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Overall Equipment Effectiveness - OEE

Overall equipment effectiveness (OEE) is a performance metric or KPI that combines the measurement of plant availability, performance efficiency and quality of a specific plant, equipment or process. OEE is considered an overall metric of plant efficiency as well as plant performance and is commonly used by management as a KPI to compare performance among similar or identical production plants. OEE is a ratio and usually expressed in percentage terms.

OEE is an effective KPI to measure and evaluate the progress of process improvement/kaizen or lean manufacturing initiatives in the same production plant attempting to improve OEE. The KPI should be calculated and tracked actively by operations staff to provide an insight into which of the three major components; Plant Availability, FTT/ Quality or performance efficiency is affecting OEE and must be focused on.

OEE is generally displayed on a graph in a central area of the production plant where all operators, supervisors and managers can see it and hold meetings if required to perform a Kaizen event to tackle problems affecting plant performance as most problems affecting OEE may not be easily apparant and will require a team based approach to solve.

Calculating OEE and OEE component formulas

In order to calculate OEE we must first calculate the three performance measures that make up the ratio, as previously named these are Plant Availability, First time through or Quality and Performance efficiency.

These measures are calculated as follows:

-Equipment/Plant Availability measures the amount of time the production plant is available to produce as a percentage of total time, production and maintenance downtime will affect this measure, it is calculated as follows:

Equipment and plant availability formula

-First time through (FTT)/quality measures the quality of outputs from the production process, it is calculated with the following formula:

First time through (FTT) ratio formula

-Performance efficiency tracks the ability of the production process to produce products at the required rate to satisfy customer orders; it is calculated with the following formula:

Performance efficiency formula

Finally the last step is to calculate OEE by the following equation:

Overall equipment effectiveness (OEE) formula

OEE comparison among production plants

Overall Equipment effectiveness is a good measure to compare and benchmark different production plants which are identical or very close in nature. If OEE is used to compare different production plants even though in the same industry or making the same product it can lead to inaccurate comparisons. Some plants will have limiting factors or issues specific to that plant, even different work and company cultures, which may impact their OEE numbers and make them look less efficient than competitor plants.

An example of the pitfalls in comparing OOE among similar plants but not identical there is a common scenario in a globalized business environment where managers will compare the OEE of one plant in a developed country such as Australia with the OEE of a similar plant in Asia. This in most cases is an inaccurate comparison and can lead to performance demand of the underperforming plant without identifying the grass root issues that hinder the OEE of each production plant.

In the example above the production plant in Asia could be very similar to the Australian one, but there are differences which make the comparison not that clear. Work ethic and culture is quite different in Asia from Australia, skill levels of operators and staff can be different, different production machinery, maintenance program, although both plants may make the same product they may use raw material from different sources which depending on the process can require different plant or techniques to process it

These are only a few examples of differences that two production plants can have even being in the same industry or making the same product can end up being in fact quite different thus making OEE not the most appropriate comparison KPI.

Even though OEE comparisons among different plants may not be the best way of benchmarking and comparison the fact is that many operation managers do use it this way. It is important that the local plant operations teams treat OEE as a performance metric for assessment on their specific plant or process and use it to analyse the overall performance day to day, week to week and month to month to keep continuously improving and solving issues as a team and not get caught up in the hype of comparison with other competitor plants.

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