May 25, 2016 / best practices, continuous improvement, KPIs, LIT, operations metrics, performance metrics
Regardless of what is happening in the market, there is one challenge that forges and other industrial metal-cutting organizations are always fighting, and that’s downtime. In fact, despite a trend toward internal process improvements, an industry benchmark study revealed that machine downtime, blade failure, and operator error remain the top-three sources of frustration for industrial metal cutting operations on the shop floor.
To combat this issue, many shops are turning to metrics like overall equipment effectiveness (OEE). Although this type of measurement has traditionally been used in large production facilities, smaller and medium-sized shops are starting to find OEE to be a useful way to track and improve the effectiveness of their production machinery.
What is OEE?
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 is 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 after implementing a new “shop floor to top floor” software program.
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.”
How to Use OEE Effectively
So how do you use OEE correctly? Below are a few pointers from an article from IndustryWeek:
- Use OEE as an improvement measure—not a Key Performance Indicator (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, just because you aren’t a high-volume producer, don’t assume OEE isn’t for you. Check out this article from thefabricator.com, which describes how automated data collection can help smaller shops better measure OEE in more custom manufacturing applications. Another archived article from Production Machining describes other ways to apply OEE concepts to medium and small-sized shops.
As the IW article states, OEE can be misused and misunderstood, but it is not a “bad metric.” When calculated and applied correctly, OEE can be very useful in helping companies quantify and uncover new improvement opportunities.