What is Overall Equipment Efficiency (OEE)?

Overall Equipment Efficiency (OEE) is the most important standard for measuring productivity. OEE (overall equipment efficiency) is one of your best tools to optimize processes.

If you are looking to increase production on a large scale, even minor improvements can make a significant difference in your bottom line. This is particularly true in the manufacturing sector, where a few seconds can make a dramatic difference in production time and reducing the number of defects by 1% can result in thousands of dollars per month.

Overall Equipment Efficiency Basics

Overall Equipment Efficiency (OEE) is a key performance indicator (KPI), which compares the equipment’s actual performance with its ideal performance.

It measures the performance of your equipment, people, and processes by using numbers.

  • Availability – Amount of time the process is available versus the amount of time it is functional
  • Performance – The speed and consistency of the process, sometimes measured in TAKT time
  • Quality – # of good parts versus total # produced

OEE How to Calculate – Availability x Performance x Quality

OEE calculates the asset’s productivity using productivity data. Each piece of equipment receives an OEE score. OEE measures machine productivity and considers the people who run them.

Overall Equipment Efficiency (OEE)
OEE How to Calculate – Availability x Performance x Quality

The Six Losses

Implementing an OEE program has the greatest goal: to reduce or eliminate the most common causes of machine- or equipment-based productivity losses. These losses can be broken down into six OEE categories.

Equipment Failure

This refers to equipment that stopped running at the time it was scheduled to be in production. It can cause unplanned downtime. Unplanned maintenance stops, machine breakdowns, and tooling failures are all common examples.

Setup & Adjustment

This refers to production downtime caused by changeovers, tooling, and machine adjustments, planned maintenance, and inspections.

Idling & Minor Stops

Also known as small stops or idling, minor stops and idling are short-term equipment stops. This could be due to jams, flow blockages, incorrect settings, or cleaning. The operator often fixes these problems.

Reduced speed

Sometimes referred to simply as slow cycles, a reduced speed means that equipment runs at a slower pace than the ideal cycle (the fastest) time. Poor lubrication, poor materials, or bad environmental conditions can all lead to reduced speed.

Process Defects

Any defective part made during stable production includes scrap parts and parts that are reworkable. Process defects are often caused by incorrect machine settings or operator or equipment mistakes.

Reduced Yield

Defective parts from startup to stable production are considered Reduced Yield. This can refer to scrap parts or parts that can be repaired, just like process defects. Most commonly, lower yields occur after machine warmups, changeovers, and incorrect settings.

Overall Equipment Efficiency (OEE)
Overall Equipment Efficiency (OEE) Calculation
OEE How to Calculate – Availability x Performance x Quality

Overall Equipment Efficiency – Measuring Productivity

The overall equipment effectiveness (OEE) is an important metric. OEE provides useful information and can be used to measure productivity in multiple ways. It can increase your throughput if it is correctly calculated and interpreted. 

Overall Equipment Effectiveness (OEE) is not only a great tool for managers but can have a significant impact on employees. Plant floor metrics can include:

  • OEE Calculation for “Target” – A real-time production target
  • OEE Calculation for “Actual” – The actual production count
  • OEE Calculation for “Efficiency” – The ratio between target and actual; the percentage that shows how far ahead or back production is

For example, the average shift at a facility that makes one-gallon cans of paint is 480 minutes (or 8 hours). The operators must take three ½ hour breaks. We can calculate the Overall Equipment Effectiveness (OEE) availability score as:

  • 480 minutes -180 minutes = 300 minutes
  • 300 minutes /480 = 62.5 Percent Availability

The facility makes sixty cans per hour to calculate the performance. The facility can potentially produce 18,000 cans of paint (300×60) in three hundred minutes. But, if the machines run slower let’s say at 1.5 seconds per cycle (which slows down the maximum speed by 2/3), this decreases the actual performance to 12,000 cans. To calculate the performance, we use:

1.5 seconds per can = 1 / 1.5 = 2/3 = 66.7% Performance (66.7% x 18,000 cans = 12,000 units)

Let’s assume that out of 12,000 cans, only 3,000 are “good”, which would make the yield for the cans 75%. This is how the quality part of this equation is calculated:

(12,000 – 3,000 defects) / 12,000 = 75% Quality

OEE How to Calculate – Availability x Performance x Quality. The OEE Calculation is = 62.5% x 66.7% x 75 percent = 31.25% OEE

Return of Investment (ROI)

Machinery is a large investment. It’s crucial to maximize this return. It can make an enormous difference to your bottom line if you can produce 15% more products with the same equipment and in the same period.

Reduce Machinery Costs

The OEE strategy allows you to understand the actual performance of your equipment so that you can determine if it is performing efficiently. You will also be alerted to potential problems that could lead to repairs or future breakdowns. You can reduce downtime and maintenance costs by predicting potential machine failures.

Increase competitiveness

Manufacturers strive to minimize production losses to ensure maximum market share. The OEE report can help you pinpoint bottlenecks and weaknesses in production so you can take immediate action.

Quality and competition go hand in hand. OEE’s quality metric helps you to identify production problems that cause scrap or rework.

Visualize Equipment Performance

To maximize equipment effectiveness, visibility is key. This allows you to visualize production issues instead of relying on your best guess. Everyone can see the most important sources of productivity loss and decide where to improve.

Maximize Workforce Productivity

You can use OEE to find out why your operator is experiencing downtime. It will also reveal productivity data. This information will help you pinpoint long setup or changeover times. This information will help you to allocate resources effectively, determine excess capacity and identify areas where you need new employees.

Overall Equipment Effectiveness (OEE) – Benefits

Overall Equipment Effectiveness (OEE) allows you to adopt a proactive approach and adjust processes in real-time. It reduces downtime, increases capacity, lowers costs, improves quality, and increases efficiency. Let’s look in more detail at the benefits of OEE.

Getting started with Overall Equipment Effectiveness (OEE)

To ensure your success with OEE, here are some best practices.

Start from a standardized process

You need to start from a stable and standardized process to increase your overall equipment effectiveness. Implementing solid SOPs (standard operating procedures) is key.

Don’t give up!

OEE can bring significant rewards. Many people avoid OEE because it is difficult to track and collect the data that you need over time. You will be grateful that you put in the effort and time if you are involved in a large-scale or mid-sized process. Your bottom line will be impacted by two seconds of time saved here and three defects removed there. These improvements will make your bottom line more efficient and save you time.

Keep track of all variables

OEE measures machine productivity and considers the people who run them. Machines aren’t always the cause of problems, sometimes humans and external processes are the key variables. OEE allows you to gain insight into every aspect of your strategy.

Deploying OEE in your organization

Piloting major process changes is always a clever idea. Pilots can help you identify and fix problems before they become a problem all over. These pilots can also help you understand the impact of these changes on your company. OEE is no exception.

  • Define the scope for your pilot. Choose a production area, piece, or team that is interested in improvement. This will be your pilot team.
  • Define the period for data collection. Define the timeline for data collection and OEE analysis. As we discussed earlier, it is crucial to gather enough data and the correct data to create an accurate OEE score. Pay attention to the definitions for each metric.
  • Analyze, improve. Once you have all the information you need, you can perform your OEE calculations. Find the areas that need improvement. Look at the six major losses and pick one or two of them to fix.
  • Analyze again. Continue data collection after you have made the necessary changes. You can now reevaluate your OEE to see if it has changed.

After your pilot is completed, adapt your process to reflect what you learned. Apply it widely. Keep in mind that data collection is ongoing, and that CI is never finished.

Your data collection must be automated or integrated into your day-to-day operations. Soon you’ll have your first OEE score for the entire organization!

How to avoid common OEE errors

Your process can be elevated by improving overall equipment effectiveness. If you don’t do it correctly, however, you might not reap all the benefits. These are the top mistakes in OEE.

Focusing on OEE scores, not losses

Remember that OEE is not an end, but a tool to help you get there. You can use it to track your progress on a longer, more meaningful path to improvement. It is a measurement of time, and it will not change if you do not focus on improving.

You can look at it like your bank balance all day. It won’t get bigger until you get up and work. OEE is a straightforward way to see where you stand at any given moment. If you want to improve your OEE, you must focus on the losses and the actions you take to reduce them.

Excluding Changeovers in Your OEE Calculation

Yes, production time is affected by changeovers. It is a fact that cannot be ignored. They are essential to your business and can be improved. They make such a difference that it is tempting to remove them from your time measurements. This will not only reduce the accuracy of your score but also make it difficult to identify one of your most lucrative opportunities to improve.

Implementing OEE throughout the entire facility

It’s exciting to have one tool that simplifies your productivity. You may find yourself the type of person who hates to do things halfway and would love to be able to use the tool everywhere you go.

It takes a lot of effort and time to do it right. Be careful with your resources. Piloting the program will help you identify areas where OEE is most useful and those that it won’t.

Data collection drags on

If data collection drags on, it can lead to data gaps that may not be covered by staff changes, seasons, or other factors. These things can cause data problems and make it difficult to identify what needs improvement.

You need to collect data quickly and thoroughly so you can get a score that accurately represents your production process. CMMS and other cloud-based technologies are a fantastic way to automate the data collection process.

Altering the Rules

OEE is more valuable when it can be compared between similar lines and teams as well as across industries and organizations. However, if you alter the rules or calculate OEE your way, you lose the ability to compare yourself to others. You also lose the ability to quickly find and make improvements.