Improving Manufacturing Efficiency Using OEE

Ever rising costs and globalization are putting manufacturing companies under ever greater pressure to increase production efficiency. There are many techniques, programs and tools that can be used to maximize efficiency and one of these is OEE.
OEE or to give it its full title Overall Equipment Effectiveness is a simple formula to measure the effectiveness of production machines in manufacturing.

OEE was developed at the Japan Institute of Plant Maintenance (JIPM) in the 1970’s and came into widespread use in the West after it was translated in to English in the 1980’s. It is the primary measure used in Total Productive Maintenance (TPM) program to identify and quantify the major equipment related losses and a metric for rating “equipment effectiveness”. Although TPM is designed to be an organisation wide approach to eliminating the major equipment losses, OEE has become widely used in many plants “stand alone” because it is simple and cheap to implement.

OEE highlights the “major losses” for focussed improvement. It can then be used to measure the effectiveness of the focussed improvement efforts or initiatives introduced to reduce the major loss and therefore tap “hidden capacity”

Any manufacturing machine or equipment will have some losses, either in the available time it can run, the speed it can perform and the quality of product it produces. These loss factors are accounted for in the OEE formula which is the product of Availability, Performance and Quality expressed as a percentage.

In simple terms ‘Availability’ is the total time available for production less any planned (breaks, maintenance etc) and unplanned (breakdowns, change overs) downtime. ‘Performance’ is the difference between the potential output and actual output, when the equipment was available to run. Performance relates primarily to machine speed losses. ‘Quality’ is the total good parts produced expressed as a percentage of the total parts produced.

In the “perfect” factory all machines would run at 100% Availability and 100% Performance and produce 100% good quality product to achieve 100% OEE. In reality most manufacturers struggle to achieve “World Class” OEE of 85%.

Most manufacturers implement OEE using manually collected data and this provides a good way of benchmarking their machine effectiveness. OEE was designed to be used manually because it brings to the attention of machine operators where losses are occurring. However using manual data collection to track many machines becomes very difficult with a mass of information to collect and process. This creates a lot of work and there is always a significant lag before OEE is available. Manual data collection also introduces “guestimations” and inputting errors which means that OEE figures are often inaccurate.

To eliminate these problems software and systems are available from a number of companies to automate OEE data collection, reporting and analysis. These vary from elaborate spreadsheet packages to complete PC based systems that collect data directly from the machines. A leading UK based vendor is Plantrun offering automated data collection, reporting and analysis systems for OEE.


Using OEE to measure and improve production efficiency.

To increase productivity and reduce costs it is essential to have an effective system of measurement, control and improvement of production efficiency.

The current competitive environment is characterized by a progressive reduction in margins due to increasing globalization and less willingness by customers to spend.

This requires companies to reduce manufacturing costs to maintain or improve their competitiveness. An essential key to achieving this is to maximize the efficiency of the productive resources.

Being more efficient means, in effect, increasing productivity with the same resources. This means that you can get the same productivity with fewer resources, or get more productivity from existing resources.

Often we tend to think that the best way to increase production efficiency is to renew or upgrade assets, requiring substantial capital investments. But experience teaches that, in the absence of an adequate control system for improving efficiency, few production processes achieve more than 50-60% of its potential.

For a company that wants to be competitive it is therefore a priority to develop an effective system for monitoring and improving efficiency, in particular on “critical” resources. This allows the company to:

  • measure production efficiency in an objective manner;
  • spontaneously spread indicators that induce an increase in productivity;
  • identify and eliminate the sources of inefficiency.

OEE (Overall Equipment Effectiveness) is universally recognized as the most effective method. Originally devised for continuous flow production, the technique can also be used successfully for work cells, departments or even service centers that perform potentially repetitious and standardized tasks.

OEE provides some basic steps:

  • definition/validation of standard (times and methods)
  • implementation of the system of registration of inefficiencies
  • development of the tool for the calculation of the efficiency and the ABC analysis of the inefficiencies
  • training the staff on the objectives of the activity and the significance of the indicators
  • evaluation of the current level of efficiency
  • identification of the main sources of inefficiency
  • eliminating inefficiencies through targeted improvement activities
  • quantification of the improvement achieved and feedback

The technique is usually implemented in a pilot area (department, production line or office) and then progressively extended to other areas. This allows the company to set up a sustainable path and fine tune OEE in specific context.

Typically, an OEE project enables production efficiency to be raised by 30-40% in a few months, depending on the starting situation, bringing it to its maximum potential. Inefficiencies are often identified primarily as organizational in nature, and therefore their resolution requires an investment that is very low or even zero.

Consequently, the implementation of OEE is usually characterized by a very rapid return on investment, in addition to ensuring a significant efficiency gain that can increase over time if used as part of a program of continuous improvement.