What is OEE? What does OEE stands for?

Ilabo
February 18, 2022
Reading Time: 4 minutes
What is OEE?
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OEE (Overall Equipment Effectiveness) is widely accepted as the best metric to capture your manufacturing productivity. It defines the percentage of time that is truly productive for your factory. Measuring it and making sure it stays at the highest possible level is essential for improving the performance of your manufacturing business.

The OEE formula is quite simple, it measures effectiveness across the three key areas of availability, performance, and quality. As an example, the OEE score of 100% means that all of these three areas are perfect and your machines, lines or whole factories produce 100% good parts, with 100% performance and 0% downtimes. There’s almost no need to mention that hitting such a maximum OEE level is practically impossible.

NOTE: Some may think that manual OEE measurement is enough. We know that in practice this data is often not precise enough to provide true value for improvement. That’s why the best way is to automatically collect all data directly from the machines.

TEEP and OEE measurements in manufacturing

A view from the PackOS application (a part of LogiX suite) that monitors factory lines, providing real-time data about OEE performance and production progress.

TEEP and OEE measurements in manufacturing. Types of OEE.

It is important to mention  two following types of KPIs tackling Overall Equipment Effectiveness.

TEEP (also called OEE1) refers to the total available time, which is 24h/7days a week.

The main examples of TEEP (OEE1) use cases are:

  • increasing the total capacity and getting rid of the bottlenecks
  • manpower planning and overtime planning
  • long-term business planning

OEE (also called OEE2) refers to scheduled production time, for example, 10 shifts per week. Knowing the OOE (OEE2), you can easily check your efficiency in the time planned for production.

The main examples of OEE (OEE2) use cases are:

  • checking and then improving productivity within scheduled time
  • manpower planning and overtime planning
  • capacity planning processes in cases where demand is increasing

OEE Waterfall chart. Every activity consumes time and lowers the OEE.
OEE waterfall graph

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What are the OEE Standard benchmarks?

As we have already mentioned, the total equipment effectiveness includes information in three dimensions (Availability, Productivity, Quality), which, when properly measured, will allow you to understand where are the possible areas to increase your production efficiency. Knowing what the industry standards are will help you to correctly position your manufacturing business on the market and can inspire you to take appropriate actions aimed to improve your OEE.

Read also our article about Production monitoring

It is assumed that 100% OEE is a reference to ideal production process, and the result at the level of 85% is regarded as Best-in-Class/Word-Class and defines the production of high performance. The OEE result of 65% is described as typical (average) and 40% is viewed as low performance result, which does not mean that it is not quite common as it occurs mostly in manufacturing companies that are just beginning to measure and improve their OEE.

NOTE: You may try to track OEE manually but you will quickly see how time-consuming it is.

Using the LogiX (PackOS) OEE software you will not only be able to quickly check the current OEE at your each factory or each production line but also you will be able to compare it between factories and drive knowledge sharing that will result in tips allowing you to improve your total manufacturing productivity across your business operations.

What you can focus on knowing your current OEE?

OEE < 40%OEE 70%-40%OEE >70%
Automate data collection and focus on the biggest downtimes like.Check how you can reduce machine failures and other major downtimesTry to reduce the short-stops
and speed up the changeover time
 
Double-check the way you collect and calculate all your data

How to calculate OEE

One of the possible ways to properly calculate your OEE you first need to measure the three  key aspects of your production: availability, performance, and quality

The OEE formula

OEE = Availability × Performance × Quality

AVAILABILITY

When calculating availability, we take into account all planned and unplanned stops which are included in the planned production time. We can distinguish for example, different types of stoppages, like technical failures or material shortages (unplanned stops) as well as machine changeover time (planned stops).

Availability = Run Time / Planned Production Time

Run Time = Planned Production Time – all planned and unplanned stops

PERFORMANCE

In order to calculate performance, we take the ratio of actual production in a given time i.e., the number of products produced, to target production. By target production, we mean the number of products that could be produced assuming maximal line throughput.

Performance = Actual Production / Target Production

QUALITY

When counting quality we compare the ratio of good production, i.e. products meeting the quality standards, to the actual production. Losses observed here can be related to products that do not meet quality standards.

Quality = Good Count / Total Count

Key business benefits of measuring and improving OEE

1. Measuring and knowing your OEE gives you an opportunity to improve it and as a result to increase productivity while lowering the production costs. That can directly improve the Return On Investment (ROI) in your production assets.

2. By comparing your OEE between lines and factories, you can easily identify where and why you are losing the most and assess the potential room for improvement.

3. You have much better knowledge and better control over your machine downtimes. You can better manage their repair and maintenance processes, and therefore you can reduce its costs.

4. Knowing your OEE allows you to easily identify the weakest points in your production performance and to address them with proper corrective actions. This makes it easier for you to stay competitive in the marketplace, either by producing more products in a given time (higher revenue play) or by producing planned quantity of products in a shorter time (lower costs play)

What can be measured can be improved

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