What is OEE?

OEE is a highly effective Business Performance Management Tool, which critically evaluates how effectively a manufacturing operation is utilised? OEE can be used on single and multiple production lines and from one to a number of plants in a group-wide structure. It is suitable for all types of manufacturing processes including discrete, continuous or bulk. Put simply “OEE measures the gap between the actual performance and the potential performance of a manufacturing unit”.

WHY use OEE as a Production Performance Metric?

If you are not currently using OEE as a Production Management Performance Metric then you are missing one of the most influential Key Performance Indicator (KPI) for Production Management.

Companies that truly understand OEE adopt it into their production process do so for some of the following business reasons:

  • Increase Output using existing resources to meet Customer Demand
  • Increase the Sales Margins on product by reducing the cost of Production
  • Allow for more flexibility within existing Production Processes to win new business
    (for example smaller batch sizes)
  • Promote a strong sustainable culture with your people focused on Production Performance Improvement.

HOW does OEE Deliver the WHY?

Rather than thinking of OEE as Overall Equipment Effectiveness you should think of it as Overall Production Performance Effectiveness. The word “Equipment” is unfortunate because the equipment element of OEE is minor unless you have exceptional Reliability issues. It is also unfortunate because many companies make the mistake of thinking of delivering OEE by means of SCADA or Control type systems.

OEE Companies that truly understand how OEE needs to be integrated with the Production Management process get significant gains because OEE properly deployed delivers:

  • Cross Functional Teams working in a Pro-active manner delivering the right projects
    with measurable returns.
  • Facilitates and actively encourages culture change by empowering your resources
    to be accoutable and pro-active.
  • Each OEE measurement point becomes an accurate reflection of the Production Process and accurately identifies Production Loss Issues ranging from reliability, supply chain, process and operational procedures.
  • Answers the business assumptions about Production Process.
  • Presents information to support the Business WHY! (Production Time Vs Production Costs Vs Production Capacity).

WHO are the main users and drivers of OEE?

The most common misconception about OEE is that many organisations think OEE is purely an Engineering tool and therefore only relevant to Engineering. Most failed OEE implementations are exactly because of this misinterpretation. It is because of that word “Equipment”. Data collected in this implementations tends to be very technical and of little value to everyone (including Engineering).

You should remember that OEE really stands for Overall Production Performance Effectiveness and as a result the main users and drivers of OEE extends beyond just Engineering.

Below are the teams we believe are critical to a successful deployment of OEE:

  • Production (Operations) are actually the most important user of the system. This is because their understand the true root cause of why a line might be stopped (e.g. “No Materials available so cannot finish setup of next Batch”.
  • Operational Excellence (Lean Management/Continuous Improvement) are also critical in terms of reviewing data over a prolonged period, observing trends and identifying / agreeing with other key players like Production and Engineering the right Projects to work on in order to drive OEE improvement towards the business goals and driving culture change.
  • Engineering and Maintenance are key to ensure design and reliability of equipment is maintained to a high standard and be involved in very detailed root cause analysis (hard to diagnose) using tools such as Condition Based Monitoring and SPC.
  • Automation to ensure the right alarms are reporting and sensors are sensing!
  • Senior Production and Corporate Management to ensure all departments are pulling in the same direction to meet overall company goals.
  • Quality Assurance to ensure that high standards are maintained during all these improvements.

OEE Definition #1 (Theoretical Production Time for Actual Good Units Produced)

Typically used when you meet customer demand (e.g. order fulfillment process). By this definition OEE (Overall Equipment Effectiveness) can be defined as the ratio between theoretical production time for the actual good units produced and actual production time it took to produce these good units. Click Here to see a worked example of how to calculate your OEE using this definition.

OEE % = Theoretical Production Time for Good Units Produced / Actual Production Time %

OEE Definition #2 (Theoretical Output based on Actual Production Time)

Typically used when you can produce more product (e.g. High Demand and not enough capacity). By this definition OEE (Overall Equipment Effectiveness) can be defined as the ratio between actual good output and theoretical good output for the actual production time. Click Here to see a worked example of how to calculate your OEE.

OEE % = Actual Good Units / Theoretical Good Units %

OEE Definition #3 (Using Availability, Performance and Quality)

Best method but only if you have all the components of the formula! Fundamentally, OEE (Overall Equipment Effectiveness) is a performance metric compiled from three data sources of the machine (or Process) being measured. The three data sources are Availability, Performance and Quality. Availability, Performance and Quality are all defined below. Click Here to see a worked example of how to calculate your OEE.

OEE % = Availability X Performance X Quality %

Availability Definition for calulating OEE Metric

Availability is defined as the ratio between the available time (uptime) and the scheduled production time. An Availability of 80% implies that the equipment/process was actively producing product for 80% of the scheduled production time and for the remaining for 20% of scheduled production time the equipment/process was not available to produce (i.e. downtime losses).

Availability % = Uptime / Scheduled Production Time %

Performance Definition for calculating OEE Metric

Performance is defined as the ratio between the theoretical production time for the total product produced during available time (uptime) and the available time (uptime). A Performance of 90% implies a Speed Loss of 10% (e.g. due to equipment speed being turned down, gaps in product feeding to equipment/process).

Performance % = Theoretical Production Time for throughput / Available Time %

Quality Definition for calculating OEE Metric

Quality is defined as the ratio between the good units produced and the throughput. A Quality score of 95% implies a Yield Loss of 5% due to scrapping and/or reworking of product (this reworking consumes capacity in the equipment/process).

Performance % = Theoretical Production Time for throughput / Available Time %

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