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Why should companies include OEE in their manufacturing KPIs?

Overall equipment effectiveness is a measurement of how well your manufacturing operations are performing, and SAP ERP can enable the monitoring of this critical KPI. Here's how.

Manufacturing key performance indicators are critical to the success of all manufacturing companies, and overall...

equipment effectiveness (OEE) is one of the most important manufacturing KPIs in use.

OEE, a measurement of manufacturing operations performance, can be monitored via a company's SAP ERP system, either in an optimal systems landscape or with SAP ERP Central Component (ECC) and a few other additions.

In a company's ideal SAP landscape for OEE monitoring, a company has ECC, which maintains production and planning data; SAP Manufacturing Integration and Intelligence (MII) to capture actual data; and SAP HANA to provide real-time analytics on OEE. ECC transmits the planned production data to MII, which captures the actual production data from the production lines and transmits it back to ECC. The planned versus actual production data is then used to calculate the OEE. This ideal landscape is uncommon, however. While ECC is generally available, few companies use MII, and even fewer are on HANA at this point.

Still, even companies that have ECC, but not MII and HANA, can get OEE insight with some additional software. You can install the ERP add-on component called SAP Overall Equipment Effectiveness Add-On for SAP ERP (OEE ERP) and implement cloud-based, HANA-powered Lumira, which can quickly create an OEE analytics dashboard without infrastructure investments. In the absence of Lumira, a custom-developed report for OEE in ECC can serve the same purpose. You also need a shop floor automation system, such as a plant historian system or a manufacturing execution system, to capture the pertinent actual production data and to enable ECC to calculate an OEE of a machine.

Before delving into how and where to maintain production planning and execution data, take a look at the three variables that determine the OEE metric:

OEE = availability x performance x quality

For example, a machine with 90% availability, performing at 95%, and churning out good quality product at 98%, will have an OEE of 83.79%.

Note that OEE is always expressed in percentages.

Let's now look at each of the three OEE factors, as well as how to map them in ECC.


The planned availability of a machine is the expected time for which it is supposed to remain available for production. This planned time takes a company's working days and working hours, including breaks, if any, into account. On the other hand, a machine is considered unavailable due to unscheduled or unplanned shutdown, or due to unavailability of the material required for production, which factors into the actual availability.

In ECC, the data on the planned availability of a machine is maintained in a work center or a resource. This data includes, for example, a company's factory calendar, holiday calendar, production shift details and any scheduled breaks. Further, capacity details for a machine are maintained in a work center, so that a machine's planned production capabilities can be used as the basis for OEE calculation. For example, a machine with a production capacity of 90%, which is available for 10 hours daily, will have its planned availability for nine hours.

During actual production, the actual machine availability is monitored via a plant historian system or manufacturing execution, and is recorded in ECC. Having data on both planned and actual machine availability enables OEE calculation.


The performance of a machine is its actual production speed, or the number of products produced in a given time. For example, 100 pounds of tomato paste produced in an hour against the planned production of 120 pounds equals 83.33% machine performance. This actual performance is measured with the planned performance to assess its efficiency. In essence, performance records the quantity produced and the time it took to produce the planned quantity.

In ECC, the plant operator maintains the actual production data, while also confirming the yield of a product. This can be a manual data entry done by the plant operator or an automatic data entry using a bar code scanner or a radio frequency ID device. If a shop floor automation system is in use, then the actual production data will form the basis for the OEE calculation.


Quality is measured in terms of the number of defect-free products produced without a rework, while also minimizing or eliminating waste or scrap. Materials and production planners do account for the scrap expected from each production step, so as to ensure effective material and production planning.

Based on physical or visual inspection, the plant operator can manually record the actual scrap produced, or the rework required, during the confirmation of an operation. While calculating OEE, the system refers to the planned versus actual scrap to assess the quality of the goods produced. If the company has integrated the SAP Quality Management component of ECC into its production processes, then the actual quality-cleared yield and scrap produced will form the basis for OEE calculation.

Manufacturing KPIs as efficiency enablers

Of course, all manufacturing KPIs are important to the health of your organization, but by using ECC to glean OEE, you'll be able to create greater production efficiency through timely insights, and you'll be able to address the root causes responsible for suboptimal production.

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