Introduction to OEE (Overall Equipment Effectiveness)

Many companies have jumped on the bandwagon of using OEE (Overall Equipment Effectiveness)

as a KPI for their manufacturing equipment, lines, and plants. This article will introduce what OEE

is and briefly discuss how it should and should not be used.

What is OEE

OEE indicates how effectively machines are utilized on the manufacturing plant floor. Another way to put it is OEE is the percentage value the machine is performing up to it’s true potential.

OEE is made up of three parts, each which are calculated as percentages, and the total value is calculated by multiplying all three parts: Availability rate x Performance rate x Quality rate. Ex: 70% Availability x 80% Performance x 90% Quality = 50% OEE

Each of these parts can be further broken down as follows:

Availability (up-time of the machine)

  • Equipment failure or breakdowns
  • Setup and adjustment

Performance (speed producing widgets)

  • Idling and minor stoppages
  • Reduced speed of operation

Quality (products produced correctly the first time, without rework)

  • Process defects (scrap, repairs)
  • Reduced yield (from startup to stable production)

Why is OEE Valuable?

This is very valuable because the utilization of an asset has a direct correlation to the revenue the machine provides the manufacturer. If the machine isn’t utilized well, i.e., if it’s down or if it’s producing poor quality parts that cannot be sent to a customer, then the machine isn’t generating as much revenue as it otherwise would.

How to Use it

Here are 3 ways we recommend using OEE if your company is new to this manufacturing KPI:

  1. Find machines that need attention: A good manufacturer will attempt to remove all constraints in their production process whether or not that additional capacity is currently needed. Users can find constraints or issues with machines by looking at the individual OEE values for each machine and determine which are performing effectively and which are not. Lower OEE values will indicate which may need some attention. Addressing issues with machines and thereby improving their operating effectiveness can then increase the revenue the machine produces.
  2. Find the cause: Once a machine with a lower OEE is identified the staff can look at each of the three components of OEE (Availability, Performance, and Quality) and find a leading cause of the OEE difficulties. Additional analysis is then required to find the cause and fix. Then setup improvement projects to address the issues.
  3. Confirm improvement: Once the issues are addressed with the machines continue to monitor the OEE values for those machines. If the OEE numbers go up, especially in the parts where the issues were addressed, then the efforts to fix may have been worthwhile. Otherwise, the machine and it’s issues may warrant a second look.