Overall Equipment Effectiveness (OEE) is both a benchmark and a baseline that’s valuable for manufacturers to know when it comes to measuring productivity. Below are the key benefits of this metric, how it works and how to calculate your operation’s overall effectiveness.
What is Overall Equipment Effectiveness?
Overall Equipment Effectiveness is a metric that helps manufacturers identify the percentage of planned production time that is actually productive. An ideal OEE score would be 100%. This score would mean that an operation is manufacturing only good products as quickly as possible with no downtime. While 100% is ideal, a score of 85% or better is still considered world-class. Many manufacturers, however, score more in the 40% to 70% range, which is common, but shows that production can be improved. Manufacturers can use their OEE score as a benchmark to see how their operations compare to that of similar organizations, as well as a baseline to track progress over time.
You may have heard of OEE as one of the elements needed to calculate another meaningful metric: asset utilization. To calculate OEE itself, you only need to know three factors, which are asset availability, asset performance and production quality.
What is the OEE Calculation?
The formula to remember to calculate OEE is: A x P x Q = OEE
The A stands for availability. Availability looks at all the events that interfere with planned production for long enough to be worth noting, which, for many manufacturers, would be several minutes or more. Availability is calculated as the ratio of Run Time to Planned Production Time: Availability = Run Time / Planned Production Time
Run Time is Planned Production Time less Stop Time, with Stop Time being any time the manufacturing process should have been running but wasn’t due to unplanned or planned stops. This can be calculated as: Run Time = Planned Production Time – Stop Time
The P stands for performance. Performance refers to anything that causes the manufacturing process to run at less than the maximum possible speed. Performance is the ratio of Net Run Time to Run Time. That formula is: Performance = (Ideal Cycle Time x Total Count) / Run Time
Ideal Cycle Time is the fastest cycle time your process can achieve in the best possible circumstances. If performance is calculated as more than 100%, this likely indicates that the Ideal Cycle Time is incorrectly set too high.
The Q stands for quality, which looks at all the manufactured products that do not meet quality standards, including parts that need to be reworked. Quality, in this case, refers to parts that successfully pass through the manufacturing process the first time without needing any tweaking.
Again, to calculate OEE, you’ll multiply your asset availability by asset performance by production quality. That number will be your overall OEE score.
Benefits of Overall Equipment Effectiveness
There are many valuable benefits to knowing your Overall Equipment Effectiveness score and using it as a motivational metric to improve upon. Below are some of the biggest benefits manufacturers can see from being aware of their OEE.
Manufacturers know that machinery is expensive. You want to see a worthwhile return on your investment. OEE helps ensure a strong return by raising the standard of productivity on all assets. You’ll also get better performance out of new machinery sooner.
Staying competitive is essential for any operation. Having the most accurate OEE insight helps organizations, for example, figure out why they’re only producing 50 pieces per hour when they’re capable of 80. By seeing where the production line is failing, you can correct inefficiencies.
Even the most financially sound operation can’t afford too many defective products. The use of OEE and the right technology allows for better traceability to determine where the drop in quality is originating so it can be quickly corrected.
Many manufacturers don’t realize that they’re actually operating at a lower efficiency than they’re capable of. OEE allows manufacturers to quantify their efficiencies. When you’re able to measure and analyze your operations, you can more strategically improve them. And it’s not just products and processes that can be improved. Having real-time insights helps plant personnel see how they’re working and where they can work smarter.
Reduced Machinery Repair Costs
Because OEE helps you keep a closer eye on machine performance, you can better anticipate issues that will lead to needing repair. This foresight helps manufacturers to preventively maintain and address machinery in a predictable manner, which is typically more cost-effective than waiting until equipment fully breaks down and halts production.
Utilizing OEE is appropriate for any company size or plant type. You can begin by using an OEE system on one machine or process and then expand usage as you’re ready.
Industries Utilizing Overall Equipment Effectiveness
OEE is a KPI used by many industries that utilize manufacturing equipment and machinery throughout their operational processes, such as:
OEE is relevant to the entire manufacturing industry and can often be a gateway to working more strategically and digitally. When it comes to increasing efficiency, manufacturers can’t ignore the value of connected manufacturing and utilizing today’s technology systems to collect more and better data to identify gaps and issues that are holding back operations. Calculating and monitoring OEE is a valuable part of many manufacturing ERP systems. In fact, QAD Adaptive ERP systems include a predefined action center that is a dashboard designed specifically for analyzing OEE.
How Can Overall Equipment Effectiveness Improve Maintenance?
In general, Overall Equipment Effectiveness can help identify issues that slow down the manufacturing process, as well as provide strategies on how to successfully eliminate them. It’s essential visibility for manufacturers who want to reach their full potential and stay profitable and competitive. OEE allows manufacturers to pinpoint underperforming assets and draw a line from low performance to one of the three main factors: availability, performance and quality. It may be that a machine’s belt needs replacement or a system isn’t being aligned between uses. When you know where the issue is occurring, you can work to correct it.
QAD’s Enterprise Asset Management (EAM) solution assists in this process, focusing on asset management. It’s a solution that helps manufacturers better manage the full, acquire-to-retire lifecycle of an asset for improved asset utilization and production yield, longer equipment life, reduced maintenance costs, higher ROI and more streamlined processes. If optimized efficiency is your goal in utilizing OEE, an EAM system is an ally to manufacturers when taking efficiency to the next, quantifiable level.
Discover QAD EAM and learn how it can help you work more preventively and strategically.