What is Overall Equipment Effectiveness (OEE)?

Overall equipment effectiveness_OEE

Overall Equipment Effectiveness (OEE) is an analysis of a manufacturer’s efficiency and productivity, the results of which are displayed in a hierarchy of metrics. Formulated in the 1960s by Seiichi Nakajima, OEE is now globally recognised as a best practice measure and key performance indicator in a range of manufacturing industries – from pharmaceuticals to the automotive industry. As a manufacturer improves its OEE score, it benefits from higher profitability and lower manufacturing costs. (See here how through measurement and visibility, OEE is a simple way to improve your bottom line.)

OEE is an holistic KPI and delivers a score. It measures what could have been made — should every piece of equipment have operated effectively — against what actually has been produced, providing the result as a percentage. The higher the percentage, the better the facility has performed. An OEE score of 100% represents perfect production: manufacturing only good parts, as fast as possible, with no down time.

So as a benchmark, what is considered a “good” OEE score?

  • An OEE score of 100% is perfect production: manufacturing only good parts, as fast as possible, with no down time.
  • An OEE score of 85% is considered world class for discrete manufacturers. For many companies, it is a suitable long-term goal.
  • An OEE score of 60% is fairly typical for discrete manufacturers, but indicates there is substantial room for improvement.
  • An OEE score of 40% is not at all uncommon for manufacturing companies that are just starting to track and improve their manufacturing performance. It is a low score and in most cases can be easily improved through straightforward measures (e.g. by tracking down time reasons and addressing the largest sources of down time – one at a time).

Overall equipment effectiveness_OEE

Source: http://www.leanproduction.com/oee.html

One early case study in favour of OEE is the car manufacturer Toyota. Taking influence from the Ford car production line facility and American supermarkets, Eiji Toyoda introduced the Just In Time system to Toyota. This meant only ordering parts as they were needed to save space and money in terms of storage, and ironing out inefficiencies in the production line process to eliminate waste and inconsistency. On this occasion, the implementation of OEE helped Toyota to become a world-class company.

OEE assesses quality, speed and downtime across the entire manufacturing facility. Within any production facility there are many hundreds of variables at play all at once, across production lines, machines and more. Finding a way to improve efficiency in one area may be detrimental further down the production line, and with so many factors to consider, it can become incredibly difficult to determine where systems can be streamlined. That’s where OEE comes into its own. By looking at overall equipment effectiveness, managers can determine the success of the operation, highlight areas which can be improved and make decisions quickly.

Capturing OEE

With recent advancements in technology, it is now easier than ever to determine the overall effectiveness of manufacturing equipment. With so much of the production line computerised, information regarding quality and quantity can be captured and analysed at almost every stage of the process. Systems are able display information in easily understandable forms, such as graphs and charts.

For example, using vision systems technology to feed into the OEE metric enables manufacturers to assess whether labels, bar codes and tamper seals are present and correct. It allows businesses to see with immediate effect, the percentage of incorrectly applied labels or seals, and optimise the system if too many products are subject to faulty labelling. Vision systems enabled one US pharmaceuticals company to increase OEE on a packaging line by 200%. The manufacturer used OCR/OCV technology to compare characters to correct sequences and considerably reduced the false reject rate of good packages*.

It isn’t just management for whom OEE information is extremely pertinent; to improve upon productivity, the entire workforce can be motivated by using real-time scoreboards that display line efficiencies per shift, reject rates and more. Additionally, scoreboards encourage competition between teams, which can boost a department’s overall performance.
Different colours may be used to denote targets met and areas underperforming, so significant losses in production can be rectified immediately.

Providing real-time data is another key factor for the success of an organisation – and one which can be provided as part of an OEE solution. In days gone by, information about downtime or stoppages could only be gleaned within days or even weeks; news may have come from hand-written reports with measurements of time given as a mere estimation. Technological advancements in OEE systems include data capture at every stage of the production using coding and labelling printers, barcode scanners and machine vision systems to measure outputs, which inform staff within moments of any issue, allowing it to be measured and resolved quickly, thus reducing the impact of downtime on the entire operation.

OEE was one of the trends discussed at interpack 2014.

See here where OEE fits into mitigating risk and building brand trust. It also one of the 12 most important metrics to measure in manufacturing. See in this blog, which sets out the difference between preventive maintenance vs breakdown repair, where OEE fits in (it may be a surprise to know that the true cost of a machine breakdown has been estimated as between 4 to 15 times the maintenance costs — don’t get caught out: choose a local provider, with 24-hour support). You may also be interested to see how inefficient coding and labelling equipment can waste time, money and resources, so check out 10 ways to optimise your current operations.

*PharmaManufacturing.com – http://www.pharmamanufacturing.com/articles/2012/114.html

Mark Dingley
Mark Dingley is Chairman of the Australian Packaging and Processing Machinery Association (APPMA) and is the CEO at Matthews Australasia. With 20+ years of experience in the product identification industry and the wealth of knowledge gained from working closely with industry associations in developing and implementing standards & best practice, Mark is able to assist manufacturers with a range of issues from getting real-time visibility of their production line, improving automation, establishing quality assurance using machine vision to selecting the best fit technology for coding and labelling applications. Mark Dingley's LinkedIn Profile
Mark Dingley

by Mark Dingley

Mark Dingley is Chairman of the Australian Packaging and Processing Machinery Association (APPMA) and is the CEO at Matthews Australasia. With 20+ years of experience in the product identification industry and the wealth of knowledge gained from working closely with industry associations in developing and implementing standards & best practice, Mark is able to assist manufacturers with a range of issues from getting real-time visibility of their production line, improving automation, establishing quality assurance using machine vision to selecting the best fit technology for coding and labelling applications. Mark Dingley's LinkedIn Profile

6 thoughts on “What is Overall Equipment Effectiveness (OEE)?

  1. Christoph Roser says:

    Totally agree with your estimate of “World Class”, “Typical”, etc levels of OEE. Came to a similar conclusion based on my own experience. However, many plants report much higher OEE – simply because higher OEE look better and it is so easy to fudge these numbers. Wrote a whole series of posts on measuring OEE and fudging OEE myself on http://www.allaboutlean.com/tag/oee/.

  2. Overall Equipment Efficiency says:

    Thoroughly enjoyed your post! You made a good point that its not just the management who it concerns. Until and Unless the entire workforce is motivated to be a part of its actual implementation, its going to be very hard to reach “Perfect” or even “World Class” level.

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