Simply put, OEE identifies the percentage of manufacturing time that is truly productive. An OEE score of 100% means you are manufacturing only good parts, as quickly as possible, without stopping the process. Said in a different way, you are producing 100% quality good parts at a 100% level of performance (as fast as possible), with 100% equipment availability.
Overview: What is Overall Equipment Effectiveness (OEE)?
OEE is simple and practical. It takes the most common sources of manufacturing loss, places them into three primary categories and then computes metrics which will provide you a way for measuring where you are and how you can improve manufacturing performance.
OEE is frequently used as a key metric in TPM (Total Productive Maintenance), Lean Manufacturing programs and other initiatives by providing an overall framework for measuring production efficiency.
The three categories or factors used in the computation of OEE are Availability, Performance and Quality. The formula is simply; OEE = Availability x Performance x Quality. Let’s examine each factor in more detail.
1. Availability is calculated as the ratio of Run Time to Planned Production Time:
Availability = Run Time / Planned Production Time
Run Time is the Planned Production Time less Stop Time, where Stop Time is defined as all times where the manufacturing process was intended to be running but was not due to Unplanned Stops (e.g., Breakdowns) or Planned Stops (e.g., Changeovers).
Run Time = Planned Production Time − Stop Time
2. Performance takes into account anything that causes the manufacturing process to run slower than the maximum possible speed when the equipment is running.
Performance is the ratio of Net Run Time to Run Time. It is calculated as:
Performance = (Ideal Cycle Time × Total Count) / Run Time
Ideal Cycle Time is the fastest cycle time that your process can achieve under optimal   conditions. Therefore, when it is multiplied by Total Count the result is Net Run Time (the fastest possible time to manufacture the parts).
3. Quality takes into account manufactured parts that do not meet quality standards, including parts that need rework. Remember, OEE Quality is similar to First Pass Yield, in that it defines Good Parts as parts that successfully pass through the manufacturing process the first time without needing any rework.
Quality is calculated as:Â Quality = Good Count / Total Count
Benefits of OEE
Here is a list of seven benefits of using OEE in your manufacturing process.
- Ensures you use existing equipment to its fullest capacity, reducing the need for investment in other areas.
- Gives you a better oversight of the production process, so you understand where the real problems exist and how to prioritize them.
- Delivers significant return on investment whether you are increasing capacity, driving efficiencies, launching new products, and more.
- Helps you maintain competitiveness in the market, particularly in competitive industries like pharmaceutical and medical device manufacturing.
- Improved process quality which will save you time and money as well as helping maintain your reputation in the market while also avoiding the risks and consequences of product recalls.
- Reduces machine maintenance and repair costs as you can put proper plans and schedules in place.
- Improves the scalability of your production line.
Why is OEE important to understand?
While the underlying formulas are rather simple to understand, the overall concept needs to be fully understood to get the most out of this methodology.
Pinpoints areas of improvement
OEE helps visualize the most important sources of productivity losses into one single percentage. Everyone in the organization can easily see what’s working well and where OEE improvement is needed.
Impact on equipment return on investment (ROI)
Buying and installing your equipment is a large capital investment. To achieve the maximum ROI in the shortest possible time, you need to ensure your equipment is being used to its fullest efficiency and effectiveness. OEE will provide insights into where and how you can make changes to get the best performance from new and existing equipment.
Improve competitiveness
By reducing production losses (and therefore costs), OEE is a tool to help you remain competitive. Another way OEE helps competitiveness is by improving quality.
An industry example of OEE
The company’s Lean Six Sigma Master Black Belt (MBB) was asked by the Manufacturing Manager to do some quick calculations of OEE for the company’s key piece of equipment. Here are his calculations.
Shift Length – 8 hours (480 minutes)
Breaks – two 15 minute and one 30 minute
Downtime – 47 minutes
Ideal cycle time – 1.0 second
Total units produced – 19,271 units
Units rejected – 423 units
Planned Production Time = 480 – 60 = 420 minutes
Run Time = 420 – 47 = 373 minutes
Good Count = 19,271 – 423 = 18,848 units
Availability = 373/420 = 88.81%
Performance = (1 x 19,271) / (373 x 60) = 86.11%
Quality = 18,848 / 19,271 = 97.80%
OEE = 88.81% x 85.11% x 97.80% = 74.79%
The company target is an OEE 0f 85%. The MBB informed the Manufacturing Manager there is some room for improvement.
3 best practices when thinking about OEE
Here are a few tips to help you implement OEE in your organization.
1. Collect real time data
Implement a real time data collection system for determining your OEE in a timely manner so any necessary adjustments can be made quickly.
2. Implement a proper preventative maintenance program
By doing this, you will reduce the amount of unexpected and unplanned downtime.
3. Correct quality problems quickly
Eliminate the root causes of problems as soon as they occur so your customers aren’t negatively impacted and you don’t use your equipment to repeatedly make the same items over and over.
Frequently Asked Questions (FAQ) about OEE
What are the three components of OEE?
Availability, Performance and Quality
What is the highest value for OEE you can achieve?
100%. This means your equipment is available 100% of the time it is supposed to run, at 100% of the speed it should run and you are producing 100% good product.
Is changeover time included in my OEE calculations?
Yes, since it could be used for producing products. While you may not be able to or want to eliminate changeover time, you can reduce it through process improvement such as Six Sigma.
Recapping OEE
OEE is designed to help you drive improvement by providing a better understanding of the losses you incur during manufacturing. It is a metric which reduces complex production problems into simple, accessible information to help you make the right decisions to improve efficiency and reduce operating expenses.
The components of OEE are availability and performance of your equipment and the quality of what is being produced. The reasons for lost time, slow performance and reduced quality are identified and eliminated or at least reduced.
