OEE stands for Overall Equipment Effectiveness and has over time taken centre stage as THE KPI of choice used by the majority of manufacturing managers to monitor and improve their manufacturing process.
The title of this post asks the question of whether or not OEE is the Holy Grail of KPI’s. I would have to say no, because it implies that we could stop our quest to strive for excellence. However, if I were a production manager and had to choose one KPI, I would without hesitation choose OEE. Why?
- OEE is not just one KPI but four+ KPI’s. I say this because OEE is the result of an arithmetical calculation that takes into account three further KPI’s.
- OEE leverages off easily attainable metrics (measure wise) yet provides big results from productivity, financial and operational points of view.
OEE works by looking at your losses. To be more specific OEE looks at the losses that are commonly acknowledged to be the six big loss categories and matches them to one of three OEE loss categories – they are:
- Breakdowns –> Down Time Loss
- Setup and Adjustments –> Down Time Loss
- Small Stops –> Speed Loss
- Reduced Speed –> Speed Loss
- Startup Rejects –> Quality Loss
- Production Rejects –> Quality Loss
The OEE loss categories are then taken into account to calculate what are called the OEE factors – they are:
- Performance. The Performance factor takes into account speed losses and is calculated as:
Performance = (Total Pieces / Operating Time) / Ideal Run Rate
- Availability. The Availability factor takes into account Down Time Losses and is calculated as:
Availability = Operating Time / Planned Production Time
- Quality. The Quality factor takes into account Quality Lossese and is calculated as:
Quality = Good Pieces / Total Pieces
Each one of these is measured in percent (%) and are multiplied with one another to give you OEE.
OEE = Availability x Performance x Quality
An example of this calculation is shown below.
Availability x Performance x Quality = OEE
73% x 82% x 97% = 58 %
World class OEE is accepted to be 85%. As you can see the OEE calculation method is one that delivers the truth without any gloves – it is going to hurt – i.e a low value can very quickly deteriorate your OEE. The upside of this, is that you have room to improve!