Overall Equipment Effectiveness (OEE) - what it is and how to use it.

Overall Equipment Effectiveness is the overall performance of one piece of equipment or an entire factory measured through availability, performance rate, and quality rate. OEE can be used to prevent wasteful spending on unnecessary equipment. Instead the business owner can focus on improving the performance of the machinery that he already has. Another common remedy involves reducing fixed cost and the cost of making goods or the cost of goods sold (COGS).

In other words OEE is the result of dividing actual output by theoretical maximum output. Many see Overall Equipment Effectiveness as a mathematical way to evaluate process improvements. Another OEE equation would look something like this:

Availability rate X performance rate X quality rate = Overall Equipment Effectiveness

Ideal performance would mean that multiplying the availability rate, the performance rate, and the quality rate would equal 100% overall equipment effectiveness. It is interesting that most manufacturers think that they are operating in the 90% range, when actually their operations are closer to the 50% range. Effective evaluation of Overall Equipment Effectiveness produces real (monetary and otherwise) results for a company.

These scores can provide workers with metric comparisons to past performance and indicates where improvement has been made and where improvement is still needed. Numbers and scores are generally dictated by industry averages and thus will vary from operation to operation. Let us now take a closer look at availability, performance, and quality rates as they apply to Overall Equipment Effectiveness.

Availability Rate = actual production time
Downtime due to equipment breakdowns - For example, when the equipment is unavailable for use, time by employees is and company resources are wasted.
Set-up and adjustment time - Instead of focusing on the output of a quality product efforts are diverted to getting production back up and running.
Performance Rate - pieces produced
Reduce speed - Ask yourself if you have the maximum amount of output possible for a given amount of time. If you do not, evaluate ways to improve.
Equipment Failures/Major stoppages - As with equipment availability, efforts are diverted to getting production back up and running instead of on the product (what is ultimately going to make you money).
Quality Rate - total useable pieces made
Scrap - These products are inferior and cannot be sold to the consumer.
Re-do's - Products that have fixable defects and are deemed better to be fixed than to be disposed of all together.
Start-up losses - It takes more time to re-make or to fix a product than it would to have made an acceptable product to begin with. In most cases because a new or replacement product can be made in the same time as a defective product can be fixed. Thus, most inferior products are turned into scrap.

Overall Equipment Effectiveness measurement and evaluation techniques will vary. Some companies will purchase industry specific software. Others create their own or have departments devoted entirely to the OEE process. Others are more simplistic and use simple rating systems and rounded numbers. The type of environment you work in is the factor in determining how intricate your Overall Equipment Effectiveness measurements and calculations will need to be.

Important Overall Equipment Effectiveness Tips...

 Identify the abilities and potential of existing equipment.
 Focus on improving what you already have, not on buying something different.
 Recognize the correlation between Overall Equipment Effectiveness and financial performance.
 Create new plans that will specify performance and quality expectations and changes.
 Set goals and provide incentives (get your workers emotionally involved)
 Provide people with the training needed to implement new ideas and do all possible to promote a successful work environment.

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Categories: Operations, Project Management, Total Quality Management,

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Tags: overall_equipment_effectiveness effectiveness equipment quality scrap setup downtime project_management performance quality OEE