Overall Equipment Effectiveness – How to Measure It?

Overall Equipment Effectiveness

It’s of paramount importance to define and follow good Key Performance Indicators (KPIs) that give easy-to-digest information on the health of your manufacturing operations.

Two common KPIs that are widely used and give a very good indication of performance at a glance are Overall Equipment Effectiveness (OEE) and Total Effective Equipment Performance (TEEP).

In general terms, OEE gives an indication of how much it is possible to raise effectiveness in the production. It presents the current effectiveness as a percentage of the ideal case.

Why to measure it?

  • Understand how effective is the production
  • See if things are getting better (or worse)
  • See areas that need improvement

However, in the real world there are always delays. Machines need to be set up and warmed up, there are breakdowns, produce that goes to scrap and a hundred other unforeseen obstructions. The OEE gives an indication on how effectively these situations are predicted and handled as well as it points out through its underlying measures, which areas are the biggest concerns.

Calculation of Overall Equipment Effectiveness and its underlying metrics

The OEE measure consists of 3 underlying measures: Availability, Productivity and Quality.

OEE is calculated as follows: OEE = Availability x Productivity x Quality.

Availability portion of the OEE Metric represents the percentage of scheduled time that the operation is available to operate. The Availability Metric is a pure measurement of Uptime that is designed to exclude the effects of Quality, Performance, and Scheduled Downtime Events. The losses due to wasted availability are called availability losses.

Common causes for availability losses are setup and warmup times, adjustments and breakdowns.

Availability = Real run time / Planned time

Performance portion of the OEE Metric (also known as process rate) represents the speed at which the Work Center runs as a percentage of its designed speed. The Performance Metric is a pure measurement of speed that is designed to exclude the effects of Quality and Availability. The losses due to wasted performance are also often called speed losses.

Common causes for performance losses are obstructions such as logistical problems or searching for tools, small stops, operator inefficiency and decreased speed of the machine.

Performance = (Total parts * Ideal production time for one part) / Real run time

Quality portion of the OEE Metric represents the Good Units produced as a percentage of the Total Units. The Quality Metric is a pure measurement of Process Yield that is designed to exclude the effects of Availability and Performance. The losses due to startup losses and defects are called quality losses.

Quality = Good parts / Total parts

Using Overall Equipment Effectiveness

The main benefit comes from seeing the bottlenecks in the production. The production is as effective as the weakest link. The machine in the main processes of the company with the lowest OEE is the effective bottleneck and dealing with it is the first priority. Looking into the underlying metrics – Availability, Performance and Quality – pinpoints the areas which need to be dealt with:

  • Availability is low: need to optimize setup times, preventive maintenance etc.
  • Performance is low: need to prevent small stops, delays, improve operator efficiency etc.
  • Quality is low: need to minimize startup losses and other defects.

The goal is to help making processes better by defining a metric that shows the overall health and progress. All employees who have access to the indicators should be educated on the essence of OEE and its underlying metrics and how they could personally help raising it. But this can be used to fuel healthy competition. However, there’s a caveat – as all statistics, including OEE, can be tampered with, it’s generally not recommended to directly link OEE to bonuses of employees. It’s certainly not intended for penalizing workers.

OEE and its underlying metrics can only be used for benchmarking a factory against itself, it gives an indication of the current situation and how it’s progressing historically, getting better or worse. It’s also not a tool in itself which can make things better, it’s a tachymeter, a gauge which only reflects the situation. It’s the driver who needs to understand the reading and act appropriately on it.

Taking the goal of improving OEE should be made conservatively, not 30% a year, but perhaps 3% a year. Only one percentile of growth can be a huge step forward and would require reevaluations of old processes, implementation of new ones and educating staff. It’s the continuous improvement that matters.

It’s vital to understand that it cannot be used for comparing one business to another, there is no industry standard. The calculation depends on coefficients which values can and will vary greatly from company to company and which can be freely defined.

Calculating and using TEEP

Total Effective Equipment Performance (TEEP) gives an indication how much in total it is possible to raise the production output of the machines by raising the overall effectiveness OEE and the loading on the equipment. It measures the OEE against calendar hours. If the unit runs 8-hours per day, there is already a 66% loss compared to running 24-hours a day due to running the unit only one third of the time available.

TEEP is calculated as follows: TEEP = Loading x OEE.

Loading portion of the TEEP Metric represents the percentage of time that an operation is scheduled to operate compared to the total calendar time that is available. The Loading Metric is a pure measurement of schedule effectiveness and is designed to exclude the effects how well that operation may perform.

Loading (week) = Planned time / (7d* 24h * 60min)

The easiest way to increase TEEP is to effectively schedule more work on the machines, which might mean opening another shift. If it is critical assets, then it is better that they are fully loaded. If you are already running 24/7, then TEEP effectively shows, what’s lacking from effectiveness – TEEP can only be 100% if OEE is 100%.

Tracking these two metrics, OEE and TEEP, side-by-side along with their underlying indicators – Availability, Performance, Quality and Loading – gives a good overview on the overall health of the production and indicates the direction the company is heading. These can be important metrics that help making decisions on what to do next, where to turn the attention.