while Juran, like Crosby and Feigenbaum, claim that reducing it is a key
objective. A ten-point approach summarises Jurans approach (Juran, 1988). Feigenbaum
identifies ten benchmarks for success (Feigenbaum, 1956, 1991).
TQM is defined as the management approach of an organisation, centred on
quality, based on the participation of all its members and aiming at long-term
success through the customer satisfaction, and benefits to all members of the
organisation and to society.
The discipline of cleanliness and housekeeping (5Ss) is a prerequisite for an effective
quality assurance (Dale, 1999). Some of the tools used in TQM to support, develop and
advance the quality improvement process are flowcharts, checklists, seven quality control
tools, quality costing, Statistical Process Control (SPC), Failure Mode and Effects
Analysis (FMEA), Fault Tree Analysis (FTA), design of experiments, Taguchi methods,
Quality Function Deployment (QFD), seven management tools, Departmental Purpose
Analysis (DPA), mistake-proofing and benchmarking. A detailed description of the
above tools could be found in Dale (1999), Hawkings (2001) and Sui-Pheng and
Khoo (2001).
While TQM is based on continuous process improvement over a relatively long time,
BPR emphasises process reengineering. TQM and BPR are complementary and integral
approach. Though both are philosophies to improve business performance, continuous
improvement should come first to provide the base for the more radical change and
improvements generated by BPR (Dale, 1999; Kelada, 1995; Harrington, 1995; Vakola
and Rezgui, 2000).
Dale (1999) says that the development of people and their involvement in
improvement activities both individually and through teamwork, is a key feature in a
companys approach to TQM. A key aspect of this is making full use of the skills and
knowledge of all the employees to the benefit of the individuals and the organisation.
470 K.M.N. Muthiah and S.H. Huang

There are a number of different types of teams with different operating characteristics, all
of which can act as a vehicle for involving people in improvement activities. The names
given to the teams vary depending on the objective Quality Circles (QCs), yield
improvement teams, quality improvement teams, continuous improvement teams,
problem elimination teams, self-directed work teams, process improvement groups, task
groups, SPC teams, error cause removal teams, corrective action teams, kaizen teams and
cross functional teams and are found in areas such as design, quality assurance, costs,
standardisation, delivery and supply. A detailed description of the role of teams in
continuous improvement could be found in Dale (1999).
Nakajima (1988) developed TPM by combining the key features of preventive,
productive and predictive maintenance with TQM, QCs and employee involvement.
A number of Japanese companies started TQM some 3035 years ago; the majority of
them have only become involved with TPM during the last 15 years. The consensus view
among the companies is that, in their experience, TQM has only a limited influence on
machine performance, and so, they have introduced TPM to focus on the machines (Dale,
1999).
The Six Sigma methodology was developed by Mikel Harry in the late 1980s to
provide a consistent data drive-approach to solving difficult business problems. Harry
posited that every problem could be characterised as a process with inputs and
outputs. Addressing process problems, analysing their root causes and troubleshooting
solutions to them could be divided into the following five discrete steps or phases:
Define, Measure, Analyse, Improve and Control (DMAIC) (Sharma, 2003). The
Six Sigma philosophy maintains that reducing variation will help solve process and
business problems (Pojasek, 2003). Tennant (2001) mentions that the component parts of
a Six Sigma quality initiative include:
TQM, which provides tools and techniques to bring about cultural change and
process improvement within an organisation
SPC, which supplies powerful metrics, analysis tools and control mechanisms
a Japanese approach to process improvement and design, customer satisfaction
and customer needs analysis, helping to bridge the gap between quality as
satisfaction experienced and an actionable reality
a new paradigm of total customer satisfaction as a primary driver for the quality
initiative.
Sharma (2003) mentions that there are many advantages of using strategic Six Sigma
principles in tandem with lean enterprise techniques, which can lead to quick process
improvements. It is sometimes difficult for a company to translate or leverage such
improvements enterprise wide because no infrastructure exists to do so quickly and
efficiently. By introducing Six Sigma principles into the improvement mix, however, it
becomes possible to put in place a business process framework with which to leverage
benefits in one process to other processes in an organisation. The strategic use of
Six Sigma principles and practices ensures that process improvements generated in one
area can be leveraged elsewhere to maximum advantage, resulting in quantum increases
in product quality, process improvement or corporate earnings performance (Sharma,
2003).
Greene (1991) defined world-class companies as those which continuously
outperform the industrys global best practices and which know intimately their
customers and suppliers, know their competitors performance capabilities and know
 Review of literature on manufacturing systems productivity measurement 471

their own strengths and weaknesses. The term world-class was introduced by Hayes
and Wheelwright (1984) to describe the capabilities, which had been developed by the
Japanese and German companies to compete in export markets. The virtues of Japanese
companies in particular were already the subject of much admiration, and Schonberger
(1986) picked up the term in his second major book World-Class Manufacturing
(Harrison, 1998). Maskell (1991) mentions that the term world-class manufacturing is a
very broad one but will generally include the following:

a new approach to product quality

JIT production techniques

change in the way the work force is managed

a flexible approach to customer requirements (Maskell, 1991).

TOC can be summarised using the terminology of the system we seek to improve as
follows:
1 identify the systems constraints
2 decide how to exploit the systems constraints
3 subordinate everything else to the above decision
4 elevate the systems constraints
5 if in the previous steps a constraint has been broken, go back to step one, but do
not allow inertia to cause a system constraint (Goldratt, 1990).

McMullen (1998) lists the reasons for TOCs popularity to its ability to increase
profitability, to expose hidden capacity; make growth in throughput value added
the perpetual top priority, improve profitability of product mix, reduce inventory in
supply chain, focus manufacturing and quality improvements on throughput value added,
reduce cycle time, that is, establish excellent delivery performance, produce better
Returns-on-Investment (ROI).
Japanese manufacturing techniques, also known as JIT, and more recently
popularised under the name of lean manufacturing, are considered to be the leading
edge of manufacturing strategy and are being adopted by companies throughout the
world. However, Suri (1998) mentions that for markets that make highly engineered
products in small batches and companies that do not need to engineer each product, but
have a very large number of different products with highly variable demand, a new
strategy called QRM is more effective than the lean manufacturing. There are ten
principles laid down by QRM and the key aspect is that all principles stem from a single
theme of reducing lead times. One of the principles even states that Plan to operate at
80% or even 70% capacity on critical resources instead of keeping the machines and
people busy all the time (Suri, 1998).
Among all the methodologies surveyed in this section, no one method can be
concluded to be the best. The findings of IW/MPI survey also support this argument.
As quoted by the IW/MPI survey, a methodology will only be good as those guiding and
executing it (Taninecz, 2004b).
472 K.M.N. Muthiah and S.H. Huang

5 Performance metrics-based methods and motivation for a factory

level approach

Conventional performance metrics used to measure factory performance is production

throughput (), process inventory (L), cycle time (W). The relationship between these is
given by Littles law, which states, L = W (Little, 1961). Table 5 summarises the
performance metrics reviewed and critiqued in this section. This section also has a
detailed survey of commercial tools available for performance measurement. It is
followed by the motivation for a factory level performance diagnostics approach and the
proposed framework.

Table 5 Performance metrics reviewed

Performance metrics Literature surveyed

Throughput (), Process inventory (L) and
Cycle time (W)
Overall Equipment Effectiveness (OEE)
Overall Factory Effectiveness (OFE)
Overall Throughput Effectiveness (OTE)
Little (1961)
Ames et al. (1995), Bonal et al. (1996), Chand
and Shirvani (2000), Giegling et al. (1997),
Hansen (2002), Jonsson and Lesshammar
(1999), Leachman (1997), Nakajima (1988) and
SEMI E79-0200 (2000)
Scott and Pisa (1998) and SEMI E124-0703
(2003)
Huang et al. (2002) and Huang et al. (2003)

Unit-based OEE measures the equipments productivity relative to its maximum

capability, assumed constant during the time period (total time) for measuring
performance. OEE is defined as (Nakajima, 1988),

OEE = Aeff Peff Qeff (1)

where Aeff is the availability efficiency that captures the deleterious effects due to
breakdowns, set-ups and adjustments, Peff is the performance efficiency that captures
productivity loss due to reduced speed, idling and minor stoppages. Qeff is the quality
efficiency that captures loss due to defects, rework and yield. These three components of
OEE are calculated as follows:

TU
Aeff = (2)
TT

TP Ract
Peff = NOR SR= (3)
TU Rth

Pg
Qeff = (4)
Pa

where TU is the uptime of the equipment, TT is the total observation time of the
equipment, NOR is the net operating rate, SR is the speed ratio, TP is the production
time of the equipment, Ract is the actual processing rate of the equipment, Rth is the
 Review of literature on manufacturing systems productivity measurement 473

theoretical processing rate of the equipment, Pg is the good product output from the
equipment and Pa is the actual products processed by the equipment during the
observation time.
Though OEE is a part of TPM, it has been used extensively outside the maintenance
paradigm. OEE has been used extensively for equipment productivity improvement,
especially in the semiconductor industry (Ames et al., 1995; Bonal et al., 1996; Chand
and Shirvani, 2000; Giegling et al., 1997; Leachman, 1997; SEMI E79-0200, 2000).
OEE was recognised as a fundamental method for measuring equipment performance
beginning the late 1980s and early 1990s. Now it is accepted by management consultants
as a primary performance metric (Hansen, 2002). The OEE measure attempts to reveal
the hidden costs associated with a piece of equipment. When it is applied by autonomous
small groups on the shop-floor together with quality control tools, OEE is an important
complement to the traditional top-down oriented performance measurement systems
(Jonsson and Lesshammar, 1999).
Scott and Pisa (1998) pointed out that the gains made in OEE, while important and
ongoing, are insufficient. It is necessary to focus ones attention beyond the performance
of individual tools towards the performance of the whole factory. The ultimate objective
is a highly efficient integrated system, not brilliant individual tools. The authors coined
the term OFE, which is about combining activities and relationships between different
machines and processes, and integrating information, decisions and actions across many
independent systems and subsystems.
Fab graph, a directed multigraph is used for performance analysis for wafer fabs. The
defining feature of a wafer fab is its process flow. However, a process flow cannot be
executed without equipment. Consideration of how a process flow maps onto a set of
equipment leads naturally to the fab graph. In addition to providing a useful pictorial
representation of the process flow, the fab graph is a legitimate mathematical entity.
Using discrete-event simulation as a numerical technique, the dynamic model may be
implemented in computer software with measures of fab performance such as dynamic
capacity, product cycle time, process throughputs, equipment utilisation and scheduled
lot completions. It is claimed that automated analysis and interpretation is possible
because of the fundamental understanding of fab structure derived from fab graph
analysis. The method is focused on semiconductor manufacturing and the metrics used
are at the equipment level (Atherton and Atherton, 1995; Beineke and Wilson, 1978;
Deo, 1974).
Table 6 summarises commercial tools available to measure manufacturing system
performance. The criteria used for summarising to the tools are as follows:
Factors measured: refers to the performance metrics measured or observed
using the tool.
Improvement methodology: refers to improvement technique (such as TPM, lean
manufacturing, etc.) followed.
Metrics level: refers to whether the factors measured are for individual
equipment or for the entire system.
Modelling capability: refers to whether the tool has manufacturing system
modelling capabilities.
Automated diagnostics: refers to whether in the tool, process of bottleneck
detection is automated.
474 K.M.N. Muthiah and S.H. Huang

Table 6 Survey of commercial tools

 Review of literature on manufacturing systems productivity measurement 475

Table 6 Survey of commercial tools (continued)

476 K.M.N. Muthiah and S.H. Huang

Table 6 Survey of commercial tools (continued)

 Review of literature on manufacturing systems productivity measurement 477

Table 6 Survey of commercial tools (continued)

478 K.M.N. Muthiah and S.H. Huang

It could be observed from Table 6 that all tools measure performance at the equipment
level. The extensive literature review shows that quantitative metrics to measure
performance at factory level are lacking. A quantitative approach to perform factory level
diagnostics (identifying bottleneck, opportunities for improvement) is lacking.
A systematic methodology driven quantitatively to focus on critical areas constraining
manufacturing system productivity is lacking.
Semiconductor Equipment and Materials International (SEMI) is now pioneering the
development of OFE metrics (SEMI E124-0703, 2003). However, the metrics are geared
towards semiconductor manufacturing. SEMI metrics are intended for evaluating the
overall efficiency of semiconductor manufacturing, not for diagnosing problems
(identifying bottleneck/opportunities for improvement) in the factory. Therefore, their
utility is limited.
An attempt was made by Huang et al. (2002, 2003) to come up with factory
level diagnostic metrics. Though a noteworthy attempt, however there were some
major unaddressed issues. Overall Throughput Effectiveness (OTE) metrics developed
then were for series and parallel subsystems alone. This was not sufficient to
compute OFE as it lacked constructs to model a factory by capturing the equipment
connectivity information. The OTE metrics defined needed good product output
from the factory for computation. Hence, it cannot be used for factory level
diagnostics such as bottleneck detection. The OTE metrics developed were not
statistically validated.
To measure performance and to systematically perform diagnostics at the factory
level, quantitative metrics at factory level consistent with a manufacturing system
modelling technique capturing equipment interconnectivity information is essential. This
could be achieved by classifying the entire manufacturing system layout into subsystems
based on what is occurring in real-world manufacturing systems, such as series,
parallel, assembly and expansion. The subsystems defined would serve as the
modelling constructs to create manufacturing system models.
The framework for quantitative factory level metrics-based production monitoring
and diagnostics is illustrated in Figure 1. Manufacturing system modelling is driven by
the equipment data and would aim at capturing the equipment interconnectivity
information conducive for factory level performance monitoring and diagnostics. This
could be achieved by classifying the entire layout into subsystems based on what is
occurring in real-world manufacturing systems, as series, parallel, assembly and
expansion. The interconnectivity information of these subsystems is captured to achieve
at the factory level model. There are different approaches to derive factory level
productivity metrics. As long as the derivation obeys the law of conservation of material
flow, the resulting metrics will be able to measure factory performance. However, to be
useful for factory diagnostics and production line design, factory level metrics should
be derived as a function of the individual equipment productivity consistent with the
manufacturing system modelling technique. Subsystem level metrics is first derived
based on the interconnectivity information of the equipments. Finally, the factory level
metric is achieved by synthesising the subsystem level metrics, capturing the
interconnectivity information of the subsystems. A constraint-based approach should
be used to drive the metrics development to be useful for factory diagnostics. The
equipment productivity which constraints the value of the factory level metrics is used to
drive the diagnostics. This approach would also have a tremendous potential to automate
the entire factory performance diagnostics.
 Review of literature on manufacturing systems productivity measurement 479

Figure 1 Schematic illustration of factory level effectiveness metrics-based production

monitoring and diagnostics

6 Conclusion

This paper presents a detail review of the literature on manufacturing systems

productivity measurement and improvement. The review is summarised under four
categories. OR-based methods emphasise mathematical modelling leading to the deepest
understanding of the behaviour of systems. However, complexity and heavy dependence
on the issues being studied are drawbacks. Systems-based methods can identify major
elements of the system and model it in a hierarchical structure by breaking down the
whole system into low-level units of a factory. However, these modelling techniques
are not designed to facilitate productivity measurement and analysis as they focus on
the availability of the unit/equipment, which is only one aspect of the system
performance. Among all the continuous improvement methodologies surveyed, no single
methodology can be crowned as the best. A methodology is as good as those guiding and
executing it. A survey of performance metrics-based methods indicates lack of factory
level approach to measure performance and to systematically perform diagnostics.
A survey of commercial tools available to measure manufacturing system performance
480 K.M.N. Muthiah and S.H. Huang

indicates that the tools measure performance at equipment level and there is no modelling
capability leading to automated diagnostics. A framework is proposed to develop
quantitative metrics at factory level consistent with a manufacturing system modelling
technique. The approach would help factory professionals to systematically perform
factory diagnostics by quantitatively focusing on critical areas constraining
manufacturing system productivity.

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