Overall Equipment Effectiveness (OEE) is a derived metric that combines assessments of three different aspects of the operation of your machines and lines of machines: availability, performance and quality. What do these values represent, and how can optimizing OEE improve manufacturing operations?
A quick tour of OEE
Availability, typically measured in terms of uptime percentages, is the least complicated of the three elements of OEE – equipment is either running or not. The availability measurement indicates how long the equipment sat idle when it should have been in operation.
In most manufacturing companies, unplanned downtimes that require repair and maintenance can quickly erode profitability and margins, and because of production delays can negatively impact customer satisfaction.
Performance indicates the throughput achieved by your machinery or machine lines, represented as amounts of discrete products or output volume produced in an hour, a shift, a work day or other limited time span. Performance is not an on/off measurement like availability, but falls within acceptable or unacceptable ranges.
Many different factors can contribute to variances in performance – the quality of raw materials and parts, environmental conditions, operator training and proficiency, tuning and placement of the machinery, logistics processes and others.
Unless performance becomes so bad that it impacts customer delivery, it may have little impact on customer relationships. However, it can greatly improve or worsen the efficiency and profitability of a manufacturer’s operation.
In most manufacturing operations, quality also ranges along scales of desirable and sub-par values. In a simple quality assessment scenario, the output must match target dimensions within tolerance limits for deviations.
However, it’s common that the quality metric includes more complex or multiple findings. Quality could also mean that the output can withstand certain temperatures or other environmental conditions without damage, for a specified exposure time. Or, for instance, its tensile strength, chemical composition and ability to reflect sound must fall within defined ranges.
Quality assessments vary greatly depending on the purpose of the item and a company’s customer commitments. They can touch on many other business processes such as procurement and warehousing.
Often, quality is highly consequential for meeting customer needs and for maintaining customer loyalty and satisfaction even before it impacts a company’s bottom line or productivity.
Finding the OEE formula that works for you
The compound OEE metric makes sense because it holistically combines three essential assessments that, taken on their own, might not be as relevant or meaningful. For instance, you could produce outstanding quality even when your uptime and performance are poor.
In the reverse, quality could be unacceptable while performance skyrockets. Or, your availability might be perfect, but your performance bottoms out and your quality levels are barely acceptable.
However, you typically cannot act to improve OEE without understanding and working on the values that determine it. Only if you dive into each of them can you see how they influence overall OEE and what you should do to improve it.
On the other hand, the three components of OEE may not be of equal relevance in your manufacturing business.
We know companies – these are often manufacturers of scientific or medical devices and tools – where quality matters above all else. Achieving it consistently is already such a powerful competitive distinction that performance and availability are of a lower priority.
Other businesses may have deployed some of their most important machines with planned redundancy. If one of them fails unexpectedly, they instantly shift production to another. In this case, availability is unimportant, but keeping performance up is crucial.
OEE measurements are critical to your operations
No matter whether your main interest is in overall OEE or in its component values, the ability to assess OEE and also closely review the values that constitute it is critical for almost every manufacturer. With the right visibility, you can see, properly balance and improve the outcomes you want to accomplish for availability, performance and quality.
OEE improvements can directly improve your bottom line. Industry research as well as our own experience demonstrate that a 10% OEE improvement can result in an increase in income from operations (IFO) by 20% or more.
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