Measuring Effectiveness – Getting started with OEE

Getting Started with Overall Equipment Effectiveness (OEE) – Your definitive guide to Overall Equipment Effectiveness

The “internet” is a powerful tool that can provide information in a matter of seconds.  Use Google to search for Overall Equipment Effectiveness or OEE and you will quickly receive an overwhelming number of “hits” leading you to the latest promotion selling you on the latest data collection technology or a ream of books that will provide wisdom and guidance to implement OEE.  We’re here because … you’re at your desk, not the book store.  Nor are you waiting for some sales professional to call you after submitting your information on line.

Although we have nothing against these venues, we are here to help you get started now.  While the information presented here is based on our experience with lean manufacturing and OEE integration, we do recommend some key reading that can serve as valuable references for anyone looking to implement OEE.  If you are looking for on line references, click here to access the most up to date books available on the market today or visit our “References – Books” page for a quick review of our top selections.

We provide numerous examples to demonstrate the concepts presented here so you can see for yourself how to calculate OEE and immediately put it to good use as a key performance metric to help you manage your business.  If you are looking for on line OEE training, all the information you need is here.

OEE Spreadsheet Templates

We are currently offering our OEE Spreadsheet Templates and example files at no charge.  You can download our files from the ORANGE BOX on the sidebar titled “FREE DOWNLOADS”, click on the Free OEE Templates page, or simply click on the name of the file you need from the Download Files link list on the sidebar.  These files can be used as is and can be easily modified to suit many different manufacturing processes.  There are no hidden files, formulas, or macros and no obligations for the services provided here.  So let’s get started …

What is OEE?

OEE measures how effectively time is utilized to manufacture a product, or products, using a piece of equipment.  It can also be expanded to measure how effectively time is utilized in your entire operation.

OEE is comprised of three (3) basic factors expressed as a percentage:  Availability, Performance, and Quality.  We will discuss how these factors are measured a little later in this post.

• OEE = Availability X Performance X Quality

Availability:  measures the uptime of the machine during the course of the production run.

Performance:  measures the cycle time of the machine or process against the ideal or standard cycle time.

Quality:  measures the time required to make good parts against the time required to make all parts.

Note that most texts indicate that Quality is the yield of good parts made (Good Parts / Total Parts).  While this may be true for an individual part or production process, you will learn that this can be misleading when attempting to determine the true weighted OEE for an entire department or operation.  More on this later.

Caution!

Comparing OEE between departments, divisions, or even companies can be very misleading unless a standard definition for OEE and its related factors has been determined.  We’ll discuss this in more detail later.  For now, be advised that, unless everyone is following the same definition, the results cannot be used for comparison purposes.

Availability:

Availability measures the actual equipment up time over the planned production time.  In other words, the amount of time that the machine was available to make parts when the machine was scheduled to make them.  The easiest way to measure uptime is to measure the down time and subtract that from the time the equipment is available.  We need to determine the available time and understand what actually qualifies as down time.

A typical shift is usually 8 hours or 480 minutes.  Each shift is provided with two 10 minute paid breaks and a 30 minute unpaid meal break.

• Net Available Time:  480 minutes – Break Times (20 minutes) = 460 minutes.

Shift Time		Break Time Calculations				Net Available
Hours	Minutes	Break	Frequency	Meals	Total	Time
8	480	10	2	0	20	460

Down time events include machine change over or setup, material changes, adjustments, break downs, or other events that take away from the production of parts.

Availability = (Net Available Time – Event Down Times) / Net Available Time

Example, a full shift of production was scheduled to run on machine A.  Production was stopped for 20 minutes due to a machine failure, 10 minutes for a bin change, 30 minutes for a quality concern requiring a tool repair.

Assuming the net available shift time is 460 from our example above, the availability is calculated as follows:

• Availability = (460 – (20 + 10 + 30)) / 460 = 400 / 460 = 86.96%

Availability Factor				Net Operating
Down Time Event			Time	(Up) Time
Machine Failure			20	440
Bin / Container Change			10	430
Quality Concern			30	400
Total			60	400
Availability = 400 / 460				86.96%

Performance:

Performance measures the actual cycle time against the ideal or standard cycle time established for the process.  From our example above, the net operating time for the process is 400 minutes.  The next step is to determine how effectively this net operating time used to produce parts.  In OEE terminology this is known as the process Performance.

Continuing with the above example, let’s assume that a total of 1200 parts were produced.  The actual cycle time is 1200 parts /400 minutes = 3 parts / minute.  If the ideal cycle time established by engineering or the equipment manufacturer is 4 parts / minute, the performance for the process is calculated as follows:

• Performance = Actual Rate / Ideal Rate = 3 / 4 = 75%
• Performance = Ideal Cycle Time / Actual Cycle Time = 15 seconds / 20 seconds.

Performance Factor
Ideal Cycle Time (seconds)				15
Total Quantity Produced				1200
Ideal Operating Time (Total Quantity x Cycle Time)				300 minutes
Actual Operating Time (Net Operating Time)				400 minutes
Performance = 300 minutes / 400 minutes				75.00%

So far so good!  Now all we need to do is calculate the Quality Factor.

Quality:

Almost everyone in the industry assumes that Quality is a measure of yield (good parts / total parts made).  This simple definition of the Quality factor is misleading if we recall that OEE is a measure of overall equipment effectiveness and this in turn is based on how well that time was used to make good parts.  More on this later.

Moving on with our original example, 6 parts were scrapped during the course of the production run due to various quality defects.  This means that only 1194 of the 1200 parts produced were acceptable.  The simple yield calculation is as follows:

• Quality = Good / Total = 1194 / 1200 = 99.50%

Since OEE measures how effectively an asset is used, we should be basing our calculation on how much TIME was lost to produce the 6 parts.  From a capacity planning and utilization perspective, the lost time is the real concern.

The ideal production rate is 4 parts per minute.  Therefore, the lost time can be calculated as follows:

• Lost Time = Lost Parts / Ideal Rate = 6 / 4 = 1.5 minutes OR,
• Lost Time = Lost Parts * Ideal Cycle Time = 6 * 15 = 90 seconds (1.5 minutes)

To put this into proper perspective, we should calculate the time required to make GOOD or Acceptable parts only.  From our example, this is the time required to make 1194 parts.  The calculations are as follows:

• Time to Produce Good Parts = 1194 / 4 parts per minute = 298.5 minutes
• Time to Produce Good Parts = 1194 * 15 seconds = 17,910 seconds = 298.5 minutes

The quality factor can now be calculated correctly as follows:

• Quality % = Time to Produce GOOD Parts / Time to Produce Total Parts = 298.5 / 300 = 99.50%

Quality Factor
Ideal Cycle Time (seconds)				15
Quantity Scrap / Defective				6
Total ACCEPTABLE Quantity				1194
NET Ideal Operating Time (Quantity Accepted * Cycle Time)				298.5 minutes
Ideal Operating Time (Total Quantity x Cycle Time)				300 minutes
Quality = 298.5 minutes / 300 minutes				99.50%

Again, OEE is a measure of how effectively a machines time was used to make good parts.  The time element will become clearer when we pursue department, and company wide OEE calculations.

OEE:  Overall Equipment Efficiency

We finally get to put it all together.  Now that we have calculated the Availability, Performance, and Quality factors we can calculate the Overall Equipment Efficiency (OEE) using the basic formula:

• OEE = Availability * Performance * Quality = 86.96% * 75.00% * 99.50% = 64.89%

OEE Calculations
Availability				86.96%
Performance				75.00%
Quality				99.50%
OEE = 86.96% x 75.00% x 99.50%				64.89%

OEE Quick Check:

If you recall earlier, we said that the definition of OEE is how effectively the machine time was used to produce a quality part.  Now for the proof and yet another simple quick way to verify or calculate your OEE.

From our example above, Net Available Time = 460 minutes and the Net Ideal Operating Time =  298.5 minutes.  We could have calculated our total OEE as follows:

• OEE = Net Ideal Operating Time / Net Available Time = 298.5 / 460 = 64.89%

OEE Quick Check
NET Ideal Operating Time				298.5 minutes
Net Available Time				460 minutes
OEE = 298.5 minutes / 460 minutes				64.89%

Other considerations:  Weighted OEE

Although we discuss weighted OEE in depth in another post, some people just can’t wait to get started and don’t return to find out how to do the weighted OEE calculations.  For starters, it is not a simple arithmetic average of the results.  The following example provides a solid basis for calculating the weighted quality factor for multiple processes.

Process A has a cycle time of 1 minute and process B has a cycle time of 2 minute.  Let’s assume that processes A and B made a total of 50 and 100 parts respectively.  Let’s also assume also that 10 parts were scrapped at each process.  The quality factor for each process should be calculated as follows:  Time to make good parts / Time to make total parts.

• Process A = (40 * 1) / (50 * 1) = 40 / 50 = 80%
• Process B = (90 * 2) / (100 *2) = 180 / 200 = 90%

First, does it make sense to use a simple average between the two processes knowing that one process ran 4 times longer than the other?  We would say no.  The simple arithmetic average in this case is (80% + 90%) / 2 = 85%.

Second, does it make sense to base the quality factor on the total yield?  Again, we would say no.  A total of 130 good parts were produced from a total of 150.  In this case the simple yield would be 130 / 150 = 86.7%.

Third, does it make sense to base the quality factor on the time required to make good parts versus all parts?  We would say yes.  Most people conclude that the cycle times “cancel” and are irrelevant but they do not consider what happens when two or more processes are viewed together.

The Quality factor looks quite different when the Processing Time is considered.  The total time to make GOOD parts for processes A and B is 40 and 180 minutes respectively for a grand total of 220 minutes.  The total time to make ALL parts processes A and B is 50 and 200 minutes respectively for a grand total of 250 minutes.  The Quality factor is calculated as 220 / 250 = 88.0 %

The point of the example presented here is that we have three (3) uniquely different numbers that theoretically represent the same data.  While the differences may seem small, it becomes even more relevant when determining the overall OEE for a department or plant where machines are used to manufacture products having substantially different cycle times and quality yields.  The effect could be contrasted further when comparing automated and manual production operations, or high speed equipment (stamping presses) and low speed assembly operations.

The secret to calculating line item and weighted OEE is simple:  The calculations applied to each line item process also apply to the sum of the whole.  You will see this at work in our post specifically written to address weighted OEE calculations.

Now that you know the “quick” OEE calculation, you can easily calculate the OEE for any process simply by knowing the cycle time, the good and total part quantities, and the total Net Available Time.

This introduction provides the basics to calculating OEE correctly.  In the next post we will teach you how to calculate the weighted OEE so you can determine the overall performance of your plant, department, or company.  As easy as it is to do, most people just don’t seem to “get it”.  Unfortunately, too many heated discussions in the boardroom have erupted as a result.

If you would like a copy of our free fully functional spreadsheet with detailed explanations – no strings attached – please visit our Downloads page or select the files from the Orange Download Widget in the sidebar.

Until Next Time – STAY lean!

Twitter:  @Versalytics

Originally Published:  19-Nov-2008 @ 00:49