The quick and dirty about OEE: Key concepts and formulas

Learn these key formulas to calculate overall equipment effectiveness (OEE) and assess Lean performances.

09/22/2015


OEE is a great way to see the impact of 6 big losses in order to eliminate them in the Lean manufacturing transformation. Courtesy: Daniel Penn Associates

Much has been written about overall equipment effectiveness (OEE) but it is important to revisit some of the key points. OEE is a great way to see the impact of 6 big losses in order to eliminate them in the Lean manufacturing transformation. The 6 big losses are:

  1. Breakdowns
  2. Setup and adjustments
  3. Small stops
  4. Reduced speed
  5. Startup rejects
  6. Production rejects.

You can calculate OEE at least two simple ways depending on the information you are starting with. The standard formula is: OEE = %A x %T x %Q, where:

  • %A (Availability) is the ratio of the time the equipment was available for production to the scheduled operating time, and
  • %T (Throughput) is the ratio of the actual output to the total possible output while equipment is running, and
  • %Q (Quality) is the ratio of good output to total output.

Learn these key formulas to calculate overall equipment effectiveness (OEE) and access Lean performances. Courtesy: Daniel Penn Associates

A second method, the Throughput Ratio method, is handy for assessing an overall process or line. OEE = (AT)/(TPR x SOT), where:

  • AT (Actual throughput) is the amount of good product produced, and
  • TPR (Theoretical processing rate) is the processing rate of the system's bottleneck under ideal conditions, and
  • SOT (Scheduled operating time) is the amount of time the system is not scheduled to be idle (includes production and maintenance).

Here are a few common errors that prevent OEE from delivering its full value as a key performance indicator:

  • Not using the ideal equipment speed or cycle time: if the company uses anything else, such as a budgeted or average rate or speed, it makes it difficult to see the real impact that the 6 big losses have on performance. The bar is set for too low.
  • Not including changeover time: this is a common mistake because people argue that changeover is not processing, which is true, but our objective is to improve throughput and every minute spent on changeover is a minute not spent on throughput.
  • Not recognizing the bottleneck on a line: the second method for calculating OEE above works well for a production line provided you recognize the bottleneck. It should go without saying that the bottleneck sets the pace for the entire line so the meaningful OEE for the line must be based on the throughput at the bottleneck.

Focusing on the OEE score and not the underlying problems – sounds simple but, as is the case with using performance indicators in general, users sometimes forget that the whole point of these indicators is to drive corrective action. When a child’s temperature is 104 F someone needs to act, not simply notes that it is 6 degrees too high.

There is no universal target OEE number. 85 is a great OEE (95%A x 95%T x 95%Q,), but what is more important than the OEE value is to see positive change in OEE over time as a result of the actions taken to improve equipment’s performance. Likewise, benchmarks are handy for indicating what is possible and where someone might look for more improvements but step one is to get an honest measure of the performance. OEE is a great place to start.

Steve Mueller is director of commercial operations for Daniel Penn Associates. He is responsible for project development, management and delivery of results for the company’s private sector clients. Steve has over 30 years consulting experience. Daniel Penn Associates LLC is a CFE Media content partner. edited by Joy Chang, digital project manager, CFE Media, jchang@cfemedia.com



MICHAEL , MI, United States, 09/29/15 12:57 PM:

I’ve always been an advocate of knowing where one is and how he got there before taking a step to the promised land.

OEE originated in Japan to measure the “effectiveness” of Total Productive Maintenance (TPM) programs. OEE was suitably coined for TPM because it rendered the outcomes of “doing right things” as opposed to “doing things right”. This article, on the other hand, takes us down a path where we hope to “lower costs” as opposed to “increase profits”. Despite the fact that profits will come through either of these, the two ideas oppositely exemplify the differences between “effectiveness and “efficiency”.

The purpose of OEE is to monitor the running “performance” of shop-floor equipment. Performance is not subjective as “doing right things” or “increasing profit” but undeniably calculated. The ingredients of OEE, Availability, Throughput and Quality, are also all represented by percentages, or ratios, which are parts over wholes, which are measures “efficiency”.

Let’s start by paying tribute to the semi-conductor industry that brought all of this to light. E should stand for Efficiency.
Patrick , OR, United States, 10/08/15 09:50 PM:

This very intersesting method of benchmarking OEE at least these (6) points are a great place to start.
shaukat , NV, Pakistan, 10/08/15 11:29 PM:

Very useful article for industrial manufacturing performance calculations and to start improvement for future.
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
2016 Product of the Year; Diagnose bearing failures; Asset performance management; Testing dust collector performance measures
Safety for 18 years, warehouse maintenance tips, Ethernet and the IIoT, GAMS 2016 recap
2016 Engineering Leaders Under 40; Future vision: Where is manufacturing headed?; Electrical distribution, redefined
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Safety at every angle, Big Data's impact on operations, bridging the skills gap
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Applying network redundancy; Overcoming loop tuning challenges; PID control and networks
Driving motor efficiency; Preventing arc flash in mission critical facilities; Integrating alternative power and existing electrical systems
Package boilers; Natural gas infrared heating; Thermal treasure; Standby generation; Natural gas supports green efforts

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role of plant safety and offers advice on best practices.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me