August 10, 2014 / benchmarking, best practices, bottlenecks, KPIs, lean manufacturing, LIT, Output, performance metrics, productivity, quality
Over the last several years, a growing number of fabricators and other industrial metal-cutting companies have started measuring overall equipment effectiveness (OEE). This is definitely a good trend, as measurement is a critical part of continuous improvement. However, many companies are jumping on the OEE bandwagon without being fully informed, which is causing a lot of misunderstanding and misuse of this important metric.
Knowing what OEE is—and what it isn’t—is the only way to make sure you are using it effectively. Here’s a quick primer.
What OEE Is
According to leanproduction.com, OEE is a best practices metric that measures the percentage of production time that is truly productive. It takes into account all six types of loss, resulting in a measure of productive manufacturing time.
In simple terms, OEE can be described as the ratio of fully productive time to planned production time. According to leanproduction.com, it can be measured in one of two ways:
(Good Pieces x Ideal Cycle Time) / Planned Production Time
Availability x Performance x Quality
(You can find a more detailed description of the calculation here, as well as a sample calculation.)
A plant with an OEE score of 100 percent has achieved perfect production—high quality parts as fast as possible, with zero down time. While that’s ideal, it’s not quite possible in the real world. According to oee.com, studies show that the average OEE rate among manufacturing plants is 60 percent, which leaves substantial room for improvement. Most experts agree that an OEE rate of 85 percent or better is considered “world class” and is a good long-term goal for most operations. The good news it that 85 percent is achievable. As this case study from Metalforming magazine describes, Magellan Aerospace in Kitchener, Ontario, Canada was able to improve its OEE from a mere 36 percent to a world-class 85-percent-plus.
Managers can use OEE as both a benchmark and baseline. Specifically, leanproduction.com says it can be used to “compare the performance of a given production asset to industry standards, to similar in-house assets, or to results for different shifts working on the same asset.” It can also be used as a baseline “to track progress over time in eliminating waste from a given production asset.”
What OEE Isn’t
Even with a basic understanding of OEE, many operations are still misinterpreting it and, therefore, aren’t using it effectively. This blog post, for example, argues that OEE is not a key performance indicator (KPI), and it shouldn’t be measured at a company or plant level. The author goes on to state five reasons why OEE is not a good KPI, including the fact that it is not comparable between different pieces of equipment and/or different locations. Instead, he suggests OEE should be used as a way to help identify and eliminate waste in front of a process, line, or equipment.
Another misconception is that OEE is the same thing as Total Productive Maintenance (TPM). An article from IndustryWeek (IW) says this is definitely not the case. “OEE is the measure most closely associated with TPM, but OEE is not equivalent to TPM,” the IW article states. “At its heart, TPM is not about complex metrics; it’s about developing the capabilities of people.” So while a good understanding of OEE can help with TPM, the two terms shouldn’t be used interchangeably.
How to Use OEE Effectively
So how do you use OEE correctly? Below are a few pointers we called out from the IW article:
- Use OEE as an improvement measure—not a KPI.
- OEE is best used on a single piece of equipment or synchronized line.
- There is no absolute that works as an OEE benchmark or target—it’s relative to your situation.
- Use it as a yardstick, not a club.
Also, if you are short-run, high-mix fabricator, don’t assume OEE isn’t for you. Check out this article from thefabricator.com, which describes how automated data collection can help you to better measure OEE in more custom manufacturing applications.
As the IW article states, OEE is often misused, but it is not a “bad metric.” In fact, it can be very useful in helping companies quantify improvement opportunities. Just be sure you know the facts before you start using OEE measurements to make strategic decisions.