Overall Equipment Effectiveness (commonly referred to as OEE) is a production performance formula manufacturers use to measure the efficiency of their production processes. More specifically, OEE measures what percentage of a given manufacturer’s operation—its tools, machinery—all its equipment used in production—is used at any time.
OEE calculations help manufacturers establish a standard to gauge operational effectiveness and track progress. Knowing what percentage of manufacturing time is productive allows managers to identify where production areas are lagging and correct it. The overall objective in measuring your production processes and performance is continuous improvement.
Understanding Overall Equipment Effectiveness
Seiichi Nakajima coined OEE as part of his Total Productive Maintenance (TPM) system, which he developed in the 1960s. TPM is designed to maintain and improve an organization’s integrity and business value. It offers a holistic approach that encompasses the entire operational processes—production, safety, employees, and system quality as measured through its machines, equipment, and processes. Thus, the OEE component of TPM is the essential indicator of productivity.
Nakajima’s TPM system envisioned a way for manufacturers to engage all of their employees in a unified effort to reduce significantly, if not wholly eliminate, waste in production processes by improving the efficiency of equipment used in manufacturing products. OEE is the data tool that places a number, i.e., a value, on how effective operations are to remain competitive.
OEE values measure an industrial facility’s equipment’s availability, performance, and quality from 0% to 100%. Those percentages represent the production time planned for equipment versus the time it is genuinely productive. In other words, the OEE formula measures percentages of the time equipment and machines are running, their uptime, their production quality, and the throughput performance, all of which are then combined into one overall value.
The percentages and the values help identify areas of productivity loss and show how effectively manufacturers utilize their plant and production equipment. Any downward percentage shift during production processes allows managers to identify and correct problems, typically, easily, and quickly. This, in turn, demonstrates how effectively quality products can be delivered to customers and the time in which they are delivered. Delivering quality products on time is essential, if not crucial, in ensuring that companies remain competitive.
How OEE Impacts Your Business
Overall Equipment Effectiveness is a tool enabling managers to quantify production. It is designed to increase the use and production of plant equipment more effectively. OEE scores can be used as a performance indicator benchmark and as a baseline to track the progress of a given production tool over time. How can an OEE score impact a business? Consider that an OEE score of 100% means the percentage of manufacturing time of quality parts has reached optimum production as fast as possible, with no stop time. That’s perfection and unlikely sustainable for any number of variables.
In contrast, most manufacturers introducing OEE to track performance start with a score of 40%. An OEE score of 85% is considered world-class and, for many manufacturers, a suitable long-term goal. A score of 60% OEE is relatively typical and indicates substantial room for improvement.
OEE scores provide a structure for companies to consistently improve their production processes and, thus, output. Those scores measure how efficiently your equipment works compared to its full potential, availability, and planned operating time. Breaking down processes into three measurable components—availability, performance, and quality—gives system managers valuable information and insight into how their manufacturing system works and how it systematically works. OEE metrics provide vital data points that serve as measurable guidelines for a company’s production processes and as a control mechanism to manage production efficiency.
Contact the Experts at EAM, Inc.
Overall Equipment Effectiveness is a valuable metric that guides managers in setting meaningful goals for their companies. Still, as a performance metric, OEE is only as effective as the equipment. Regarding innovation and design, EAM Inc. develops and manufactures various custom assembly and product handling automation equipment for companies. We are leaders in custom automated manufacturing machinery and industrial-engineered automation systems. We work with manufacturers to provide the solutions they need to help them increase their productivity, efficiency, and performance capabilities. For more information, contact us at EAM today.