OEE: what it is and how to calculate it in your factory

OEE indicators are a KPI used to measure efficiency and productivity in industry. This index measures the efficiency of a piece of equipment and shows where processes can be improved to increase productivity.

In industry, it can often be hard to find good performance indicators to monitor the efficiency of shop floor productionopens in a new tab. To solve that problem, OEE, or Overall Equipment Effectiveness, was created.

Do you not yet work with the OEE concept in your factory? Then read this post and see how to implement this KPI.

What is OEE?

Put simply, OEE indicators are a KPI that measures the effectiveness of a piece of equipment in industry. This indicator became very popular with the growth of the lean model, or lean manufacturingopens in a new tab. Today, it is used even in plants that do not follow that model.

The success of OEE lies in the fact that the index says clearly and objectively whether a piece of equipment was used effectively. That is: how many items of the desired quality the equipment produced, compared with its total capacity to produce items of the desired quality.

Besides the number of good parts produced, this indicator also tells us about the time spent on production. With it, you can tell how much of the available time was actually spent making parts.

Within that time, the index also shows how fast the equipment produced. Finally, we learn how many of the items made in the given time met the specifications that guarantee the desired product quality.

This information shows not only how many products the machinery failed to produce, but also where those productivity losses happened. That makes it easier to identify what needs to be done to fix the problem and make better decisions.

How did the OEE concept come about?

OEE is a concept developed by Japanese author Seiichi Nakajimaopens in a new tab. He is considered the creator of TPM, or Total Productive Maintenance. The goal of that methodology is to increase the productivity of a manufacturing plant with a relatively low investment in maintenance.

In the video below, you can learn more about the TPM concept:

For that productivity increase to be possible, you need to understand how much each piece of equipment can produce and what its effectiveness level is. So an indicator capable of giving us that data had to be developed. Hence the creation of OEE indices, today one of the main efficiency indices in industry.

To learn about others, see the industrial production indicatorsopens in a new tab.

What are the OEE indicators?

The OEE index is based on three main indicators, which you should take into account in the calculation. Let us look at each one in more detail.

1. Availability

This indicator concerns how available a machine, or a set of machines in a plant, is for use. Suppose you have a packaging machine in your factory, planned to run for 2 shifts of 8 hours.

In this example, the total availability (100%) of our packaging machine will be 16 hours per day. If something happens and the machine runs for fewer than 16 hours on one or more days, that means it is operating at an availability below 100%.

Availability = operating time / planned time

2. Performance

This figure relates to the equipment’s productivity. Still using the packaging machine example, how many packages can it close over the 16 daily hours of production?

Suppose the machine in question can pack 100 products per minute. That means that in the 16 hours of a typical workday, the machine can pack 96,000 products, which corresponds to 100% of its performance. If the day’s total is below that number, the equipment is running below its maximum performance.

Performance = actual output / ideal output in the operating time

There are two methods to measure this indicator.

Manual

The performance indicator can be tracked by the operator. They take notes at preset intervals, for example every hour, and record the values in a spreadsheet.

Automatic

Another possibility is to install sensors on the equipment itself or on the assembly line. In that case, data is collected in real time, allowing faster action when performance problems occur.

3. Quality

Availability and performance only make sense if the products actually made have the desired quality, that is, if they are not made with defects. So the last indicator of the OEE index is quality.

Many manufacturing sites have professionals responsible for analyzing part quality. In those cases, the calculation is done by sampling each batch.

Scrap is the measure of how many items are being produced with defects. When there is no professional responsible for checking quality, the operator can play that role and separate the good parts from the bad ones.

Quality = good parts / parts produced

How to calculate OEE

OEE is the result of multiplying the three indicators:

OEE = Availability x Performance x Quality

Practical example

Back to the packaging machine: the plan is 16 hours a day at 100 products per minute, which gives a capacity of 96,000 products per day. Suppose that on a given day it:

• ran for 14 hours (Availability = 14 / 16 = 87.5%);
• packed 75,600 products in those 14 hours, when the capacity in that time was 84,000 (Performance = 75,600 / 84,000 = 90%);
• had 3,780 defective products out of the 75,600, that is, 71,820 good products (Quality = 71,820 / 75,600 = 95%).

Substituting in the formula:

OEE = 0.875 x 0.90 x 0.95 = 0.748, or 74.8%

The result is the same as the direct calculation: 71,820 good products ÷ 96,000 of total capacity in the planned time = 74.8%. In other words, the machine delivered about 75% of what it could, and the 25% loss can be traced to each factor: stoppage, slowness or defects.

Simplified version

OEE can also be calculated in a simplified way, comparing good parts with total capacity. Suppose a machine has a total production capacity of 5,000 parts, but in a given shift it produced 3,000 with the desired quality:

3,000 (parts produced with the desired quality) / 5,000 (total production capacity of the equipment) x 100 = 60%

In this case, the equipment is producing at 60% of its capacity. There was a 40% loss of effectiveness, or 2,000 parts that were not produced or came out defective.

This calculation shows the size of the loss, but not where it happened. That is why tracking the three factors separately is what lets you act on the cause.

How to track OEE day to day?

Calculating a machine’s OEE shows where the loss is, but it only becomes a result when the indicator is tracked every period and the loss turns into an action with an owner and a deadline.

In Stratwsopens in a new tab, the strategic and performance management platform created by Siteware, indicators live in a visual dashboard, with period-over-period comparison, and each deviation is recorded with a root-cause analysis, using tools such as PDCA and Five Whys, and tracked through an action plan until completion.

Visit our website and explore the Routine Management and Continuous Improvement solution in Stratwsopens in a new tab.