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“If you don't know where you're going, any road will get you there”

Knowing where you're going is always useful, not just when you're off on an adventure. The same applies to business, and OEE will help keep your company on the right path to reducing waste and greater efficiency

Whenever you open a magazine to read about manufacturing companies and their fight for survival or path to success, the work 'Lean' is often in there somewhere. In very general terms, lean means to trim down and in relation to manufacturing companies, is used to describe trimming production to comply with customer expectations.

Lean is a philosophy in which results have to be created by and through the workforce constantly working to reduce waste, whilst maintaining constant focus on the customer. But if waste cannot be identified, it's difficult to see where improvements can be made. Or, by misquoting Lewis Carrol: The workforce must know where to start, before lean can yield any results.

The central time factor

Overall Equipment Effectiveness (OEE) is a method of measurement used to identify waste on production equipment. The intention behind the name is to reduce idle time as much as possible, to boost efficiency and productivity.

Time and time registration are central elements for lean and OEE on the basis that any superfluous element or error can result in increased time spent. If production equipment stands idle, or only runs at half capacity, production time is of course lost; but poor quality also has a time perspective as it means that products have to be remade or modified. These central time factors create unnecessary variation in the manufacturing process, which indirectly increases buffer stocks, unnecessary work and transport.

For the workforce and benchmarking

OEE is just one of a range of excellent tools, which support the process of introducing lean and make it more operational. In simple terms, OEE puts a value on waste so that not only the management can see the state of play, but the workforce too. Used correctly, OEE can thus be used to involve the workforce, to create focus on idle time and thus further the benefits of lean.

OEE is also an internationally recognised measurement method, which means it can be used for benchmarking within- and between companies. Large companies with several production sites can use OEE to compare each site's ability to maximise production equipment use, and apply benchmarking to work towards achieving best practice throughout the entire company. A company's total equipment efficiency level can also be benchmarked against the OEE standard for a given sector if available.

Simple formula

So what is a good OEE rating? And how do you measure it? OEE is actually a simple formula, which provides answers to some elementary questions:

  • How well is the equipment currently being used?
  • How efficiently is the equipment currently running?
  • What level of quality does the equipment currently have?

– or put into a formula: OEE = Usage x Effectiveness x Quality

It looks simple enough, but the challenge lies of course in calculating the various areas. The ideal OEE rating is 85%, which indicates 'world class'. Very few companies achieve such a high score before starting to implement lean and OEE; and the OEE value can of course vary from one industry to another, but the target should be 85%.

How to measure degree of utilisation

OEE is based on a total amount of time available for production, i.e. 24 hours, 365 days per year. From this total, production is planned to run for a certain period, along with periods for planned non-production, usually related to holidays, planned maintenance, periods with no orders and so on. OEE focuses exclusively on planned production, so planned idle time is excluded from the measurement.

Degree of utilisation is the relationship between planned production and unplanned idle time during production, e.g. due to waiting for materials, machine stoppages and the like. It is performed by logging the time each time a machine stops. The cause of stoppage is irrelevant to OEE as the only concern is time. Logging can either be performed manually by the operator or – preferably – automatically by the machine. Once production idle time has been measured for a period, the degree of utilisation can be calculated as follows:

(Planned time – idle time)/planned time = degree of utilisation

The world-class degree of utilisation is around 90%, which is therefore the target for this part of the OEE calculation.

How to measure degree of efficiency

The degree of efficiency is an indication of how efficiently the production equipment is being used. OEE focuses on loss of performance and time due to inefficient production. If a machine takes 10 seconds to produce an item as standard, but takes 11 seconds in your factory, you are losing one second for every unit produced. You can measure performance by collecting data on how many units are produced within a given period, and compare it to the standard time. Whether you measure by item or batches is immaterial as long as standard time and actual times are compared. The calculation involves:

(Standard time x number of items produced)/(planned time – idle time) = degree of efficiency

The world-class degree of efficiency lies around 95%.

How to measure degree of quality

OEE focuses on loss of quality, and thus the extra time required for running production again. As such, the number of items produced is compared to those of satisfactory quality. It sounds simple, but can be difficult as it involves process errors, those errors the machine detects itself, or which are detected by quality control. Unfortunately, OEE does not include the errors detected by the customer. The calculation involves:

(Items produced – defective items)/quantity produced = degree of quality

The world-class degree of quality lies around 99.9%.

When all three measurements have been performed, they simply have to be entered into the OEE formula, which with world-class measurements looks like this:

OEE formel

Powerful control tool

There are many advantages to be gained from measuring OEE. Apart from being a tool which involves the workforce and for benchmarking, it is an excellent control tool for management. When measurement is introduced, the OEE figures can be used for analysis and statistical follow-up, thus providing valuable insight.

OEE gives you better grounds for decision-making, allowing direct action if the figures start to indicate a trend giving management and workforce a tool to correct those errors which will yield the most value.

By introducing OEE, some of the seven waste types related to lean can be directly or indirectly reduced:

Overproduction: Experience shows that out of a series of 550 items, 10% are lost during production.
Waiting time: When operators wait for materials, order details or for production equipment to be set up.
Unnecessary transport: When parts have to be transported over long distances before they can become complete products, or where they are moved around a lot during production.
Defects and deficiencies: Arising from the manufacture of defective products, which then have to be re-worked or perhaps even scrapped.
Capital tied up in stock: The build up of small stocks to cover faults, poor planning or lack of stability in production.
Unnecessary movement: Due to poor workplace layout, which can mean often having to look for tools.
Unnecessary processes: Processes and tasks which overlap each other, causing double work.