OEE – Driving Performance or Complacency?

In my role as Manufacturing Solutions Architect I have seen many industries and manufacturing processes up close. These range from consumer goods to mining to petrochemicals and beyond. These businesses couldn’t be more different except for the general acceptance of deploying OEE (Overall Equipment Effectiveness) to drive improvements. If your organization uses OEE as a key metric, ask yourself: Is OEE driving improvements, or is it being used as a cover for complacency?

Even though most organizations agree that OEE is Availability times Performance times Quality the calculation and assumptions vary significantly from organization to organization and sometimes between plants within the same organization. There tends to be a focus on the composite number, not the reasons driving that number.

The foundation of OEE is Lean Manufacturing and Total Productive Maintenance (TPM). Both drive waste and inefficiencies out of organizations by focusing on value added activities which shorten production cycles, increases quality and reduce costs. World class OEE is commonly touted to be 85%. This is based on the book “Introduction to TPM: Total Productive Maintenance (Preventative Maintenance Series)” by Seiichi Nakajima and uses a machine shop in the 1970’s as a reference. His targets were 90% Availability, 95% Performance and 99% Quality. The reality is that most manufacturing companies, even today, have OEE scores closer to 60% or 65%.

However, the 85% number is commonly referred to as world class and is adopted as the target for many companies. This leads to corruption and misuse of the OEE methodology. The important point is – don’t fixate on the absolute value of the number. Management needs to focus on improving the individual component scores that comprise OEE to drive the overall number. This takes a combination of objectively analyzing the processes, establishing realistic current performance levels and correcting operational issues as they are identified. The result is setting goals that are attainable and aspirational.

Availability is the actual production time as a percentage of planned production time.  It is normally the time the line is available, scheduled and actually producing. There are various ways to arrive at available time. This time may or may not include changeovers, tests, downtime, etc. A danger is to have the line “unscheduled” if a significant down event occurs. This falsely inflates Availability. Changeovers should also normally be included since the ultimate measure of the line is good product. Changing between products negatively impacts effective use of available line time and needs to be managed, not hidden or overlooked.

Availability (%) = (Actual Run Time (excluding downtime) / Planned Production Time) * 100

Performance is the rate of production (how many units are produced) during actual production time. It is the actual units produced as a percentage of the expected units produced.  Problem areas that lower performance are speed reductions and minor stoppages. Performance results can be manipulated by lowering the target production rate or the actual run time. The target production rate should be the normal, achievable production rate. Many companies use an average of actual historical performance. This builds downtime into the equation. Running at the correct rate is critical to a profitable operation. Operators often slow the line down to minimize other potential problems. The tipping point between a consistent slower run and a faster run with intermittent issues needs to be determined by management and process engineering, not individual operators to yield the optimum output. A significant opportunity for line improvements is in addressing minor stoppages. Without visibility and awareness these stoppages are commonly overlooked and just considered normal, not losses that can be reduced or eliminated.

Performance (%) = (Actual Pieces Produced / (Target Production Rate * Actual Run Time)) * 100

Quality is normally the number of good pieces as a percentage of the number of pieces produced. For calculating OEE Quality is often assumed at 100% during the production run and adjusted afterwards with an OEE downgrade, if adjusted at all. Some organizations deduct process scrap or total rejected product or poundage. Some try to measure first pass quality. How or if Quality is measured allows manipulation to achieve the desired outcome, and may not reflect actual operating conditions.

OEE Quality (%) = Good Production / Total Pieces Produced (including waste)

Plants need to accept a dose of reality by objectively establishing where they are. This is vital to know before realistic goals can be determined. Focus on the drivers of Availability, Performance and Quality losses, not just the numbers. Otherwise, OEE is just shielding complacency and not driving improvements.

CLICK HERE TO OBJECTIVELY DISCUSS AND REVIEW YOUR COMPANY’S OEE LEVEL AND ORGANIZATIONAL MATURITY.