OEE is a measure or metric of the effectiveness of any equipment. It helps us quantify the effectiveness and answer the question “is the equipment performing effectively?” If equipment is performing effectively, then it should always be available to use when required, it should be working at the best possible speed, and finally it should be making good quality products. OEE is a number that varies from 0% to 100%. Equipment that is operating close to 100% would be very effective while those operating at close to 0% would be very ineffective. By understanding the OEE of any particular equipment, it would be possible to determine opportunities for improvement especially if the OEE is lower than the benchmark values for other similar equipment used within the company or at a competitor location. By measuring OEE on a regular basis, we could track the trend over time and determine a correlation between any actions we are taking to improve the process and the resulting effect on the equipment performance.
How is OEE Calculated?
OEE is calculated as the product of three variables: Availability, Performance, and Quality. Each of these three variables is measured on a 0%-100% scale, so that the product OEE also varies from 0%-100%. Let’s look at each of these metrics:
Availability: Equipment is said to be available to perform the work if we can use it when we need to use it. For example, if an equipment is broken down, then clearly it is not available to run production, hence down-time caused by equipment breakdowns contributed to lack of availability of the equipment. Other reasons, why a machine may not be available could be:
Equipment is not staffed to operate (say 1 shift operation for 8 hours vs. 24 hours in a day)
Raw material is not available to run the production
Tooling or fixtures are not available
Preventive maintenance activities
Shifts and meetings
Lunch breaks, etc.
So, in a 24 hour day if the equipment is scheduled to be run for 8 hours but it only runs for 6 hours due to lunch, breaks, and lost time due to machine setup etc., the availability would be 6/8 = 75%. If you were interested in calculating the total overall utilization of the equipment, then we could calculate this as 6/24 = 25%. Note that the availability number can never exceed 100%.
Performance: The second measure of equipment effectiveness is Performance. Performance measures if we are operating the equipment in the best possible way. For example, if you are able to run a 100 meter race in 10 seconds, but you actually lose 1 second and take 11 seconds to run the race, we conclude that your performance was not up-to-the-mark. Performance measures how effectively we are using the equipment when it is available to run. For example, if we are capable of making 100 units per hour but we only made 90 units in an hour due to various reasons, then we say that the performance was 90%. Note that Performance number cannot exceed 100%. Some of the reasons for poor performance on equipment are:
Running the machine at a sub-optimal speed
Problems in running the equipment causing losses (tooling)
Problems with machine stoppages
Ineffective way of working (non-standard way of working)
Lack of training of the operators
Attitude of the workers, motivation etc.
Quality: The last measure of equipment effectiveness is Quality. Quality measures the First Time Right – whether the products we are making are good or if they have to be reworked or scrapped. There is no point in running the equipment at high speed and make junk and all the products have to be reworked at a later point in time. For example, if we make 90 pieces in one hour and 5 of them are not of good quality, then the quality metric would be 85/90 = 94.4%. Note that Quality number cannot exceed 100%. Some of the reasons for poor quality could be:
Poor quality tooling or fixtures
Non-standard way of working
Defect in incoming raw material
Poor measurement system
Fatigue of the workers etc.
Once the three metrics are calculated, the product of these three metrics provides the Overall Equipment Efficient (OEE).
In the previous example, the overall OEE number would be (75%)(90%)(94.4%) = 63.72%. If we were asked to improve this equipment, we would see that the low value of OEE is primarily due to availability and then performance and finally quality. So, we would probably target to improve availability first.
How to use OEE?
OEE helps us understand the baseline performance of our equipment. It is a fact based measure which helps us understand the current performance and points out to areas for improvement. If you have several equipment in your facility, you can decide to first institute a way to monitor the OEE for your equipment or at a minimum identify the key equipment or bottleneck equipment and then start the OEE monitoring for those equipment. You can chart the OEE metric and train your operators to correctly interpret the results. It is a good idea to visually track the historical trend of the equipment over a period of time.
Once you understand the baseline performance of your equipment, you can determine what actions you want to take to improve the effectiveness of your equipment. You can possibly perform a Kaizen activity to get ideas for the team members to make improvements to the process. Using the PDCA approach you can correlate the actions you plan to take to improve OEE with the actual results you are seeing on the metric. It is also possible to track the OEE on a control chart to determine if the variations you are seeing is due to common causes or special causes.
Finally, you can combine the OEE for several pieces of equipment in your facility to determine an overall level of OEE for the entire facility. The overall OEE number or the OEE for critical equipment could be something that you may want to track at a higher level as part of your business balanced scorecard or as a KPI linked to productivity or performance bonuses for your employees. Based on historical trend, you can roll-down suitable targets for improvement each year to your employees in the spirit of continuous improvement.
Limitations of OEE
OEE does not consider the cost element in calculating the overall effectiveness of equipment. It places equal emphasis on availability, performance and quality. However, if the cost of rework is very high, then we should be placing more emphasis on quality vs. the other two factors.
Sometimes, it is not clear whether the factors that are being considered are impacting availability or performance. For example, if material is not available to run a machine, that could impact availability and it could impact performance as well. So, clear definitions are needed so that these numbers can be calculated consistently in an organization.
OEE is more of a relative measure than an absolute measure. It is hard to directly relate what an improvement in OEE means in financial terms. Even though OEE for all equipment is measured on a scale of 0-100%, different industries and different processes may have different benchmarks for an acceptable OEE number.
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