What is Overall Equipment Effectiveness OEE? How to Calculate it?

Overall Equipment Effectiveness OEE

Overall Equipment Effectiveness OEE is a metric that measures the functioning of a running manufacturing unit compared to its full potential.

To simplify, OEE measures the percentage of productive manufacturing time.

An ideal OEE is 100% which can only be possible when the quality, performance, and Availability are 100%.

How to Use Overall Equipment Effectiveness OEE?

overall equipment effectiveness oee
Image Credit: planettogether.com

Overall Equipment Effectiveness OEE is very effective in understanding the working of machines in a manufacturing unit or in-house equipment.

It also gives a clear picture of the productivity of a machine in different conditions and shifts.

Overall Equipment Effectiveness OEE has some standard benchmarks that give a varied understanding of the productivity of the machines. Let’s learn about the standard benchmarks of OEE.

  • 100%– The ideal form of production indicates that the best quality products are produced faster with no downtime.
  • 85% – Many manufacturers consider it a long-term goal as ideal conditions are not always present.
  • 60% – This score shows that it requires improvement in the production unit, which must be sought after at the earliest.
  • 40% – This score is considered low, but some immediate measures can improve the score.

Metrics for the Plant Floor

Overall Equipment Effectiveness OEE is a tool that the employees can also use to impact the plant floor’s work significantly.

There are a few metrics for the Plant Floor; they are,

  1. Target- It is the target given for the production in real-time.
  2. Actual- It refers to the actual production count.
  3. Efficiency- It is the ratio of the target and actual. It indicates the difference in the production units.
  4. Downtime- It refers to all the time when the production was stopped. It is recorded for each shift and updated in real-time.

Terms to know in OEE

Some terms need to be understood to calculate the Overall Equipment Effectiveness OEE.

These terms are:

  1. Planned Production Time- It is the expected total production time of equipment.
  2. Ideal Cycle Time- It is the time taken to manufacture one part.
  3. Fully Productive Time is the production time calculated after removing all the losses.
  4. Run Time- The scheduled time in which the system is running for production
  5. Total Count is the total number of parts produced, including defective pieces.
  6. Good Count is the number of parts that meet the quality standards.
  7. Good Parts- The number of parts meets quality standards and needs no repetition.
  8. Quality- It is calculated as,
    Quality= Good Count / Total Count.
    Quality indicates the Count of parts that do not meet the quality standards and need repetition.
  9. Performance- It is calculated as,
    Performance= ( Ideal Cycle Time * Total Count) / Run Time.
    It includes the number of slowdowns or brief stops in the manufacturing process. A proper performance score indicates the speed of the manufacturing process.
  10. Availability- It is calculated as,
    Availability= Runtime / Planned Production Time.
    It refers to both planned and unplanned production times. A proper availability score indicates that the manufacturing unit is running at all planned times.

How to Calculate Overall Equipment Effectiveness OEE?

There are 2 different methods to calculate Overall Equipment Effectiveness OEE.

Before learning about the methods, let’s understand the difference between Effectiveness and Efficiency.

Effectiveness is the ratio between the number of parts manufactured by a machine to the number of parts a machine is capable of producing.

Effectiveness doesn’t depend on any other factors, but other factors like labour can increase the effectiveness of a machine or manufacturing unit.

Efficiency depends on other factors like labour etc. If any outside factor increases the effectiveness of a machine or manufacturing unit, then the efficiency reduces by 50%.

The two different methods to calculate OEE are,

  1. Simple Calculation:
    – It is the easiest way to calculate Overall Equipment Effectiveness OEE.– It is the ratio of full production time to the planned production time.

    – The formula is,

    OEE= (Good Count * Ideal Cycle Time) / Planned Production Time

  2. Preferred Calculation
    – This method has 3 essential attributes. They are Availability, Quality, and Performance.– It is the most preferred way of OEE calculation because it denotes the problem in the manufacturing and gives a clear scope to improve it.

    – The formula is,

    OEE= Availability * Performance * Quality.

    Let us take an example to understand the calculation of OEE better.

    For example, A machine in a manufacturing unit has an availability of 95%, efficiency of 96%, and a quality of 97%. Calculate the OEE.

    – The answer for this would be,

    OEE= Availability * Performance * Quality.

    = 0.95 * 0.96 * 0.97

    = 88%

    – It indicates that the OEE of the machine is 88%, and the runtime of the machine can be slightly improved to reach the ideal score, which is 100%.


Transform your operations, achieve your goals

with our expert BPM consulting.


What are ‘The Six Big Losses’? How is it related to OEE?

Let’s answer the last question first; the main objective of calculating Overall Equipment Effectiveness OEE is to eliminate or reduce the Six Big Losses.

Now coming to the first question, The Six Big Losses are the most common losses incurred in the production unit or a single machine.

The Six Big Losses are categorized in 3 different attributes of OEE; they are-

  1. Availability Losses
  2. Performance Losses
  3. Quality Losses.

In each type of above losses, there are 2 types of losses which account for 6 big losses in manufacturing.

  1. Equipment Failure
    – It is a type of availability loss.– It can be due to loss of equipment, dysfunctional equipment, sudden breakdowns, or unplanned maintenance stops.
  2. Adjustments and Set up
    – It is a type of availability loss.– It is due to changeovers, tooling adjustments, machine adjustments, inspections, planned maintenance, and warmup time.

    – It comes under production downtime.

  3. Minor stops– It is a type of performance loss.– It is due to minor issues like flow obstructions, cleaning, and wrong settings.– It is for a short period which the operator can immediately resolve.
  4. Slow Cycles
    – It is a type of performance loss.– It happens when the equipment runs at a slower speed than desired.

    – It happens due to old and worn-out equipment, bad environmental conditions, less or poor lubrication methods, and substandard materials.

  5. Process Defects
    – It is a type of quality loss.– It is a type of loss that occurs due to producing a defective or scrapped part during production.

    – It is due to incorrect machine settings by the operator or equipment defects.

  6. Reduced Yield
    – It is a type of quality loss.– It refers to all the defective parts produced, including the parts that need repetition from the start of production till the stable state is achieved.

    – It occurs during machine warmups, changes, and incorrect machine settings.

Hence, the OEE score is the best indicator of the actual problem in production.

Benefits of Overall Equipment Effectiveness OEE

Benefits of Overall Equipment Effectiveness OEE
Image Credit: softwebsolutions.com

The five most important benefits of Overall Equipment Effectiveness OEE are,

  • OEE acts as an eye for visualizing problems in the manufacturing unit, which helps assess, analyze, and implement strategies to resolve or eliminate the problem.
  • OEE helps cut down machinery costs as it can easily identify issues with the machinery and give complete details about future breakdowns of machines and various other related errors.
  • A report on OEE can help the manufacturers to reduce losses during production and help improve the quality of the products, which is positively related to good productivity.
  • Data from OEE reveals many things like long changeovers, setup times, operator downtime, and machine productivity data. This data helps in employing the workforce and extracting maximum productivity from the production unit.
  • Last but not least is the Return on Investments. Manufacturers spend a lot of money on different types of machines in their factories, and such expensive machines should yield better productivity. By identifying the problems and errors through OEE, the manufacturers can increase their production and revenue.

Setting up a manufacturing unit costs a bomb, and if the revenue doesn’t show a good spark, then the whole investment goes down the drain.

Overall, Equipment Effectiveness is a measurement that adds relief to the hearts of all the manufacturers. It is a measure that gives a clear picture of the errors and problems related to the functioning of a machine. It also gives the manufacturers a scope for improving and correcting the errors, which is the best part of all.

Imagine having people in life who can show your problems and give you scope to amend them. Well, with humans, it may be an impossible thing, but OEE is that factor for the machines. Hence, I insist businesses utilize this measurement strategy in their units and reap all the benefits it produces.

Take Action Now and Make a Difference

Feel Free To Contact Us for Further Information 

Leave a Reply

Your email address will not be published. Required fields are marked *