Calculating Overall Equipment Effectiveness (OEE)

Overall Equipment Effectiveness (OEE) is part of the process in improving manufacturing efficiency. A lean manufacturing term developed by the Japanese, specifically Seiichi Nakajima—OEE establishes routine in determining how effective each operation step in manufacturing is. OEE is a metric that identifies the percentage of time that is truly productive.

To give you an idea of how the scoring works: A score of 100% is perfect production, a score of 85% is world class for manufacturers, a score of 60% is fairly typical, and a score of 40% is not uncommon for manufacturers that don’t practice lean techniques (TPM - Total Productive Maintenance). Calculating OEE will help your company identify where to improve quality, where to maximize your existing resources and reduce waste—saving you money in the long run.

Here is a hypothetical example: A tire manufacturing plant recently adopted Kaizen, a lean process of continuous improvement. Once Kaizen was fully implemented every employee is now motivated to evaluate the steps in their job function in order to improve efficiency. Employees noticed that for every 100 tires produced on the manufacturing line; there is a group of 12-14 tires that end up with treads cut incorrectly. Before Kaizen was implemented, employees counted those tires as defective, assuming it was a usual margin of error. Because all employees now look for ways to continually improve the process, OEE is used to go back to assess each step in the tire manufacturing process to determine where improvements could be made. A timing issue was found in one step of the process where a machine would reset for an extra four minutes while tires continued to move through the line. This caused a small batch every 90 minutes to cut tires incorrectly. By using OEE, it was determined to slow the manufacturing line for those 4 minutes. This adjustment increased the quality rate, reducing waste.

The decision to upgrade a specific machine was decided upon using the OEE Calculation.
*OEE Calculation is based on three factors; Availability (A), Performance (P), and Quality (Q). How is each one calculated?

Availability considers Down Time Loss.
A= Operating Time / Planned Production Time

Example: A conveyor system is scheduled to run for two 8-hour (960 minute) shifts, with a 30-minute break per 8 hours.
Operating time = 900 min scheduled - 90 min unscheduled downtime = 810 minutes

Calculation: Availability = Operating time / Planned Production Time
Availability 810 minutes / 900 = 90%

Performance considers Speed Loss
P = Ideal Cycle Time / (Operating Time/Total Pieces)
Ideal Cycle Time is the minimum cycle time that your process can be expected to achieve in optimal circumstances. It is sometimes called Design Cycle Time, Theoretical Cycle Time or Nameplate Capacity.

Example: A conveyor system is scheduled to run for two 8-hour (960 minute) shifts, with a 30-minute break per 8 hours.
Operating time = 900 min scheduled - 90 min unscheduled downtime = 810 minutes
Parts are produced at the Standard Rate of 40 units/hour or 1.5 minutes per unit
The conveyor system produces 525 units during the total day. This is Total Units, not Good Units. Quality is not measured at this point.

Calculation: Performance = Ideal Cycle Time / (Operating Time of Total Pieces)
Time to produce parts = 525 * 1.5 minutes/unit = 787 minutes (Ideal Cycle Time)
Performance (Productivity) = 787 / 810 = 97%

Quality considers Quality Loss, and is calculated as:
Q = Good Pieces/ Total Pieces

Example: 525 units are produced. 56 are defective.
(525 units produced - 39 defective units) = 469 units
469 good units / 525 total units produced = 89%

OEE considers all three OEE Factors, and is calculated as:
OEE = Availability x Performance x Quality

*Calculation formula taken from www.oee.com. Examples are hypothetical.

Using OEE is not an absolute measure; it can break down in various areas. It's best used to identify problem areas that will take further analysis for key performance improvement. From manual, semi-automatic, to fully automatic operations or processes, implementing OEE tools as part of your lean manufacturing protocol will improve performance for any process in your workplace.

OEE is dependent on reducing the downtime of machines and systems. Learn about our recommended best practices in the Total Productive Maintenance Guide where we provide actionable advice on improving your organizations productivity and safety. Get your free copy below!