How to Calculate OEE Within Your Manufacturing Business
For manufacturers, maximizing production efficiency is like pursuing the Holy Grail. The reason is simple: the more efficient your operations, the better your bottom line. But just how do you quantify manufacturing efficiency?
One key way this can be achieved is to employ a methodology known as Overall Equipment Effectiveness (OEE). In simple terms, OEE uses three metrics to calculate just how effective manufacturing equipment is performing. By measuring availability, performance, and quality, OEE can identify inefficiencies and reduce costs.
In this article, we cover everything business leaders need to know about OEE and how it’s calculated.
What is OEE?
Before we look at calculating OEE, it’s worth taking a more detailed look at just what OEE is and how it is measured. Put simply, OEE is a widely recognized metric that is used to evaluate the efficiency (or otherwise) of manufacturing processes.
As noted above, OEE relies on three components to perform its magic. It combines availability, performance, and quality into a percentage that represents equipment efficiency - with 100% demonstrating perfect production. Of course, this is a situation that rarely occurs in real-world manufacturing.
This method is designed to simplify performance tracking by providing a clear, data-driven overview of manufacturing efficiency.
Let’s take a more detailed look at the three components at the heart of OEE:
· Availability: Measures the percentage of time equipment is available for production versus planned downtime, such as maintenance or changeovers. A low availability score often indicates excessive downtime, which reduces overall efficiency.
· Performance: Assesses how the equipment’s actual operating speed compares to its ideal or designed speed. Factors like slow cycle times or minor stops can reduce performance, highlighting opportunities to optimize machine speeds.
· Quality: Tracks the ratio of good units produced versus total units manufactured, focusing on products that meet quality standards. High defect rates lower the quality score, signaling the need for quality control improvements to reduce waste.
OEE is a simple yet effective way to ensure that manufacturing machinery is being used at its optimum levels. All it requires is three measurable components and a little arithmetic to accurately measure manufacturing efficiency. Let’s have a look at the arithmetic that makes sense of the data.
The OEE Formula: Breaking It Down
Once you understand the core components of Overall Equipment Effectiveness (OEE)—Availability, Performance, and Quality—the next step is to apply the formula. The OEE formula combines these three metrics into a single percentage that reflects your overall manufacturing efficiency:
OEE = Availability × Performance × Quality
This formula provides a clear and actionable view of how well your equipment is performing. Let’s break down how to calculate OEE with a simple example.
Example: Calculating OEE
Let’s say a factory operates a single 8-hour manufacturing shift. To keep it simple let’s forget about lunches, breaks, etc, and assume that the machinery is scheduled to run for the entire period. However, the reality is that this will be rarely achieved.
Let’s look at how the figures pan out for a typical 8-hour shift assuming the following:
· The machine ran for 400 minutes out of a possible 480 minutes.
· The machine's performance was at 85% of its maximum potential.
· It produced 1000 products of which 50 were rejected for quality reasons.
Using these figures we can calculate the percentage for each metric as described below:
Availability:
· The machine was available for 400 out of 480 minutes.
· Availability = (400 ÷ 480) = 0.833 (or 83.3%)
Performance:
· The machine ran at 85% of its ideal speed.
· Performance = 0.85 (or 85%)
Quality:
· Out of 1,000 units produced, 950 were of acceptable quality.
· Quality = (950 ÷ 1,000) = 0.95 (or 95%)
Now, individually you’d be forgiven for thinking that overall efficiency isn’t too bad, the lowest percentage being 83.3%. However, once you run these figures through the OEE formula, the picture that emerges isn’t quite so pretty.
To calculate the overall OEE, we need to multiply the decimals and then convert the result back to a percentage:
OEE = 0.833 × 0.85 × 0.95 = 0.673
Converting this back into a percentage: OEE = 67.3%
As you can see, this OEE score of 67.2% means that the machine is operating at roughly two-thirds of its maximum possible efficiency. While each individual figure appears acceptable, the overall efficiency is significantly lower. This is why OEE is such a valuable tool—it provides a more accurate view of performance and highlights where improvements can be made.
Best Practices for Implementing OEE Tracking Systems
In essence, OEE is a simple system. Based on three measurable metrics and a single formula, the foundation of the system is indeed straightforward. However, achieving accuracy requires consistent data gathering and ongoing monitoring and can be challenging.
To help, we have compiled a list of best practices that can help you achieve meaningful OEE figures that will help you maximize manufacturing efficiency:
· Implement advanced software solutions: Utilize specialized OEE tracking software to automate data collection and analysis. This technology provides real-time insights, enabling quicker decision-making and more accurate reporting. It is also being boosted by recent advancements in IoT technology, which has simplified machine monitoring and the collection of data.
· Train your team: Ensure that all employees are trained on OEE concepts and the importance of accurate data entry. Engaging the workforce promotes a culture of accountability and continuous improvement.
· Establish baseline metrics: Before implementing changes, establish baseline OEE metrics. This will help you measure the effectiveness of your improvements and identify trends over time.
· Regularly review data: Set up a routine for analyzing OEE data and discussing findings with your team. Frequent reviews can uncover hidden inefficiencies and foster collaboration in problem-solving.
· Focus on actionable insights: Instead of just tracking numbers, prioritize actionable insights. Use OEE data to guide maintenance schedules, production planning, and process improvements.
Establishing an OEE tracking system can be challenging. However, the efficiency improvements and the resulting reduction in costs make the effort well worth the while.
Making it Efficient: The Role of OEE in Manufacturing
The manufacturing sector is highly competitive and anything that offers an edge over the competition is worth its weight in gold. OEE is one such thing, it provides manufacturers with an accurate and comprehensive snapshot of machine efficiency in one simple figure. But it's more than just a percentage to be pinned on a chart at the next production meaning. Hidden within that figure and the metrics that are used to calculate it is a wealth of information. Information that can help define strategies for expanding a manufacturing business.
Efficient manufacturing is something that is at the core of business, and OEE is one of the main keys to unlocking it.