What is OEE? Formula, Calculation, and How to Improve It

The contemporary manufacturing environment operates under constant pressures to maximize production capacity, reduce waste, and minimize operating costs. The moment machines fail and operations move slower than designed, manufacturing plants are losing money. 

To compete successfully, operations managers have to employ industry-standard metrics and understand true factory productivity. Knowing the overall equipment effectiveness allows industrial engineers and factory managers to have a holistic view of asset performance, detect losses, and implement the necessary measures to improve their business.

What Is the Overall Equipment Effectiveness?

Overall equipment effectiveness, or OEE, is a standard performance metric to assess how effectively a production facility uses its equipment in comparison with the theoretical limits.

In order to know why a shift failed to achieve its goals, the OEE metric considers production efficiency from three different angles: availability, performance, and quality. If OEE is equal to 100 percent, this means that the machine operates all the time at the maximum speed with no defects.

Three Pillars of the OEE Equation

How to calculate OEE involves multiplying three independent percentages together:

• Availability: Monitors what percentage of scheduled time the equipment runs, considering breakdowns and tool changeovers.
• Performance: Checks the efficiency of the machinery while running, penalizing small stops, idling, and slowdowns in the process. 
• Quality: Determines the proportion of perfect products produced versus the total number of products made. 

Learning the OEE Formula and Practical Example 

In order to measure the state of equipment correctly, production crews use a simple math equation.

Practical Example of OEE Calculation

Let’s consider an OEE calculation example of a production plant where automatic packaging machinery works during an eight-hour day (480 minutes), excluding 30 minutes of a lunch break, thus getting 450 minutes of planned production time.

• Availability Calculation: In case of unexpected malfunctions, which resulted in 50 minutes of stoppages, we can say that the actual time of working is 400 minutes. Thus, dividing 400 minutes by 450 minutes, we get an availability of 88.8%.
• Performance Calculation: If the designed rate is 100 parts per minute, the machine is expected to make 40,000 parts within those 400 minutes of run time. However, because of small pauses, the machine makes only 36,000 parts. When we divide our actual performance by our desired performance, we get a Performance of 90.0%.
• Quality Calculation: Of the total of 36,000 pieces made, 35,100 are up to standard while 900 are scrapped or require rework. By dividing good pieces by total pieces, we get a Quality score of 97.5%

World-Class OEE Benchmark Clarification

Analyzing what constitutes a good score will allow companies to develop realistic production goals:

• 100% OEE: Perfect but rarely reached or maintained in the real world.  
• 85% OEE: Known as world-class OEE for discrete manufacturing processes, meaning high asset utilization.   
• 60% OEE: Common in most typical manufacturing units. There is a lot of room for optimization here.   
• 40% OEE and below: Indicates frequent equipment breakdowns, bad maintenance practices, and large amounts of waste.

Conclusion

Monitoring operational efficiency is an absolute necessity for any industrial plant in today’s world to reduce wastage and increase profits. With knowledge of the basic OEE formula, conducting analysis through data, and comparing results with other industry benchmarks, organizations can reveal the latent capacity of the factory. Adopting tools for digital transformation helps manufacturers to continuously increase the OEE rate.

Frequently Asked Questions