Oee - Lean Manufacturing Metric

Overall Equipment Effectiveness is the common machinery and process metric utilized through a lean manufacturing initiative.

The OEE concept normally measures the effectiveness of a machine center or process line, but can be utilized in non-manufacturing operations also.

The high level formula for the Lean Manufacturing OEE is:

OEE = Availability X Productivity X Quality. Abbreviated, it is OEE = A X P X Q.

The “Availability” portion of the equation measures the percentage of time the equipment or operation was running compared to the available time. For example, if a machine was available to run 16 hours but was only run for 12, then the “Availability” is 75% (12/16). The 4 hours when the machine didn’t run would be setup time, breakdown, or other down time. The 8 hours the company did not plan to run the machine is rarely used in the calculation.

The “Performance” portion of the equation measures the running speed of the operation compared to its maximum capability, often called the rated speed. For example, if a machine produced 70 pieces per hour while running but the capability of the machine is 100, then the “Performance” is 70% (70/100). The concept can be used multiple ways depending on the capability number. For example, the machine might be capable of producing 100 pieces per hour with the perfect part, but only 90 on that particular order. When the capability of 100 is used for the calculation, the result is more a measure of facility OEE. For example, the sales department may take an order for a part than can only be produced at 90 per hour which negatively affects OEE.

The “Quality” portion of the equation measures the number of good parts produced compared to the total number of parts made. For example, if 100 parts are made and 90 of them are good, the “Quality” is 90% (90/100).

Combining the above example into the OEE equation, the OEE is:

OEE = 75% X 70% X 90% = 47.25%

As you can see, an OEE of 100% would require a machine to produce good quality every second of the available time at its top rated speed.

The key to using OEE is in the analysis. For example, if the “Availability” is 70%, the 30% of time for breakdowns, setup, and downtime should be analyzed for improvement opportunities.

The most effective use of OEE is to break down the losses into smaller buckets of “opportunity”. A 50% OEE doesn’t mean much without any detail.

The OEE goal depends on the process, setup times, and order quantities. For example, a machine that produces 10 orders per day with a 30 minute setup time would have 300 minutes reduced from the Availability equation. Conversely, a machine that runs one order all day would only have 30 minutes of setup time. These facts make it difficult to compare two machine’s OEE numbers. The value is in the analysis and comparison of a machine’s OEE in one period versus another. The comparison may also become meaningless if the order quantities vary significantly day to day.

Knowing the complete OEE breakdown, the opportunities for improvement become apparent. The largest opportunities should be improved first, working down the list until all opportunities are improved.

The improvement opportunities are always in one of the following “buckets”.

Breakdown
Setup
Downtime
Speed Loss
Small Stops
Quality

OEE is an excellent way of communicating the improvement opportunities to everyone, including operators, maintenance technicians, sales representatives, engineers, and managers.

Most lean manufacturing tools work together to create value in the system and eliminate “waste”. OEE is a prime example of this integration of tools.

Many lean implementations begin with a concept called “5S” and value stream mapping. The value stream map shows where the waste occurs in the system. OEE analysis can be applied at the point where the waste occurs. The improvement in the OEE number will take the use of other lean applications, such as SMED (setup reduction), TPM (total productive maintenance), standardized operations, and “kaizen events” targeting specific areas.

It is important in a lean manufacturing implementation to use the correct tools at the right time. Many lean implementations have failed because organizations failed to grasp a deep understanding of all lean concepts.

The tools should be “picked” based on the opportunities in the organization, rather than “fit” into the organization. When an organization forces tools that don’t apply, it creates chaos and credibility problems.

OEE is a powerful lean manufacturing tool, especially when combined with other tools using an integrated approach.