Operational Equipment Effectiveness (OEE) is a Lean Manufacturing concept that is generally found in discrete manufacturing facilities. However, the philosophy can be used in many other business sectors such as Call Centers and Information Technology. In many continuous improvement initiatives, it becomes difficult for Process Engineers to measure the gains of their improvement efforts. OEE is a powerful benchmark to provide rapid feedback on a given system or process. Companies that currently operate Six Sigma programs use data to identify areas of improvement and also monitor the modifications made. OEE enables the Process engineer to perform these measurements.

An ideal process, equipment or system that has been implemented would operate:

100% of the time, at 100% capacity, and with an output of 100% good quality.

In real life, however, this situation is rare. The difference between the ideal and the actual occurrence is due to losses. If there is a gap between our daily process and the ideal situation, it makes sense to focus on this gap and look for ways to bridge it. Losses can be categorized into 3 main categories: downtime, speed, and defects. There are a number of specific losses that can be grouped under these 3 categories but the six most common ones are listed in the table below.

Calculating the OEE is easy and can be applied to many types of systems. It is the "availability rate" multiplied by the "performance rate" multiplied by the"quality rate".

  • The "availability" rate is the time the equipment or system is really running, versus the time it could have been running
  • The "performance" rate is the quantity produced during the running time, versus the potential quantity, given the designed speed of the equipment or system.
  • The "quality rate" is the amount of products meeting requirements versus the total amount of products produced.

The chart below outlines the OEE calculation and graphically shows the relationship of the common wastes which ultimately contributes to lost effectiveness. The gray shaded areas are the waste which intrudes on the white (productive space).

As more waste is observed in each category, the available time and output that is productive is reduced (white space becomes less).

Consider this example:

A current computer system used to process checks is operating at 80% of the designed operating speed, with defect rate of 3%, and is only running 35% of the time due to maintenance. The OEE equation would look something like this.

Availability (35%) x Performance (80%) x Quality (97%) = 27% OEE

Obviously, the first place to do process improvement is on the availability of the equipment. With some reactive maintenance to fix the current problem and then preventive maintenance to keep the equipment running, at 95% up-time goal can be achieved. Here is how our OEE has changed:

OEE = 95% x 80% x 97% = 73%.

A world class benchmark would show a system performing at 85% OEE. Though the equation will vary, depending on the process, here is an example of an equation for world class OEE:

World Class OEE = 95% x 90% x 99.9% = 85%

Why should you considering using this methodology?

  • It will provide a structured framework to compare alternatives and perform ‘what if?' analysis on process improvement investments.
  • Companies can use ‘what if?' analysis to determine if it makes more sense to fix the current equipment or purchase new.
  • OEE quickly provides key insight into the limitations of a system and can provide focus on what changes will provide the biggest impact toward achieving the ideal goal.