OEE – What is Overall Equipment Effectiveness and how is it calculated? OEE analysis and its importance in production
- What is OEE? What does OEE mean?
- The history of OEE
- What is the difference between Overall Equipment Effectiveness and Overall Equipment Efficiency?
- Why is the OEE indicator important?
- What is the difference between OEE, TEEP, and OOE?
- What is the difference between OEE, TEEP, and OOE?
- OEE calculation example
- OEE benefits
- The role of MES in reducing losses and increasing production efficiency
Overall Equipment Effectiveness, also known as OEE, is used by manufacturing companies to measure the overall effectiveness of production equipment. In the following lines, you will find information such as what OEE is and the benefits an OEE (Overall Equipment Effectiveness) software solution provides, what the difference is between Overall Equipment Effectiveness and Overall Equipment Efficiency, how OEE is calculated, and how important its use is in today’s economic environment, along with other relevant details.
Increase productivity with the help of OEE
In today’s economic context, where the costs of raw materials, energy, and even labor are constantly increasing and have become difficult to predict, improving productivity and maintaining a competitive position in the market can be achieved through greater control over how equipment in production operates. Equipment breakdowns, bottlenecks, equipment operating below optimal performance, and long waiting times are just a few of the issues that can lead to higher production costs, as well as difficulties in meeting product delivery deadlines for customers.
That is why tools that enable the analysis of production equipment effectiveness are essential when your goal is to minimize losses and produce at the most competitive costs possible, regardless of the industry you operate in. In this regard, calculating and monitoring the OEE indicator is highly useful. By measuring the effectiveness of factory equipment with the help of the OEE indicator, companies are able to identify and consequently reduce losses, thus increasing productivity in the production area and strengthening the business’s position in the market.
What is OEE? What does OEE mean?
OEE is the acronym for Overall Equipment Effectiveness, an English term which in Romanian means the overall or total effectiveness of equipment. OEE is the indicator that measures how well a production operation is carried out using factory equipment, compared to its maximum potential in terms of availability, performance, and quality.
The history of OEE
The term OEE, namely Overall Equipment Effectiveness, meaning the overall effectiveness of equipment, was coined in the 1960s by Seiichi Nakajima, the Japanese pioneer and creator of the TPM system (Total Productive Maintenance). OEE was described as a central component of the TPM methodology in Seiichi Nakajima’s book – TPM tenkai (1982, JIPM Tokyo).
Measuring factory productivity with OEE calculation software
What is the difference between Overall Equipment Effectiveness and Overall Equipment Efficiency?
- Overall Equipment Effectiveness – OEE calculation refers to using production machines at their maximum potential, up to the limit
- Overall Equipment Efficiency – refers to using production machines at their maximum potential, up to the limit and with minimum resources
Why is OEE calculation – Overall Equipment Effectiveness – important?
OEE is a relevant measurement tool for all manufacturing companies, whether we are talking about food / beverage producers, medical device manufacturers, or other electronic equipment producers, and so on. OEE (Overall Equipment Effectiveness) calculation is an indispensable part of the strategy for improving production activities, together with TPM (Total Productive Maintenance), both being essential tools of the Lean Manufacturing / Lean Production concept (which refers to reducing waste in the production process).
OEE analysis provides information about which equipment / machines / processes require improvements and when. Equipment that does not operate at maximum efficiency generates losses, and without calculating the OEE indicator, many of these losses cannot be identified and, therefore, no corrective measures can be taken.
Visibility into equipment – analysis with OEE calculation software
Therefore, the operating time of a machine is critically important for production efficiency, because it cannot be recovered regardless of how many operators are available to work with that machine. In other words, thanks to OEE indicator calculation software, companies gain visibility into all losses for each individual machine and can take action to improve these situations.
What is the difference between OEE, TEEP, and OOE?
OEE, TEEP, and OOE are terms frequently used in the manufacturing industry, all representing different methods of measuring the gap between how many goods you could theoretically produce and how many you actually produce. This difference helps you identify where you need to intervene in order to make improvements and increase performance, without investing in new machinery or production facilities. The main factors influencing OEE, TEEP, and OOE are: availability, quality, and performance.
TEEP – Total Effective Equipment Performance
- The TEEP indicator is calculated using the following formula: TEEP = Performance x Quality x (Actual Production Time / Total Time), where Actual Production Time / Total Time = Availability.
OOE – Overall Operations Effectivness
On the other hand, this is the acronym for Overall Operations Effectiveness and is a less frequently used method of measuring production line availability. It shows a slight variation compared to OEE because it distinguishes between the time when the factory is operating and the time during which a machine is scheduled to run.
For example, when using the OOE metric, planned machine maintenance time is included in the OOE calculation, but not in the OEE calculation. This is because, during planned maintenance, the machine is not scheduled to operate. Shift changeover times are another factor that influences OOE. In other words, OOE measures availability from the moment the work shift starts until the moment it ends.
In most production facilities, it is not possible to start and complete the production of goods in such a way that everything fits exactly within these working hours, because there will inevitably be waiting periods. Therefore, in manufacturing, OOE typically falls between TEEP and OEE (total time, operating time, scheduled time).
- The OOE indicator is calculated using the following formula: TEEP = Performance x Quality x (Actual Production Time / Total Time), where Actual Production Time / Total Time = Availability.
How is OEE – Overall Equipment Effectiveness – calculated?
OEE calculation using specialized software is based on the time during which the machine is scheduled to run / operate. OEE is the performance of that machine compared to its maximum capacity, meaning what the equipment in question could achieve if everything were working perfectly. Therefore, OEE takes all losses into account, and an OEE score of 100% means that you produce only quality goods, at the highest possible speed, without interruptions.
The OEE indicator is calculated using the following formula:
OEE = Availability x Performance x Quality
Parameters used in the OEE calculation:
- Availability – The availability factor takes planned and unplanned downtime into account and represents the percentage of time during which the equipment / system operates, compared to the time it was scheduled to operate. An availability score of 100% means that the process runs throughout the entire planned production time.
- Performance – The performance factor takes slow cycles and short stops into account, representing the quantity produced during the operating time compared to the maximum potential of the equipment, usually specified by the manufacturer. A performance score of 100% means that the process runs at the highest possible speed.
- Quality index / Quality – The quality factor takes defects into account, including components that need to be reworked, and represents the ratio between the quantity of good-quality products and the total quantity of manufactured products. A quality score of 100% means that there are no defects, and all produced items and components have optimal quality.
OEE calculation example
For a better understanding of overall equipment effectiveness, we will present an OEE calculation example and what improvements can be made to increase the OEE indicator.
Therefore, if we have a production line operating at 80% speed, with a 4% defective item rate, and running for a period that represents 40% of the available time, due to interruptions caused by adjustments and stoppages generated by breakdowns, the OEE calculation in this case would be as follows: 40% x 80% x 96%, according to the formula Availability x Performance x Quality, in which case the OEE is slightly above 30%.
In this situation, a significant improvement in the OEE score could be achieved first of all by increasing the availability to produce. By carrying out proper proactive and preventive maintenance, which allows the equipment to remain operational for as long as possible, with as few stoppages caused by technical failures as possible, the availability score would improve.
Such measures generally allow a significant increase in the availability score. In this context, let us assume that we obtained a score of 90%, in which case the OEE calculation formula would be: 90 x 80 x 96, which means that the OEE indicator would be almost 70%.
A system with an OEE of 85% is considered “world class,” and an example of how we could approach this percentage would be: OEE = 90% (Availability) x 95% (Performance) x 99% (Quality index). Of course, it is important to keep in mind that OEE analysis parameters may vary from one process to another.
The OEE score in companies is generally significantly affected by the following:
- Planned downtime – caused by shift changes, equipment cleaning / sanitation or preparation, tool changes, etc.
- Unplanned downtime – caused by equipment failures, unplanned maintenance work, etc.
- Short-duration stops – these are generally stoppages lasting less than 2 minutes and are related to resolving situations such as a blocked sensor, jams, and similar issues.
- Slow cycles – these refer to anything that slows production below its maximum speed, such as a worn conveyor belt, an inexperienced machine operator, or poorly maintained equipment.
- Process defects – refer to defective parts produced during stable production due to equipment handling errors or incorrect equipment settings.
- Reduced yield – is caused by defective parts produced from the moment an equipment failure occurs until the equipment returns to optimal operating condition.
OEE analysis – benefits
Companies that use OEE analysis to evaluate the level of utilization of a machine’s or production line’s capacity gain multiple valuable benefits, among the most important observed by manufacturers being:
- A higher return on investment (ROI) – OEE helps you achieve better profitability by ensuring higher performance through raising the productivity standard across all equipment
- Increased competitiveness – With an OEE analysis software solution, you can identify the reasons why you are producing less than what is actually possible. By understanding these aspects, you can take action to correct inefficiencies, thus ensuring a higher level of market competitiveness for your business
- A higher quality standard – Too many defective products can seriously affect your business. By using OEE and the right technology, you will gain better traceability and easily identify what is causing poor quality, so that you can remedy issues as quickly as possible
- Leveraging key information – Most manufacturers do not realize that they are actually operating at a lower efficiency level than they are capable of achieving. OEE allows you to quantify efficiency. When you can measure and analyze operations, you also gain the tools needed to improve your business strategies. Not only products and processes can be improved, but also the activity of factory staff, thanks to visibility into the way work is performed and access to real-time information
- Reducing equipment repair costs – Because OEE (Overall Equipment Effectiveness) analysis helps you monitor the performance of machinery / equipment more closely, you can better anticipate problems that could lead to the need for repairs and take timely action to avoid such costly interventions. Preventive maintenance and the intelligent use of equipment based on such forecasts will ultimately prove more cost-effective than waiting until the equipment breaks down completely and stops your production
