WHY OEE is a Key Production Performance Indicator?

Although OEE (Overall Equipment Effectiveness) has been around for a long time it is still in my mind one of the least understood key performance metrics.  In some Production environments where it is deployed it is not properly deployed because it's true value is not fully understood. 

The main reason for being least understood probably stems from the word "Equipment" which is misleading as immediately it is thought of as an Engineering/Maintenance type metric designed to report Reliability. It is much more than Reliability!

Many poorly deployed OEE projects are also because they stem from the same assumption and the OEE information provided by Control and SCADA type systems while it may be reporting an accurate OEE figure does not give sufficient information to drive significant OEE improvement. 

If OEE was called Overall Production Performance Effectiveness then it's value would be much better understood because we've moved away immediately from just Reliability. OEE itself measures time actual good output actually took vs time it should have taken to produce the same output. There are a couple of ways to Calculate OEE  (OEE Calculation from OEEsystems International). 

The OEE Losses is where the message gets lost. OEE Losses include Reliability Issues but much more significantly they also Losses related to Operations and Process related issues which is where you most often get the quickest wins when you are driving OEE Improvements.

On the OEEsystems International Website they Have a page talking about the OEE Definition and go beyond definition by talking about WHY you should use OEE, they explain HOW OEE delivers the WHY and very importantly they talk about WHO in the Production arena should be involved in operation and selection of OEE (the OEE drivers).

The WHY is interesting because it links OEE (or Overall Production Performance Effectiveness) to the Business Goals.

They talk about Production Companies that truly understand OEE adopt it into their production process do so for some of the following business reasons:

#1 Using their existing resources (People, Machines etc..) to make more

#2 Make the same but tackle the cost of Production

#3 Increase flexibility in Production to meet customers changing demands (e.g. smaller lots)

#4 Good manufacturing environment to work in (culture)

OEE Calculation without APQ

I've seen many posts on forums asking how to calculate an OEE for a company. The majority of replies talk about the need to know your Availability, Performance and Quality (A*P*Q = OEE)in order to calculate your OEE. However if this information is not readily available then it can make the task very time consuming to gather such information.

There is an alternative calculation that gives you the same answer using information that should be easy to obtain. The calculation is based on time and the quantity of finished goods that can be shipped. This article outlines this alternative calculation.

Before you can calculate you will need the following:

• Scheduled Time for the period you are calculating OEE for. This is basically the time you planned to have a machine available. For example, you could plan the machine to be available 12 hours a day simply because you only manufacture for 12 hours a day.
• Good Units Produced is simply what quantities of product were produced for the period which meet acceptance (i.e. the figure excludes rejects, bad product). If the machine runs at different rates for different products then you should break out the Good Units total for each different product.
• Product Cycle Time(s) is the theoretical machine time it takes to produce excluding set-ups etc.. If you do not know the theoretical time then it should be relatively easy to go to a machine and calculate it using a timer for a short period of time (be sure to exclude any stoppages during that timing period as all you want to do it count why it is running). I normally try to base this on an hour (i.e. if the line was running non-stop for an hour then how many units could I theoretically produce?).

With the above information you can now calculate you OEE Percentage as follows:

OEE% = (Good Units Produced / Product Cycle Time) / Scheduled Time

Example:

I want to calculate my OEE for Machine 1 for last week. The machine is available during the normal working hours of 08:00 -> 20:00 (12 Hours) Monday -> Friday (5 Days).

Scheduled Time is 12 hrs x 5 (Days) = 60 Hrs

During that period I produced the following Good Units/Finished Goods:

789 Product A
970 Product B

Product A has a Product Cycle Time of 50 units an hour. This means that if the machine was running without any downtime at 100% performance and no quality loss then in theory I could have produced 789 unit in 15.78Hrs:

Product A Theoretical Time = Good Units/Units Per Hour = 789/50 = 15.78

Product B has a Product Cycle Time of 60 units an hour. This means that if the machine was running without any downtime at 100% and no quality loss then in theory I could have produced 970 units in 16.17Hrs:

Product B Theoretical Time = Good Units/Units Per Hour = 970/60 = 16.17

My OEE therefore is calculated as follows:

OEE% = (Product A Theoretical Time + Product B Theoretical Time) / Scheduled Time %

(15.78 + 16.17) / 60 %= 31.95/60 %= 53.24%

This means that out of 60 Hours I have effectively "lost" 46.75% of the time (or about 28 hours). These 28 hours is a combination of availability (downtime), quality (rejects and rework) and Performance (short stoppages, reduced line speed, process weaknesses).